Half of UK adults say risk warnings on financial promotions put them off investing, new research from Scottish Friendly reveals, as the mutual’s chief executive Stephen McGee backs calls for a more balanced approach to communicating investment risk and long-term opportunity.

As part of its latest Family Finance Tracker research, Scottish Friendly found that over half (51%) of UK adults say risk warnings put them off investing in stocks and shares.

The findings come amid ongoing industry and regulatory discussion around how investment risk is communicated, including recent FCA commentary encouraging firms to ensure risk communications are clear, balanced and support consumer understanding. Concerns are that overly stark or technical warnings may be reinforcing excessive caution rather than helping people make informed, long-term decisions.

Scottish Friendly’s research further suggests it is not distrust of providers that is holding people back. Just one in 10 say distrust of financial institutions or investment providers puts them off investing.
Instead, emotional and practical concerns play a much larger role in the decision to invest, with over a third (34%) saying they are worried about losing money. Over a quarter (26%) fear making the wrong decisions, while 24% say they do not feel they have enough money to invest.

Around one in six respondents (17%) say they do not know where to start, with the same number saying they lack confidence in their ability to invest successfully. A further 14% say investing feels too complicated.

The research also highlights how women are more likely than men to report confidence barriers. Nineteen per cent say they do not know where to start compared to 15% of men, and 18% say they lack confidence in their ability to invest successfully, likewise versus 15% of men. They are also more likely to say they do not feel they have enough money to invest (28% versus 19%).

Confidence barriers among adults in Scotland remain similar to the UK overall, where around 18% say they do not know where to start investing and lack confidence in their ability to do so successfully.

Stephen McGee

UK households are probably too cautious when it comes to investing, and often risk warnings on investment communications reinforce that caution.
Consumers need to understand investment risk means their investment value can go down as well as up, and they could get back less. But over half of adults say risk warnings put them off investing entirely. It is therefore encouraging to see regulators and our industry exploring how investment communications can better balance consumer protection with consumer understanding.

What is particularly striking from our research is that distrust in investment providers is relatively low. The real barriers are fear, uncertainty and lack of confidence. If the first thing people see is language about downside risk, that many retreat back into cash is unsurprising.

The problem is that excessive caution can come at a long-term cost. Inflation steadily chips away at spending power, while many people miss out on the long-term growth potential investing can provide.
“The UK needs to foster a more confident, long-term investing mindset similar to the US, and that requires support through education and awareness. Too often in the UK, investing is framed primarily through the lens of risk rather than opportunity.

Consumers need balanced communication. Confidence and education need to sit alongside consumer protection if we want more people to invest for the long term.