Using behavioural science to change the way we engage people with investing could significantly shift investment behaviours across the nation, according to a major new study from St James’s Place (SJP)1. 

  • SJP finds simple, behaviour-led interventions could help create a new generation of investors, with the potential to unlock 1.8 million new investors and £2.4 billion of additional investment in one year alone
  • Younger people respond most strongly, with investment confidence and understanding increasing 2 – 3x more than for older generations
  • SJP research identifies major engagement gap, with over half (53%) of 18-34 year-olds feeling current investment communications rarely feel useful to their personal situation
  • Findings support a behaviour-led shift in how the investment industry engages consumers, aligned with Government and FCA efforts to build a stronger UK investment culture

 

Using behavioural science to change the way we engage people with investing could significantly shift investment behaviours across the nation, according to a major new study from St James’s Place (SJP)1.

In partnership with Ipsos, SJP conducted an experiment involving almost 6,000 people to analyse the behavioural barriers between intention and action when it comes to investing2.  The results suggest that, if similar behavioural approaches were adopted more widely, this could increase intentions to invest significantly. Adopting different engagement approaches has the potential to unlock the power of investing for 1.8mn new UK investors equating to up to £2.4bn in additional investment over one year3.

The UK faces a significant long-term financial security challenge, with around 7 million adults holding over £10,000 or more in cash savings understood to be potentially missing out on the benefits of investing4. Addressing this is a major priority for the Government, Financial Conduct Authority (FCA) and investment industry, which have committed to a range of reforms and initiatives aimed at shifting the UK towards a more confident, long-term investing culture5. SJP’s latest study reveals a particular opportunity to get things right for younger people and encourage a new generation of investors.

 

Creating a new generation of investors – young people respond to behavioural interventions

SJP’s experiment, conducted in partnership with Ipsos, found three behavioural interventions had a profound effect on younger people versus their older peers:

  • Young people respond to behavioural interventions which make investing feel socially normal, relevant to their personal values and sense of self, and connected to their future.
  • 58% of those aged 18-34 are more comfortable with investing after seeing an intervention message – compared to 36% of those aged 35-54 and 20% of those aged 55-75.
  • Investment understanding also improves more post intervention for 18–34-year-olds (56%) than their older counterparts (35-54 year olds: 34%, 55-75: 17%).

As part of this experiment, SJP tested how behavioural interventions influenced how much of an extra £100 per month participants would invest. The results showed a statistically significant impact on intended investment levels, with messaging that made investing feel tangible and concrete reducing uncertainty and misconceptions among investors. High-tangibility framing of the message delivered the strongest uplift, significantly increasing the proportion of the £100 the participants said they would invest, compared to those exposed to a neutral message.

Whilst changing investment behaviours across the nation is multi-layered, the findings illustrate the scale of the opportunity. Based on the results, SJP and Ipsos modelling indicates that these interventions could equate to as many as 1.8m new investors and an additional £2.4bn of investment in just one year, if replicated at scale.

 

The shift the investment industry needs to make – new research shows over half of 18–34-year-olds feel current communication rarely feels useful to their personal situation

The need for change across the industry is supported by findings from the study which show that retail investment firms aren’t resonating with many young people. Despite having the most time until retirement to invest and make a positive difference, over two fifths (44%) of those aged 18-34 say they don’t see themselves as investors. Meanwhile, more than a third (34%) say they think investing is too much effort to be worth the returns they would get, and the same proportion (34%) say they don’t see investing as something people like them do in everyday life.

The challenge is compounded by the way investment firms currently communicate. Indeed, while six in ten (59%) 18–34-year-olds say they tend to read the financial information or advice they come across, more than half (53%) say the Information they encounter rarely feels useful to their personal situation. This is the opposite to what SJP’s behavioural experiment found resonated most – making investing socially normally, personally relevant and connected to a sense of future-self.


SJP calls for a behaviour-led approach to changing investment culture 

As a result of the findings, SJP is reviewing how it integrates a behaviour-led approach into its own marketing and communications. It is also launching a 4-point plan6 of recommendations for the investment industry and policymakers to create the shift required to build a more inclusive, resilient UK investment culture and support the emergence of a new generation of investors:

  1. Build campaigns that normalise investing and speak to different groups: Behavioural findings show that when investing feels socially normal, personally relevant and connected to people’s future selves, they are more willing to invest
  2. Integrate behavioural principles into how we communicate: Behaviour changes when investing is experienced differently. People are more likely to act when they can picture their future self, see that people like them invest, and recognise investing as consistent with their identity.
  3. Put tangibility at the centre of investment communications: High tangibility framing, clear numbers and realistic examples, is one of the most effective ways to shift how much people say they would invest from an extra 100 pounds a month. This is especially true for 18 to 34-year-olds, who have the longest time to benefit from compounding.
  4. Build a pipeline of support that helps people act: Changing investment behaviour at scale requires work on many fronts. Behavioural improvements are most effective when backed by a clear ladder of support. That ladder runs from guidance and targeted support through simplified advice and full financial advice. Each step should help people take the next action that is right for them.

 

Mark FitzPatrick, Chief Executive at St James’s Place, said: “We are facing a significant challenge to get more people investing and build a true UK investment culture. What this research makes clear is that the challenge isn’t a lack of interest in investing, but a gap between intention and action, particularly among younger people. 

“Obviously, there are a number of elements that need to work in tandem here, but how we communicate as an industry can make a material contribution. If we want to build a genuinely inclusive investing culture, we need to think differently about how people experience investing in practice. That means embedding behavioural insight into how we communicate, how we support decision-making and how we help people move from cash saving to investing with confidence.

“By making investing feel more normal, more personally relevant and more connected to people’s future lives, we have a real opportunity to help a new generation engage earlier and build stronger long-term financial security. Getting this right matters well beyond individual outcomes; a stronger UK investing culture is vital to the UK’s long-term prosperity.”

– Ends –

 

For further information, please contact:

St. James’s Place

Andrew McLagan

[email protected] 

07795 306666

 

Lansons

Anthony Cornwell / Libby Hendry

[email protected] / [email protected]

07929 730 785 / 07929 730 787

 

Notes to Editors

  1. Shifting behaviours to create a new wave of investors
  2. SJP commissioned Ipsos to conduct a nationally representative behavioural experiment with 5,916 participants, randomly assigning them to investment messages based on four behavioural principles (future self, social norms, shame reduction and identity motivation) and varying levels of tangibility. By comparing pre- and post-exposure responses against a neutral control group, the study measured changes in intended investment behaviour and confidence, isolating the impact of each behavioural intervention.
  3. Up to 1.8 million people have an increased intent to invest (assuming they have an extra £100 a month). They will switch to either starting or adding to existing investments (i.e. they move out of saying they would invest zero of the £100). Exact number from the calculation = £1,765,471. The value of this potential additional investment is £202.3 million (£202,845,887), which annualised = c. £2.4 bn (£2,434,150,645).

    1. Note that the key assumptions here are:

      This is the total addressable value. Any campaign will only reach a certain proportion of the population. It assumes that people will have an extra £100 each month (which could for example be via a salary increase). Estimates are based on the percentage of people that expressed an intention on whether they would invest. Note that this relates to the ‘Future Self’ intervention which had the highest impact (relative to the other interventions) on intention to invest.

  4. 2024 FCA Financial Lives Survey.
  5. Reforms and initiatives include:
    1. Leeds Reforms to rewire financial system, boost investment and create skilled jobs across UK - GOV.UK
    2. FCA sets out landmark package to boost UK investment culture | FCA
    3. Major Finance Firms Unite to Launch UK Retail Investment Campaign | Press Releases | The Investment Association
  6. Shifting behaviours to create a new wave of investors