Risk warnings on financial promotions put half of UK adults off investing, new research from Scottish Friendly has revealed.
As part of its latest Family Finance Tracker research, Scottish Friendly found that 51% of UK adults say risk warnings deter them from investing in stocks and shares. In comparison, just one in 10 say distrust of financial institutions or investment providers puts them off investing.
The findings come amid ongoing industry debate around how investment risk is communicated, including recent FCA commentary encouraging firms to make sure risk communications are clear, balanced and support consumer understanding. It follows concerns that overly stark or technical warnings may be driving excessive caution rather than helping people to make informed decisions.
Scottish Friendly has backed calls for a more balanced approach to communicating investment risk and long-term opportunity.
The research also showed that more than a third (34%) of respondents are worried about losing money, while a quarter (26%) fear making the wrong decisions and 24% say they do not feel they have enough money to invest.
In addition, 17% of those surveyed said they do not know where to start, with the same number saying they lack confidence in their ability to invest successfully.
Scottish Friendly said its research also highlighted gender disparity, with women more likely to report confidence barriers than men. Almost a fifth (19%) say they do not know where to start, compared to 15% of men and 18% of women lack confidence in their ability to invest successfully versus 15% of men.
Stephen McGee, chief executive of Scottish Friendly, said: “UK households are probably too cautious when it comes to investing, and often risk warnings on investment communications reinforce that caution.
“Consumers need to understand investment risk means their investment value can go down as well as up, and they could get back less. But over half of adults say risk warnings put them off investing entirely. It is therefore encouraging to see regulators and our industry exploring how investment communications can better balance consumer protection with consumer understanding.
“What is particularly striking from our research is that distrust in investment providers is relatively low. The real barriers are fear, uncertainty and lack of confidence.
“The UK needs to foster a more confident, long-term investing mindset similar to the US, and that requires support through education and awareness. Too often in the UK, investing is framed primarily through the lens of risk rather than opportunity.
“Consumers need balanced communication. Confidence and education need to sit alongside consumer protection if we want more people to invest for the long term.”
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