Chris Davies: Servicing the squeezed savers

Earlier this month we presented research on what we term the “squeezed savers” at our Autumn Institute of Directors Symposium. We see this demographic as those classified high net worth by the FCA but who also have child and potential parental care to worry about.

With so much focus on those on the runway to retirement at the moment, we wanted to look at this generation and understand whether they are impeded by an advice gap and how they may be incentivised to save and invest. What is clear is that there is still a lot to do to encourage engagement.

Our research found that investors are open to the idea of an automated, low cost service. In fact, they believe it would aid more rational decisions when it comes to meeting life goals such as children’s education, retirement or parental long-term care.

Financial technology is a key driver behind low-cost, efficient propositions and we have seen an evolution (not a revolution) towards digital services offering consumers easy access to information and opportunities to invest. The fact that 51 per cent of our research respondents said they expect service providers (advisers, wealth managers, banks) to offer an app to aid their investment decisions is very telling indeed.

When it comes to trusting the robots with their money, 57 per cent felt they were happy to invest some of their hard-earned cash in automated investments.

We were also interested to see which products are the most popular. Without doubt, both cash and stocks and shares Isas came top. However, with investors hungry for growth, many have an appetite for alternative investment structures, such as multi-asset protector funds, crowd funding, VCTs, hedge funds and collectables. These areas obviously require stringent risk management and again technology will provide an answer.

So what about the human touch? Our research data covering the accumulation and de accumulation client journey shows a need for investors to sit down and receive some form of help and support.

In particular, advice is most valued at certain points in life, such as the end of the tax year, retirement or when purchasing a house. It is not as valued when presented as a holistic solution to financial planning. And herein lies the conundrum: we have the arrival of technology that will deliver investment services at ease and low cost, yet investors still require a “phone a friend” option when the going gets tough.

The event saw Ernst and Young discuss all available technology across the front, back and middle office, and there is no doubt we are beginning to see solutions that can offer such a hybrid. In this country, Advicefront, Sammedia and Moneyhub are clear examples.

Meanwhile, Barclays head of behavioural finance Greg Davies’ talk showed the importance of recognising emotion as a key player in the investment journey. By employing decision support tools with analytic tools and creating a constructive decision environment including both automated and human services, squeezed savers will have a vested interest to engage.

Steve Webb closed the event with a view that the success of retail financial services comes down to one thing: trust. If clients have no idea what humans, robots or a combination of both can offer them, they cannot answer the essential “what’s in it for me?” question.

As 1980s pop group The Jam sang: “the public gets what the public wants”. Clients want services and products that match their personal values, not what the industry thinks those values are. With this in mind, there is still much work to do.

Chris Davies is managing director at Engage Insight