Behaviour-led interventions could create a ‘new generation’ of investors

Using simple, behaviour-led interventions to engage people with investing could significantly shift the way people think about investment and create a new generation of investors, according to a report from St. James’s Place (SJP).

Its paper argued that using behavioural science could unlock 1.8 million new investors and £2.4bn of additional investment in just one year.

The analysis, conducted in partnership with Ipsos, explored the behavioural barriers between intention and action when it came to investing.

Three behavioural interventions were found to have a ‘profound effect’ on younger people compared to older age cohorts.

Younger people responded to interventions that made investing feel socially normal, were relevant to their personal values, and connected to their futures.

More than half (58 per cent) of 18-34 year olds felt more comfortable with investing after seeing an intervention message, compared to 36 per cent of 35-54 year olds and 20 per cent of those aged 55-75.

A similar proportion (56 per cent) of the younger age cohort believed the interventions had improved their investment understanding, while 34 per cent of 35-54 year olds and 17 per cent of 55-75 year olds felt the same.

Messaging that made investing feel tangible and concrete was found to reduce uncertainty and misconceptions, potentially leading to greater investment.

SJP argued there was a need for change across the retail investment industry, as just 44 per cent of younger people saw themselves as investors, while 34 per cent thought investing was too much effort to be worth the returns, and the same proportion did not see investing as something 'people like them' do in everyday life.

While 59 per cent of the younger age cohort tended to read the financial information or advice they came across, 53 per cent said the information they encountered rarely felt useful to their personal situation.

SJP therefore outlined four recommendations for the investment industry and policymakers to support the emergence of a new generation of investors.

These were: to build campaigns that normalise investing and speak to different groups; integrate behavioural principles into communications; put tangibility at the centre of investment communications; and build a pipeline of support that helps people act.

“We are facing a significant challenge to get more people investing and build a true UK investment culture,” commented SJP chief executive, Mark FitzPatrick.

“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.

“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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