New research from investment specialists BondMason (www.bondmason.com) shows that Brexit concerns are a minor influence on Britain’s army of private investors and savers, with lethargy a bigger influence than two years of warnings from many prominent institutions and commentators.
BondMason has been investigating why so many of us are keeping large amounts of money in the bank, despite its value and purchasing power being reduced by sustained inflation coupled with low interest rates.
The latest research was conducted in August for BondMason by accredited market research agency DRG, who interviewed over 1,000 UK adults holding more than £25,000 of savings or investments. A key finding was that only a small percentage of investors were worried by siren warnings over Brexit, but many remain stuck in a malaise over where to keep their money.
Stephen Findlay, CEO of BondMason, explains:
“Ever since the financial crisis of last decade, Britain’s savers have been keeping a large amount of their wealth in bank accounts which, thanks to the years of low interest rates and sustained inflation, has proved to be a poor strategy.
“Holding large amounts of money in the bank is a strong indicator of uncertainty as people park their cash while deciding what to do. The big question is why this has continued for so long. Our research has confidently ruled out Brexit as a factor, with few people with substantial savings giving this as a reason for not investing.”
Key findings from the research include (see chart below):
- Only 11% of private savers and investors with £25,000 or more in the bank are keeping their money in cash because of fears over Brexit. This is the same proportion who are keeping it there in hope of an interest rate rise.
- By contract, investor confusion regarding the different financial products is one of the biggest drivers of inactivity, with 9% of people unaware of the alternatives to bank savings accounts and 22% thinking all other options are too risky.
- Lethargy is also a driver of inactivity, with 13% saying they had “meant to invest it elsewhere, but not got around to it”.
- Most savers significantly underestimate the impact of inflation on their savings. For instance, if you had £10,000 in a zero-interest bank account then, over the past three years, it will have lost around £650 in value. About 50% of people interviewed thought its impact was substantially less, with nearly 10% thinking inflation would have no effect.
- Only 24% of those with more than £25,000 in the bank actually felt “a bank account is the best place to safely earn a good return”.
Stephen Findlay, CEO of BondMason, said:
“The only guarantee with keeping your money in the bank is that, for the foreseeable future, it will lose value because of inflation continuing to be higher than interest rates.
“The many millions of savers who have kept too much of their money languishing in bank accounts over the past few years have missed out on much better potential returns elsewhere. For instance, in exchange for putting their capital at risk, they could have bought Fixed Term Bonds, which offer a return that is higher than most bank accounts. They have also missed out on one of the longest equity bull runs, as well as decent returns from property investments because of this market’s strong performance.
“People are right to be careful and do their homework regarding investments, but there is a difference between being cautious and being trapped by indecision. Also, our research found too many people, despite being uncertain about different financial products, are unwilling to speak to financial advice professionals who can help them plan their investment strategy”
Tim Prizeman / Kewalin Evans, Kelso Consulting (PR advisors to BondMason)
KevE@KelsoPR.com 020 7242 2286
Karen de Silva, Head of Brand Marketing, BondMason
Tel: +44 (0) 1582 802 000
BondMason is the UK's leading Direct Lending services exclusively for investors: sourcing and filtering the best lending opportunities from across the entire UK Direct Lending market. With access to more of the UK’s Direct Lending market than anyone else, BondMason’s experienced investment team conducts ongoing due diligence on the UK’s Specialist Direct Lenders and P2P platforms and has reviewed over 100 lending partners to date. The team vets every loan using rigorous selection criteria, focusing on asset-backed lending and diversification to seek to minimise risk and achieve attractive risk-adjusted returns.
About the research
BondMason’s research was conducted in August 2018 by accredited market research agency DRG who interviewed a sample of 1,014 UK adults with at least £25,000 in money or investments (including, if they have them, a private pension fund and second property).
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Warning: Nothing in this article should be construed as advice. Your capital is at risk.