Investment is largely a pursuit for the wealthiest in Ireland, a new report from the Central Bank has indicated, with households here having among the lowest levels of direct participation in markets in Europe.
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 engagement with capital markets compared to the EU average, the Central Bank said, 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”, the Central Bank said.
RM Block
A lack of knowledge of investment products is among the key barriers identified in the report. Just 15 per cent of the population consider themselves to have high levels of knowledge of investment products, the study has indicated.
More than half of people who said they are not currently investing said that clear guidance about how to start investing would encourage them to do so.
Colm Kincaid, deputy governor of the Central Bank, said the 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.”
The report recommends that the Government consider how the tax system can be used to drum up interest in products specifically targeted at retail investors that are “simple, low cost” and have the appropriate risk-return profile for them.
Financial literacy is another key barrier, and the Government’s recently published National Financial Literacy Strategy must maintain a “focus on investments and pensions”, the Central Bank said.
