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How Consumers Save and Invest 2020

  • ID: 5135117
  • Report
  • July 2020
  • Region: Global
  • 111 Pages
  • IRN Research
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45% of Savers and Investors hit by COVID-19 Pandemic

Report Highlights

45% of consumers who own savings and investment products have been negatively impacted by the COVID-19 pandemic, with the value of their money held in savings and investment products declining. Not surprisingly, given the impact of the crisis on stock market values worldwide, individuals who have money held in investment products like stocks and shares (labelled Investors) have felt its negative effects more than Savers (who tend to only own cash-based savings products), with 59% of Investors seeing a negative effect on their wealth. For the same reasons, the negative impact of the virus tends to rise the greater the wealth of the saver and investor. While 31% of Savers and Investors with less than £1,000 in wealth were negatively impacted, this rises to 76% for those with £500,000 or more in wealth.

COVID-19 has led to a sharp downgrading in sentiment regarding the growth of wealth over the past year. Pre-crisis, around four-in-ten Savers and Investors were happy with the growth of their wealth, compared with less than one-third today. Despite this, two-thirds of Savers and Investors have decided to take no action because of COVID-19 and effectively ride out the storm rather than change how they Save and Invest.

Despite wealthier Savers and Investors being the most adversely impacted by COVID-19, they still enjoyed higher returns over the past year compared with less affluent Savers and Investors. Over the past year, the typical saver and investor earned a return of around 3.6%, rising to 9.8% for those with £500,000 or more in wealth.

These findings come from the publisher's report 'How Consumers Save and Invest 2020'. The aim of this report is to study how UK consumers behave when they make financial investment and saving decisions. The report considers what types of saving and investment products consumers hold, how they purchase and invest and what factors influence their purchases. It also considers how consumer investment behaviour has been influenced by developments like COVID-19 and potential investment frauds. For this report, the publisher commissioned Made in Surveys Group (MIS) to conduct a survey among its online panel, drawing on a nationally representative sample of 2,076 UK adults aged 18+.

Examples of other findings from this report are:

  • Almost a third of savers are under-advised (i.e. they need professional advice and guidance but do not get it)
  • While only 15% of Savers and Investors used professional financial advisors in the past year, advisors are given a higher rating by their users compared with users of other sources of information and guidance
  • Only 15% of Savers and Investors seem to be aware of how to protect themselves against scams and unsuitable purchases
  • Over one-quarter of savers and investors have been approached in ways the Financial Conduct Authority has highlighted are often used by scammers and fraudsters
  • Six-in-ten consumers are Savers, while four-in-ten are Investors
  • 62% of Savers and Investors invested or saved some money in the previous year
  • The typical consumer has around £83,000 saved or invested (mean average)
  • The prime motive for saving and investing (58% of Savers and Investors) is to generate money now to cover for an immediate rainy day or unexpected event like unemployment
  • Less than half of savers and investors lay out plans for their financial future
Note: Product cover images may vary from those shown
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EXECUTIVE SUMMARY

  • Consumers divide into Savers and Investors
  • Wealth and social grade largely determine the split
  • Most consumers save or invest for defensive reasons
  • Less than half of consumers make financial plans
  • Investors can invest because they are more willing to take risks
  • Consumers want income and capital returns, but judge by the income return
  • Investors minimise risk by owning a broad portfolio of products
  • Affluent Investors are the most active
  • Consumers prefer to accumulate monthly and would like to do it online
  • 29% of Savers and Investors are Under-Advised
  • Professional financial advisors, less used but of most value
  • Consumers are susceptible to scams and mis-selling…
  • With major knowledge gaps
  • Over one-quarter exposed to suspicious action
  • Over four-in-ten negatively impacted by COVID-19

INTRODUCTION

  • Definitions

WHO ARE SAVERS AND INVESTORS?

  • Around four-in-ten consumers own investment products
  • Virtually all consumers hold cash assets
  • Age, gender and income the great discriminators
  • The saving and investing spectrum
  • The typical consumer has around £83,000 saved or invested
  • Wealth inequalities can be stark

SAVING AND INVESTING PREFERENCES AND GOALS

  • Many consumers lack financial security
  • Motives, time scales and planning
  • Investors and the Financially Tight More Likely to Plan Ahead
  • The Strategists vs. the Impromptu
  • Having a motive for saving/investing is one thing, reaching the goal is another
  • Investors and the Financially Tight are more accepting of risk
  • Income vs capital gain preferences
  • Savers prefer income and Investors capital growth
  • Most consumers monitor their finances at least once a quarter

WHERE MONEY IS SAVED AND INVESTED

  • Savings accounts are where consumers hold most of their money
  • Investors have the most diversified portfolios
  • Niche products feature mainly in diversified portfolios
  • If more risk is accepted, then significant sums are invested in risker assets
  • Important assets are diversified at an exponential rate
  • Intra-portfolio diversification is also used to minimise risk
  • Most fund owners seem to understand what they are being charged
  • Cash will remain king over the coming year
  • Investment over the coming year skewed towards affluent Investors
  • ESG products are niche at the moment but they have potential for growth

HOW MONEY IS SAVED AND INVESTED

  • Over six-in-ten saved or invested last year
  • When saving or investing consumers prefer to do so on a monthly basis
  • Investors show a greater preference for lump sum saving and investing
  • If saving and investing themselves, consumers prefer to do it online
  • Affluent men under the age of 45 are key users of fund platforms

THE DRIVERS OF PRODUCT CHOICE

  • Income return the main driver
  • The desired return shapes the factors considered

GETTING ADVICE AND SOURCING INFORMATION

  • Only around half of Savers and Investors feel they can manage alone
  • Only one-quarter can self-manage, but over seven-in-ten have to
  • The Under Advised
  • Less wealthy Investors the most likely to be Under-advised
  • Financial management matches the assets owned
  • The Internet is the preferred information resource for Savers and Investors
  • Under Advised are less likely to consult information sources
  • Professional resources, less used but of most value
  • It’s easier for wealthier individuals to find what they want

SUSCEPTIBILITY TO SCAMS AND MIS-SELLING

  • Almost one-quarter of consumers invest in highly risky products
  • Ownership is strongly associated with wealth
  • Over half of those with wealth of £250,000 or more own these assets
  • Significant gaps in knowledge exposes consumers to scams and mis-selling
  • Only 15% of Savers and Investors have strong protection
  • Less affluent Savers and Investors protected by default, not design
  • One-quarter of Savers and Investors exposed to suspicious activity

THE IMPACT OF COVID-19 ON SAVINGS AND INVESTING

  • Half of Savers and Investors impacted by COVID-19
  • Most Savers and Investors have decided to sit still and ride it out
  • COVID-19 leads to a significant downgrading of sentiment
  • Satisfaction comes from earning a return of 3% or more
  • Despite economic uncertainty, Savers and Investors expect stable returns

List of Figures

Figure 1 The split between Savers and Investors
Figure 2 The types of assets owned by type of consumer
Figure 3 The demographic profile of Savers and Investors
Figure 4 Graphic view of the income, social grade and age effects
Figure 5 The average (mean) wealth held by type of consumer
Figure 6 The average (mean) sums held in savings and investment products
Figure 7 The financial situation of consumers
Figure 8 Consumer motives for savings and financial planning
Figure 9 Financial plans by financial security and type of consumer
Figure 10 The attitudes and characteristics of the Strategists vs. the Impromptu
Figure 11 Confidence in saving/investing the right amount to reach plans/motives/goals
Figure 12 Attitudes to risk by type of consumer, financial security and confidence
Figure 13 Consumer preferences from income vs. capital growth
Figure 14 Return preferences by consumer characteristics
Figure 15 How often consumer check the value of savings and investments
Figure 16 Asset ownership and the most important types of assets for Savers and Investors
Figure 17 The average number of savings and investment products owned
Figure 18 The ownership of saving and investment products by key consumer characteristics
Figure 19 Savings and investment products considered as the most important financial assets*
Figure 20 The relationship between the number of asset types owned and the number of important assets*
Figure 21 The assets held within stocks and shares ISAs and funds
Figure 22 How well fund owners understand specific items/details of their funds
Figure 23 % intending to invest in specific saving and investment products over the coming year
Figure 24 % of Savers and Investors intending to invest over the coming year
Figure 25 The current ownership and interest in ESG products
Figure 26 The percentage of savers and investors who saved or invested money in the past year
Figure 27 How savers and investors have saved and invested over the past year
Figure 28 The main method of saving and investing in the past 12 months
Figure 29 How savers and investors like to save and invest their money
Figure 30 The percentage of investors personally using fund platforms
Figure 31 The factors that drive demand for Savers and Investors
Figure 32 The factors that drive demand by favoured returns
Figure 33 The % of Savers and Investors who are confident in their own financial abilities
Figure 34 How finances are managed and financial competence/knowledge
Figure 35 The six investment and savings groups
Figure 36 The characteristics of the advice groups
Figure 37 The types of assets where professional and DIY management are wanted
Figure 38 The information/advice sources consulted in the last year and the next year
Figure 39 The information/advice sources used in the past year by financial management
Figure 40 How helpful/useful were the information sources used in the last year
Figure 41 The % finding exactly what they were looking for or getting more help/support than planned
Figure 42 The ownership of high risk and sometimes scam-associated products
Figure 43 Ownership of assets associated with scams or unsuitable for most mainstream consumers
Figure 44 The percentage of Savers and Investors owning risky and scam associated assets by wealth
Figure 45 Saver and Investor understanding of risk and consumer protection
Figure 46 Consumer protection against scams and unsuitable purchases
Figure 47 The characteristics of the consumer protection groups
Figure 48 Potentially suspicious events Savers and Investors have been exposed to over the past 2 years
Figure 49 The impact of COVID-19 on Savers and Investors
Figure 50 Saver and Investor responses to the COVID-19 Pandemic
Figure 51 Saver and Investor sentiment with regards to the growth of their wealth over the past year
Figure 52 The average financial returns earned in the past year by Savers and Investors
Figure 53 The average expected financial returns in the next year by Savers and Investors

Note: Product cover images may vary from those shown
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