Barclays has warned that UK capital markets are missing out on around £430bn in cash deposits as it called on authorities to create a “more balanced environment” for banks to empower potential investors.
The bank said on Wednesday that the Financial Conduct Authority (FCA) should give a “badge” to identify entry-level investment products that meet certain diversification or asset allocation criteria to help less experienced investors select offerings potentially suited for their financial objectives.
It added that to make investing in these “badged” products easier, the FCA should ensure a simpler sign-up process and reduce “current frictions” in declarations, risk warnings and product documentation for entry-level investors.
The recommendations were published alongside data and analysis from the bank finding that roughly 13m UK adults hold £430bn of “possible investments” in cash deposits.
Barclays said its estimate for the UK’s “investment gap” was conservative, given it was based on savers who already hold more than six months’ income in cash savings.
Sasha Wiggins, chief executive of Barclays Private Bank and Wealth Management, said these potential investors were missing out on an opportunity to earn better returns over the long term. She added that UK capital markets could, in turn, “see a boost if more savers were to invest”.
“The industry needs to work with government and regulators to break down these barriers and help more savers to invest,” Wiggins said. “Key to this is regulatory change.”
The bank called for changes to regulation on financial guidance to allow regulated private sector firms to suggest investment actions or products to any of their own customers identified as holding “significantly more” cash than expected for an emergency fund.
Barclays said this new framework should “explicitly permit consumer-facing guidance based on generic personas such as “people like you would benefit from X’”.
Its proposals come as the FCA and Treasury jointly review the regulatory boundary between financial advice and other forms of support to ensure consumers “get the help they want, at a time they need it and at a cost that is affordable”.
Barclays pointed to survey data suggesting a quarter (24 per cent) of Britons thought investing is too complicated and that nearly two-thirds (63 per cent) wanted help comparing investment products.
“A more balanced environment is needed,” Wiggins said. “One that protects investors but also allows financial providers to deliver more targeted support, without crossing the boundary between guidance and advice.”
Barclays’ other recommendations include an online tool from the Money and Pensions Service guiding consumers to a range of investment products for consideration, and an “explicit policy aim” from the government to help develop best-buy tables for people to compare “badged” products side by side.
Kitty Ussher, group head of policy development at Barclays, said: “Our research suggests two broad barriers that prevent savers from engaging with investing: difficulty identifying the right investment product to suit their financial needs, and the inability to make side-by-side comparisons of products.
“Our policy recommendations are drawn from these insights and designed to enable more savers to engage with investing in a simple and safe way.”