Is now really a good time to start investing?

Imagine being a fly on the wall at the ideas meeting that UK government officials must have held to decide how to persuade reluctant cash hoarding Britons to invest, invest, invest.

“As a first step, let’s slash the cash Isa limit. That will force people to open a stocks-and-shares Isa!”

“Let’s get veteran ads agency M&C Saatchi to concoct a huge campaign telling people to invest and get the investment industry to pay for it!”

“And what about loosening the regulatory regime so normal people can actually ask their financial providers for investment advice instead of relying on ChatGPT and TikTok?”

Well, if that doesn’t convince nervous cash huggers to pump their money into global stock markets at a time when more seasoned investors are panicking about the AI bubble, then I don’t know what will! But this is not the fever dream of a Budget-weary FT columnist. All of these action points are well on their way to being ticked off.

Tuesday night’s Martin Lewis Money Show on the basics of investing was a TV first — a live primetime special about investing — and an excellent primer, carrying many important caveats. It’s worth viewing on catch up, if only to watch the audience reaction when a financial adviser on the panel said you’d need £75,000 for her to be interested in taking you on as a client.

But here lies the root of the problem. Fewer than one in 10 Britons can access regulated financial advice. The regulator estimates there are 7mn people with more than £10,000 in long-term cash savings who, in the long run, would be better off investing in stocks. Yet most fall into this yawning advice gap. As a result, nearly one in five who do invest say they turn to social media for help making investment decisions.

So the real game changer this week was the Financial Conduct Authority paving the way for the launch of targeted support next April. Soon, high street banks, investment platforms and pension providers will be able to nudge customers into making investment decisions by making generic suggestions to groups of similar consumers.

These could be reactive responses to customers asking for support with their investment choices. They could also be proactive interventions — for example, alerting new investors who have sunk £10,000 into a single stock to the risks, and promoting the benefits of diversification.

Much more useful than bland “guidance”, this regulatory third way will stop short of making a personal recommendation to customers based on their detailed circumstances. Hence, firms who become authorised to provide these services can avoid the onerous requirements that have made fully regulated advice so expensive. Combine this with ever-improving digital tools on finance apps (often powered by AI) and it is possible to see how cheaper mass market advice models could rapidly be scaled.

However, critics of the project fear targeted support could all too easily tip into targeted sales. Given the extremely frothy nature of global stock markets now, providing the right level of risk warnings is absolutely crucial. Punters must be prepared to invest for the long term and be able to ride out the ups and downs by building an emergency fund first.

Hence there is a lot of institutional nervousness about making proactive suggestions to non-advised clients, says Holly Mackay, founder of Boring Money. We both agree that a market correction next year would be really bad timing for these new and positive long-term changes. This could mean April’s launch of targeted support isn’t the big bang some expect.

April is also when M&C Saatchi’s government-backed UK Retail Investment Campaign will kick off, with 19 financial firms teaming up to extol the benefits of investing (note, many of these will offer targeted support).

Despite rosy memories of the “Tell Sid” campaign in the 1980s, this succeeded because punters were handed the chance to purchase discounted shares in British Gas that would quickly net them a short-term profit. That’s not the message we need to give people in the current environment. A stock market crash would be the worst possible advertisement. You persuade nervous investors to take the plunge, only for the value of their portfolio immediately to do the same. The risk is they will panic, crystallise their losses and vow never to invest again.

If I were a participant in this imaginary meeting, I would have banged my fists on the table and insisted that workplace pensions should be the primary focus of any campaign. To create a nation of investors, why not start with getting folks better to understand and engage with an investment product that most of them already have?

Pensions are long term by their very nature. With income tax thresholds entering the deep freeze, they are also a very useful way of navigating onerous marginal rates. Yet the chancellor has missed the memo on this.

The planned future raid on salary sacrifice will make pensions saving more complicated and expensive for private sector employers and staff, while the unsustainable public sector pensions system staggers on. And damaging rumours about tax-free cash in the run-up to the last two Budgets have caused billions of pounds to be withdrawn from pension funds, much of it no doubt now languishing in cash savings accounts. Not very joined up!

While automatic enrolment has nudged millions into investing in a workplace pension, it has an inbuilt design fault. PensionBee estimates there are 20mn orphaned pots that are no longer being contributed to. More than half contain less than £1,000. Yet the process of transferring pensions is too long and complex, and the promised dashboard still hasn’t materialised. So is it any wonder the nation has “lost” an estimated £30bn of pension investments?

Deciding whether to transfer or consolidate multiple pots is an area where consumers have been crying out for support. The regulator has launched a separate consultation on this — but changes can’t come soon enough.

I’ll leave you with a positive prediction. With so many firms jumping aboard the “let’s get Britain investing” bandwagon, fees could be cut as they compete for new business. So be prepared to move your money. If markets take a turn for the worse next year, reducing the amount of fees you pay is one cost that every investor should look to control.

Claer Barrett is the FT’s consumer editor; [email protected]