Industry Updates

Retail ETF uptake to ‘foster better investment culture’ in UK, report finds

Attitude towards investing lags ETF powerhouse Germany

Theo Andrew

Andrew Prosser InvestEngine

Retail investor uptake of ETFs in the UK will help “foster a better investment culture” in the market, a new report by digital investment platform InvestEngine has said.

The report, titled Building a nation of investors, said the ETF wrapper’s low cost, diversification and ease of use will encourage more people to reach their financial goals through a ‘little and often’ investing approach seen in the boom in ETF savings plans on the continent.

It compared the UK to the German market, where despite sharing similar financial goals – such as growing wealth, holidays and retirement – it found individuals in Germany would much rather invest their money than save it.

According to a survey of 4,000 people split between the UK and Germany, 48% would prefer to invest their money over saving it versus 33% in the UK.

Furthermore, 53% of Germans agreed investments offer better returns than cash savings versus 55% of Brits who disagreed or “didn’t know”.

This is highlighted by the number of savers using a cash ISA (19%) over a stocks and shares ISA (14%) to fund their retirement. German investors also ranked the UK as among the worst when it comes to money management – along with Italy and the US – while ranking themselves as the best.

They also start at a much younger age, with the 18-34 group saving or investing their money, compared to the 35-54 age bracket in the UK.

Andrew Prosser (pictured), head of investments at InvestEngine, said: “We want UK investors to be as comfortable in understanding the benefits of long-term investing as they are Germany.

“They invest cash instead of saving it and start at a much younger age to harness the benefits of low-cost investing. We are hoping the ETF vehicle is as beneficial to the UK public as it has been to the German investing public.”

In July, InvestEngine launched its own ETF savings plans allowing its UK customers to make regular investments from as little as £10 a week.

Germany is the largest market for ETF saving plans in Europe as German consumers continue to embrace an investing culture fuelled by the rise in digital savings platforms.

The number of ETF savings plans in Europe is set to quadruple over the next five years, from 7.9 million in September to over 32 million in 2028, according to the latest figures by BlackRock and extra ETF.

ETF issuers such as BlackRock are betting big on the rise of this retail in Europe via several investments and partnerships including digital bank Monzo and German fintech Upvest.

The report also made a series of recommendations to make investing more accessible to retail investors in the UK, including a single ISA covering savings and shares, renaming ISAs to ‘Tax Free Accounts’ and better financial education.

The survey found over half of people in the UK had never heard of an ETF versus 17% in Germany.

“There is still a huge financial education gap to get people investing in ETFs and the long-term. It comes down to us and other responsible investment providers to educate people,” Prosser said.

“It is also up to government policy, we need financial education high up the education budget so that people understand investing for the long run does provide better returns.”

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