The Financial Conduct Authority (FCA), which warns that inflation is expected to reach 5% next year, has advised that the 1.7 million UK-based savers can better protect their money on the stock exchange.
As inflation accelerates ahead of savings rates their rainy-day funds will also be decreasing in real terms.
FCA hopes that savers might consider moving money from the bank to low-risk investments. Could there be an issue with this plan?
Advice: Financial Conduct Authority hopes that cash-rich savers might consider moving their money away from banks and towards low-risk investment options
According to Finder.com, DIY investing is on the rise, but take-up varies across generations.
The likelihood of older people investing was lower: Only 41% of the over-75s said they were comfortable making investments after the pandemic, compared to 60% of 55-75 year olds.
You can access many investment products online. You can’t invest without the internet.
High Street
It has not always been the best choice to invest through your bank. Retail banking was plagued with controversies in 2000, including high fees, low performance and misselling.
The banks now offer tailored offers for customers every day. NatWest, Barclays, Lloyds, Santander, HSBC offer investment funds which allow customers to distribute their money among shares, funds, or other assets.
There are many services that can be accessed online. However, customers of Santander and Barclays have the option to book a telephone call with an investment adviser.
It’s possible to do it yourself
There are many offline investment options available when it comes to platforms for investing.
Sarah Coles of Hargreaves Lansdown says that despite being not comfortable online, it doesn’t necessarily mean you should avoid investing. Fidelity and Charles Stanley are also big platforms that offer traditional investment models.
Generation gap: Older people remain less likely to invest: with only 41% of over-75s saying they felt comfortable investing after the pandemic
The customer can set up an account via phone. After that, they pay in by debit card, bank transfer, or direct debit. You can then call a broker to buy funds or shares, and send them instructions via post.
You can choose which investments you want to make. You can still read information about funds and shares in the newspapers. You can also find their guides on platforms.
They may, however charge customers offline higher fees in order to pay for costs. Hargreaves Lansdown charges phone or postal customers a 1 per cent fee (with a minimum £20, and maximum £50) on each order.
For online customers, the charge is £11.95 for shares and investment trusts — while funds can be bought and sold without any fees at all.
This means an offline customer investing £20,000 evenly across five funds would pay £200 more.
Get advice
You can also hire a financial advisor to help you manage your money.
High Street IFAs are independent financial advisers who will help clients set up an investment portfolio using a regulated platform. However, this is not free.
Most companies charge an initial meeting and then an annual percentage fee depending on the portfolio. Which one? says the latter can hit 1.94 per cent —about four times the amount charged by platforms: and it can affect long-term returns.
Platform Vanguard research showed that a 2 percent annual fee for 25 years can result in a 40% loss in potential returns.
Compounded means that you are not only losing 2 percent per year but also missing out on the future return of this extra money.
Before you pay for a financial advisor, it is important to do your research. The firm Unbiased — which has a telephone helpline (0800 023 6868) — may be able to help you find one.
Mixed options
There are many options for those with internet access. Myron Jobon from platform Interactive Investor states that an affordable option to investing is signing up for a monthly plan.
Customers create a plan online and let their funds grow via direct debit.
These numbers are very helpful: Charles Stanley, 020 390 1236. Fidelity: 0333 300 33350 Hargreaves Lanzdown: 01179 0009 000