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Attracting retail investors to EU capital markets - Financing of the EU economy
Technology and supporting retail investment
By Stenning Tony - Head of EMEA Retirement and Retail, BlackRock
The barriers, both real and perceived, facing would-be investors are significant. While MiFID and RDR improve the quality of financial advice, it is more expensive to access. Many people find traditional advisers intimidating, struggle to understand financial jargon, or are put off by the on-boarding process.
It is far easier to take out substantial unsecured credit online than to invest in the most basic products. People find the volume of information they have to provide intimidating. Many prospective clients are lost during this process. The introduction of a “digital investment passport” would simplify access to investment advice.
Firms can use technology to engage better with customers and encourage the wider population to move from cash savings to investing in markets. Advisers need to think how to use technology to communicate better with clients to address consumer biases. Aggregation of holdings enabled by a digital ID would allow investors to view their exposures as a whole. So when markets move investors can make informed decisions on whether to act or hold onto their investment.
We believe that there will be increasing growth in digital platforms and advice for savers either from new entrants or as a result of greater use of technology by existing providers. These platforms are rarely entirely automated as consumers are reluctant to move to a full digital model; rather they prefer the backup of a human adviser via telephone or online support to validate their choices.
It is far easier to take out substantial unsecured credit online than to invest.
Consumers will only benefit from technological innovations if products are relevant to them. Distributors and product providers are drawing lessons from behavioural finance to design simple products that explain the benefits of investment to consumers who may only have experience of bank deposits. We also need consistency of language from industry, regulators, and government backed entities to break the cycle of low engagement, poor financial capability and resiliency. Future legislation and regulatory guidance in this area should assess the complexity of consumer behaviour to avoid unintended outcomes.