The cost-of-living crisis has curtailed disposable incomes, prompting some investors to pause or reduce investment activities. In 2023, there were net outflows of £24.3 billion, with equity funds experiencing the largest impact, losing £22.4 billion in net retail sales. However, as economic pressures ease, improving confidence and financial stability are likely to reignite market engagement.
Fluctuations in global markets can create instability. 63% of investors are concerned about how the current economic climate will impact their investment. When investors step back, trading volumes tend to decline. This drop in activity impacts investment platforms that depend on transaction or management fees for revenue.
Engaging consumers with significant savings but who currently don’t invest presents a significant opportunity for the market. Many of these individuals hold misconceptions about the complexity and risks associated with investing. In fact, a third of non-investors with more than £10,000 in cash savings feel they don’t have enough to invest. By addressing these misconceptions and providing clear educational resources to boost understanding, investment platforms can tap into this affluent segment.
This report looks at the following areas:
- Market dynamics, including market share and macro-economic factors
- Marketing trends and innovation in the market
- Usage of investment platforms, including user demographics and preferences
- Likelihood of using digital investment tools in the future and barriers to adoption
- Attitudes towards investing and investing behaviour
While obstacles remain, the UK investment market is poised for growth, fuelled by innovation, new regulations and an improving economic outlook.
Charlie Landsborough, Financial Services Analyst
Market Definitions
For the purposes of this Report, Mintel has used the following definitions:
This Report examines the retail investment market, with a particular focus on investment funds (mainly unit trusts and OEICs). The majority of these funds are available to individual investors (referred to as ‘retail investors’) through fund platforms, advisers or directly from investment firms.
Other common types of investment bought and held by retail investors include individual company shares, investment trusts, exchange traded funds (low-cost, passively managed tracker funds), corporate bonds, government bonds (or ‘gilts’) and life insurance bonds (eg with profits or unit-linked investment policies).
All FCA-regulated investments can be held inside a stocks and shares ISA, making them exempt from income and capital gains tax. They can also be held in a general investment account. Unlike with an ISA, there is no limit on how much an individual can invest in a GIA each year. Hence, they are useful for people who have used up their ISA allowance (£20,000 in 2023/24) and have more to invest.
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EXECUTIVE SUMMARY
- Opportunities for the investment market
- Improving financial literacy is key to encouraging more Brits to invest
- Investment platforms need to dispel the myth that investing requires large sums
- Investment platforms need to compete on more than just fees
- Market dynamics and outlook
- Market size & forecast
- Steady growth in gross retail fund sales expected
- Net retail sales declined for the second consecutive year in 2023
- Graph 1: net retail sales, by asset class, 2021-23
- Technology is redefining the investment landscape
- Graph 2: method of arranging or buying investments, 2024
- The market is becoming increasingly competitive
- Graph 3: investment platforms/apps or digital wealth manager/guidance services used in last two years, 2024
- What consumers want and why
- Many choose not to invest despite high cash savings
- Graph 4: consumers with zero investments, by cash savings amount, 2024
- Graph 5: amount of cash savings held, 2024
- Nearly a third of non-investors plan to start investing
- Misconceptions could be holding back greater participation…
- …presenting opportunities for providers to tackle them
- Convenience and reputation drive choice of platform
- Graph 6: key factors influencing choice of investment platform/app or digital wealth manager/guidance service, 2024
- Most investors have a low-to-moderate risk tolerance
- Two thirds worry about the economy’s impact on their investments
- Innovation and marketing
- Social media is increasingly shaping the decisions of young investors…
- Graph 7: percentage of consumers who have used investing tips they’ve seen on social media in the last 12 months, by age, 2024
- …and interactive investor is embracing it with the launch of ii Community
- Investment fees remain in flux
- Advertising spend declines for the second successive year
- Graph 8: total above-the-line, online display and direct mail advertising expenditure on retail investments, 2019/20-23/24
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MARKET DYNAMICS
- Market size
- Gross retail fund sales bounce back
- Graph 9: gross and net retail investment fund sales, 2018-24
- Investor confidence remains fragile despite signs of recovery
- Market forecast
- Steady growth in gross retail fund sales expected
- The investment market will remain robust
- Market segmentation
- Net retail sales decline for the second consecutive year…
- Graph 10: net retail sales, by asset class, 2021-23
- …driven by substantial outflows in equities
- Passive funds kept climbing as active funds stumbled
- Graph 11: net retail funds sales, by type, 2021-23
- Channels to market
- Platforms continue to lead the way despite downturn
- Graph 12: gross retail sales, by channel, 2020-23
- Retail investors are turning to investment platforms
- Graph 13: method of arranging or buying investments, 2024
- Technology is redefining the investment landscape
- Investment platform market share
- The market is becoming increasingly competitive
- Graph 14: investment platforms/apps or digital wealth manager/guidance services used in last two years, 2024
- Hargreaves Lansdown faces challenges engaging the next generation
- Graph 15: investors who have used Hargreaves Lansdown in the last two years, by age, 2024
- AJ Bell continues to strengthen its competitive position
- Market drivers
- Consumer confidence is on the mend, but remains fragile
- Graph 16: consumer financial confidence index, 2016-24
- Inflation eases, but affordability concerns remain high
- Graph 17: CPI inflation rate, 2021-24
- The UK stock market is falling behind its global counterparts
- Elevated Base Rate is limiting retail investors’ ability to invest
- Regulatory and legislative changes
- Advice Guidance Boundary Review opens new doors for providers to assist consumers
- Consumer Duty requires platforms to prioritise better outcomes for consumers
- FCA and government propose reforms to retail disclosure requirements in financial services
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WHAT CONSUMERS WANT AND WHY
- Value of savings and investments
- Over a third of Brits have £10,000 or more in savings…
- Graph 18: amount of cash savings held, 2024
- …yet many still choose not to invest
- Graph 19: consumers with zero investments, by cash savings amount, 2024
- Nearly half of Brits have investments
- Graph 20: [no title]
- Investing is becoming more accessible to everyday consumers
- Graph 21: value of investments, by value of cash savings, 2024
- Types of investments held
- Stocks continue to be the most popular investment choice
- Graph 22: types of investments held, 2024
- Providers must help consumers align their investments with their risk tolerance
- Crypto emerges as a top choice among young investors
- Graph 23: types of investments held, by generation,2024
- ETFs are capturing a growing share of the market
- Nearly one in seven investors don’t know the details of their investments
- Future expectations among non-investors
- Nearly a third of non-investors plan to start investing
- Graph 24: plans to start investing in the future among non-investors, 2024
- Young Brits are eager to take their first steps into investing
- Graph 25: plans to start investing in the next 12 months, by generation, 2024
- Addressing concerns is key to engaging wealthy savers
- Barriers to investing
- Misconceptions could be holding back greater participation
- Graph 26: ‘I don’t currently have any investments because I don’t…’, 2024
- Highlighting entry-level options will be key to removing affordability barriers
- Greater educational efforts are needed to boost investing uptake
- Many hesitate to invest due to perceived risks and lack of trust
- Key factors affecting choice of investment platform
- Convenience and reputation drive choice of platform
- Graph 27: key factors influencing choice of investment platform/app or digital wealth manager/guidance service, 2024
- Cost remains a key factor for investors…
- …but investment platforms will need to compete on more than just fees
- Established brands must leverage their reputation and trust
- Consumers want platforms to simplify investing
- Lead with learning to engage young investors
- Graph 28: influence of educational resources when choosing investment platform, by generation, 2024
- Investment risk appetite
- Most investors have a low-to-moderate risk tolerance
- Graph 29: consumers approach to investment risk, 2024
- Investment risk preferences vary by age
- Graph 30: consumers approach to investment risk, by generation, 2024
- Providers need to emphasise the advantages of long-term investing
- Graph 31: consumers approach to investment risk, by cash savings amount, 2024
- Attitudes towards investing
- Two thirds worry about the economy’s impact on their investments
- Graph 32: attitudes towards investing, 2024
- Investors say they rely on gut feeling when making decisions
- Social media is increasingly shaping the decisions of young investors…
- Graph 33: percentage of consumers who have used investing tips they’ve seen on social media in the last 12 months, by age, 2024
- …and investment platforms are embracing it
- Brits prioritise green investments but not at the expense of returns
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INNOVATION AND MARKETING TRENDS
- Competitive strategies
- Hargreaves Lansdown shareholders approve £5.4 billion takeover
- Robinhood embarks on its first international expansion
- Moneybox secures new investment to accelerate growth
- Launch activity and innovation
- Interactive investor launches ii Community to boost investor engagement
- Trading 212 launches its new payment card
- eToro partners with ARK Invest on new Smart Portfolio
- Investment fees remain in flux
- Advertising and marketing activity
- Advertising spend declines for the second successive year
- Graph 34: total above-the-line, online display and direct mail advertising expenditure on retail investments, 2019/20-23/24
- interactive investor continues to ramp up advertising spend
- Graph 35: total above-the-line, online display and direct mail advertising expenditure on retail investments, by advertisers, 2023-24
- AJ Bell looks to shake up the investing industry
- Vanguard continues its ‘Value to Investors’ brand campaign…
- …with third instalment ‘Loving the Value’
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APPENDIX
- Market forecast data and methodology
- Market forecast: underlying data
- Forecast methodology
- Report scope and definitions
- Market definition
- Abbreviations and terms
- Generations
- Consumer research methodology
- Nielsen Ad Intel coverage
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