Using behavioural science to change the way people engage with investing could significantly shift investment behaviours, according to a new study from St. James’s Place.
The study, carried out in partnership with Ipsos and involving almost 6,000 people, analysed the behavioural barriers between intention and action when it comes to investing.
The findings suggest that adopting different engagement approaches has the potential to unlock the power of investing for 1.8 million new UK investors, equating to up to £2.4 billion in additional investment over one year.
Engaging younger investors
The study found that three behavioural interventions had a profound effect on younger people versus their older peers.
Young people respond to behavioural interventions which make investing feel socially normal, relevant to their personal values and sense of self, and connected to their future. More than half (58%) of those aged 18-34 are more comfortable with investing after seeing an intervention message, compared to 36% of those aged 35-54 and 20% of those aged 55-75.
Investment understanding also improves more post intervention for 18-34 year olds (56%) than their older counterparts.
However, despite having the most time until retirement to invest and make a positive difference, over two fifths (44%) of those aged 18-34 say they don’t see themselves as investors. Meanwhile, more than a third (34%) say they think investing is too much effort to be worth the returns they would get, and the same proportion (34%) say they don’t see investing as something people like them do in everyday life.
The research found that over half (53%) of 18-34 year olds feel current communication rarely feels useful to their personal situation.
As a result of the findings, SJP is launching a four-point plan of recommendations for the investment industry and policymakers to help build a more inclusive, resilient UK investment culture.
These include building campaigns that normalise investing and speak to different groups and integrating behavioural principles into how the industry communicates, with people more likely to act when they can picture their future self and see that people like them invest.
SJP also believes tangibility should be at the centre of investment communications, pointing out that clear numbers and realistic examples are one of the most effective ways to shift how much people say they would invest an extra £100 a month.
Finally, SJP is calling upon the industry to build a pipeline of support that helps people act, involving a ladder of support that runs from guidance and targeted support through simplified advice and full financial advice.
Mark FitzPatrick, chief executive at St. James’s Place, said: “We are facing a significant challenge to get more people investing and build a true UK investment culture. What this research makes clear is that the challenge isn’t a lack of interest in investing, but a gap between intention and action, particularly among younger people.
“Obviously, there are a number of elements that need to work in tandem here, but how we communicate as an industry can make a material contribution. If we want to build a genuinely inclusive investing culture, we need to think differently about how people experience investing in practice. That means embedding behavioural insight into how we communicate, how we support decision-making and how we help people move from cash saving to investing with confidence.”
He added: “By making investing feel more normal, more personally relevant and more connected to people’s future lives, we have a real opportunity to help a new generation engage earlier and build stronger long-term financial security. Getting this right matters well beyond individual outcomes; a stronger UK investing culture is vital to the UK’s long-term prosperity.”
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