The Irish financial services industry is not reaching enough potential investors in the Republic and more should be done to encourage household i
estment, according to two new reports.
On Tuesday, the Banking and Payments Federation Ireland (BPFI) released new research, showing that just 44 per cent of Irish adults hold any investments at all.
Over three-quarters of the 1,000-plus respondents to the lobby group’s survey said they do have separate savings or deposit accounts, particularly people over the age of 65.
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The report echoes a piece of research published by the Central Bank of Ireland on Monday, which indicated relatively low levels of engagement with capital markets among Irish households compared with the EU average.
Households in the Republic hold about 38 per cent of their financial assets in deposits and cash, rather than in equities, debt securities and other instruments.
This indicates a relatively low level of participation in capital markets compared to the EU average, said the central Bank, although indirect Irish participation through products like pensions is above the average across the bloc.
According to the research, retail investors tend to be wealthy people in employment with a “higher level of educational attainment”, said the central bank.
A lack of knowledge of investment products is among the key barriers identified in the report. Just 15 per cent of the population feel they have high levels of knowledge of investment products, the study indicated.
More than half who said they are not investing noted that clear guidance about how to start go about it would encourage them to do so.
BPFI chief executive Brian Hayes said his group’s research indicates there is a “potential to increase the number of people investing” in the Republic.
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“The European Commission has proposed that member states, including Ireland, consider developing a new form of savings and investment account,” he said.
“Any new account introduced should be easy for consumers to understand and to open, have clear tax benefits and give investors freedom to invest as little or as much as they want and withdraw funds when it suits them.”
Central bank deputy governor Colm Kincaid said its report suggests that households are not getting the full benefit of what financial services could do to help them provide for the future.
“A properly functioning financial market must reflect and serve the needs and preferences of all consumers and investors,” he said. “This research provides a comprehensive society-wide insight into those needs and preferences which can inform public policy at an important juncture, as we look to improve access to capital markets for retail investors.
“In particular, the research shows that, as things stand, financial services are not effective in reaching the full population of potential investors.”
Financial literacy is another key barrier, and the Government’s recently published National Financial Literacy Strategy must maintain a “focus on investments and pensions”, said the central bank.
