Tapping into your future income – encouraging the mass market to invest

In my previous articles I have discussed the huge opportunity available to financial advisers today. By offering simple, fully automated advice to the mass market, you can generate significant revenue at minimal marginal cost. But the obvious question is: why is this segment of the market not already investing?

Factors Preventing Investing

 Factors Preventing Investing

Source: Experian Survey Results: Personal Finance (https://www.experian.com/blogs/ask-experian/survey-results-personal-finance/)

In a 2016 survey*, Experian found that there were 5 main factors preventing people from investing in stocks and bonds.

1. Not enough money to invest

There are two ways in which this has an impact. The first is a lack of disposable income to invest. But with open banking data generating a huge new array of budgeting tools and micro-investments in ETFs possible from as little as pennies, it is becoming easier and easier to invest even small amounts each month.

The second is as a result of fees. Until now, it has simply not been commercially viable to provide investment advice to savers with smaller long-term savings pots. But with the advent of automation, affordability to drastically improving.

2. A lack of understanding

In today's world of Amazon and Trustpilot reviews, people want to know what they are buying. But they want to be told in language they understand. To encourage people from all wealth backgrounds to invest, financial advice must be kept simple and understandable for the mass market.

3. Too risky

It is essential to explain to first time investors how risk and return works in real-world terms. Only then can customers make an informed decision about their appetite for risk when considering long term saving.

4. A lack of trust and confidence

Financial advice has historically been vulnerable to human error. For complex arrangements, human input is crucial, but for simple advice, technology can now ensure consistency, reducing the compliance risk and over time improving trust.

5. High fees

Providing traditional financial advice is a high cost activity. This is necessary and appropriate for those customers with high levels of wealth and complicated investment requirements. However the majority of the mass market does not require such bespoke investment advice.

By removing the variable costs required for a human adviser to provide such advice, and by investing in multi-asset passive ETF funds, it is now possible to keep fees to an absolute minimum. Sometimes less than 1% in total.

From my experience, I would add another barrier to investing:

6. It is not the #1 priority until it is too late

It is human nature to focus on the things immediately in front of us. Only when our immediate concerns are satisfied do our brains generally have the capacity to focus on longer term concerns. But this is not sufficient and has resulted in a significant savings gap in the UK.

Similar to the government's switch to opt-out rather than opt-in pensions, sometimes people need a little more encouragement to focus on the long-term picture.

So how do you ease these concerns?

As I see it, there are 6 key ways to encourage everyone to start investing in their future today:

1. Make it real

Munnypot helps customers work towards real, tangible goals, such as a new car, a wedding, or a new home. This, like everything else on the platform, is entirely customisable. Customers can even open a Junior ISA for a child or grandchild to provide them with a head start when they turn 18.

2. Make it easy

With Munnypot, customers can be fully onboarded, entirely online in as little as 20 minutes, having completed the full advice journey and verification checks. This, alongside well-timed nudges, can help people to make long term an investing a priority today.

3. Make it affordable

As a result of end to end automation, Munnypot enables you to offer simple, personalised advice at a price which is affordable for those with small savings pots. As a result, the minimum investment on the Munnypot platform can be as little as £25 a month.

4. Demonstrate the value of investing and clearly explain the risks and rewards

The Munnypot platform does not show just one predicted investment growth line, but clearly shows estimated optimistic and pessimistic scenarios in relation to the amount paid in.

The numbers are dynamic as the customer changes their risk tolerance, time horizon and contributions to clearly demonstrate the trade off between value growth and risk and the significant advantages of longer time horizons.

5. Provide clear, regulated advice to generate trust and confidence

The Munnypot advice journey is straightforward and jargon free as appropriate for the mass market. Moreover it is delivered via an award-winning user interface which emulates the conversation a customer would have with a face to face adviser to ensure it is engaging for all users regardless of demographic.

Additionally, the financial advice journey provided by Munnypot is regulated by their FCA-authorised principal firm, to ensure that customers can be confident in the advice they are receiving.

6. Keep track of the customer's investment so they don't need to

Munnypot monitors the performance of the ETF investment against the customer's personalised goal and reaches out to the customer if the goal is off-track. If necessary it will then provide further advice to that customer so that the customer can go back to focussing on their today.

munnypot mobile app

Get in touch with us today to launch your own branded online investment advice platform. Let us help you generate significant revenues at minimum marginal cost, bring on new profitable customers and free up your advisers to focus on high value, complex arrangements for your wealthiest customers.

For more information on Munnypot or to arrange a demo, please email andrew.fay@munnypot.com or contact our offices on 01293 224 281.

* Source: https://www.experian.com/blogs/ask-experian/survey-results-personal-finance/

Important Information

Munnypot is a trading name of Munnypot Limited which is an Appointed Representative of Resolution Compliance Limited which is authorised and regulated by the Financial Conduct Authority. FRN 574048.