Greater personalisation needed to improve consumer engagement – PIMFA report

20 November 2023

Greater personalisation may help to improve consumer engagement in financial services, a new report from PIMFA finds.

According to the trade association, more than a fifth (22%) of those who identified as non-investors would be encouraged to invest if they were able to access some form of basic personalisation compared with 12% who said they would invest using generic guidance as is currently the case.

A fully-tailored personalised advice offering would prove even more effective at encouraging greater saving and investing, with 51% of non-investors saying they would be most likely to start investing if this was something they were able to access. Among those already receiving advice, 57% said they valued a fully tailored personal advice model, with 40% appreciative of basic personalisation.

The research also found that 68% of non-investors said they definitely, or probably wouldn’t start investing within the next 12 months, with a lack of exposure to investing within their social circles the biggest driver (77%). This was followed by a perception that the investment world is intimidating (56%) and feeling emotionally apprehensive or overwhelmed about investing (54%). Less than half (46%) of non-investors understood the risk of the value of their cash savings being eroded by inflation overtime.

By contrast, the reason many investors started their investment journey was because of hearing about the investment experiences of others within their social network, with 45% of advised investors and 31% of DIY investors citing this reason.

The research further found that more than three quarters (77%) of advised investors and 70% of DIY investors described their financial status as secure, compared with only 59% of non-investors. For non-investors, a lack of financial security contributed to a lack of confidence, with 49% of non-investors saying they believe investing was only for those that already had a large amount of money and 53% stating they would only consider investing if they were to come into a large sum of money or inheritance.

Simon  Harrington, head of public affairs at PIMFA, said: “We sought to commission this report in order to test our own hypothesis that providing non-advised consumers with targeted, personalised guidance to encourage investment decisions would help more people overcome the behavioural barriers which prevent them from investing. In this area, our findings are somewhat disappointing.

“The introduction of basic personalisation for non-investors would have some but not a substantial impact on consumer behaviour relative to the status quo where no personalisation exists. This means encouraging people to make active decisions about their finances requires a radical change in consumer behaviour.”

Harrington added: “We are more positive about the impact increased personalisation could have with investors who are already somewhat engaged in making investment decisions as DIY investors as well as those who will be forced to engage when they come to decumulate as pension savers. It is clear to us that there is an argument to give greater thought to providing people with better targeted support when they need it most to help them achieve a better outcome. Clearly these changes cannot be made within the current regulatory and legislative framework.”

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Professional Paraplanner