Let’s make 2020 the year we change the way we save
As we enter a new decade, Richard Wilson, CEO, interactive investor, picks out seven changes he’d like to see in 2020.
We are constantly wowed with new technology that improves our lives. Some of it solves problems we never even knew we had – yet we soon come to depend on the innovation.
Take phones. We now use WhatsApp to voice or video connect with anyone, anywhere for free, and we wave our phones to make a cash purchase. Both were unthinkable just 10 years ago but are the norm as we enter a new decade.
Most of us don't really know how these things work, we just know that they do and we trust them.
Yet when it comes to investing, many of us still face solutions we don't understand, services we don't trust and obscure charges that reinforce the possibility that, somewhere in the chain, we are being ripped off. We don't feel served. We don't have control.
As an industry, we need to work harder to help customers achieve financial independence. There’s lots to do – and that goes for interactive investor too. We celebrate our 25th anniversary this year and we have the scale and resources to rattle a few cages.
Here’s what the industry needs to do in 2020:
1. Make investing simpler
Having moved from a quarterly to a far more intuitive monthly flat fee, we are constantly exploring ways to simplify and add value. This week, we announced we are removing our 99p regular investing charge. Combined with our free trades, this means most interactive investor customers pay no more than their monthly fee. There’s no smoke and mirrors, no confusion, just a flat fee, in pounds and pence.
2. Make switching easier and quicker
While exit fees might be on borrowed time (we permanently scrapped them well over a year ago) they remain a harsh reality for many.
2020 needs to be the year the industry waves goodbye to them for good. That doesn’t just mean investment platforms. Pension providers have grown fat and complacent, relying on customer inertia and exit charges to continue to deliver poor customer outcomes at a high cost. Expect more noise from us on this.
The industry also needs to make switching far easier, quicker and more transparent. The FCA backed STAR initiative – brought in to improve this muddy and sluggish process – has so far not turned out to be the lightning rod we need. I don’t say this lightly – we are founding members.
3. Improve shareholder democracy
The elephant in the room is the number of votes on investment platforms currently going to waste – a massive and neglected issue. We are looking at ways to tackle this, but this is a significant industry issue, and we would like to see more leadership from consumer, trade and regulatory bodies (the Association of Investment Companies has done good work comparing platforms in relation to voting, which is a great start) .
While some DIY shareholders might feel their voices are drowned out by large institutions, there is strength in numbers. Some 100,000 of our customers are signed up to our voting service – that’s almost a third. But there’s a difference between being registered to vote and getting out to do it.
We score well when compared with competitors at facilitating shareholder voting. We don’t charge for it either, and nor should anyone. But I’m acutely aware that more needs to be done. Meanwhile, our customers can register to vote here and for those not registered, I would urge them to do so. It’s free and easy.
4. Cut the jargon
Making things clear, simple and easy to understand is a must. Are ‘alpha’, ‘sharp ratios’ and ‘smart beta’ the best ways to describe performance? Which words should we be putting on the naughty step? Let’s start with ourselves, a D2C self-directed platform in the direct-to-consumer investment market. How clear is that? Exactly.
5. Lift the lid on ethical investing – the industry needs to catch up
We’ve worked hard to educate customers about ethical investing, and last year compiled a long list of the ethical investment universe, broken down into three ii ACE investment styles (that’s Avoids, Considers and Embraces). We also launched our ethical ACE 30 rated list, the UK’s first, and have just launched an ethical growth portfolio.
Our research tells us that many investors want to invest ethically, they just don’t know where to start. We’ve tried to help, but the wider industry still has a long way to go. The Investment Association has done some good work on this issue, but its Responsible Investment Framework final report, issued late last year, was not nearly consumer-friendly enough.
6. Clean up rated lists
The suspension of the Woodford funds last year rightly raised questions about their management and governance. Investment platforms’ rated lists have also been held to the highest level of public scrutiny.
It is absolutely right to ask why some platforms recommended these funds. We never included the Woodford funds on our Super 60 rated list, and TD Direct Investing, which we acquired in 2017, removed Woodford Equity Income from its own rated list way back in 2016 because of liquidity concerns.
Rated lists are only as good as the governance and business models of the companies who run them. I have said time and again that in putting forward investment ideas, platforms have a duty to ensure investors’ interests are at the heart. More importantly, they need to be able to prove it.
We are one of only a few platforms to include investment trusts alongside funds and ETFs on a rated list. Our charging structure does not favour one instrument over another, and nor should our rated list.
7. More financial education in schools
It’s no wonder many of us feel anxious about investing – we've been trained this way for generations.
In school we did not learn how to save and invest. So, we fail to understand the risks and are not confident articulating our goals.
Five years after financial education finally made it on to the national curriculum, it still jostles for space and is not a standalone subject.
In the latest annual London Institute of Banking and Finance Young Persons’ Money Index, 82% of students said they want more financial education in school and 69% worry about money. Another 60% want financial education as a separate subject.
This should be the year the Government starts taking financial education seriously. It needs more time and more resource with better guidance for teachers. And it needs to be a rigorous, standalone subject.
We will continue to celebrate great financial education in schools through the Moneywise Personal Finance Teacher of the Year Award, which we proudly sponsor. And we will continue to champion high quality, independent journalism, not least through our own magazines, Moneywise and Money Observer.
I want to make 2020 the year we, as an industry, change for the better.