The Republic’s financial services sector is failing its customers. Two reports published this week show that too many Irish households are not embracing the opportunity to grow wealth though they are putting away significant sums in savings.
The first from the Central Bank of Ireland notes the State has among the lowest levels of direct participation in capital markets through listed equity, debt securities and investment funds.
“As things stand, financial services is not effective in reaching the full population of potential investors,” said central bank deputy governor Colm Kincaid. “This means Irish households may not be getting the full benefit of what financial services could do to help them provide for their future.”
The report identified key barriers to investment, including a perceived lack of financial resources, psychological barriers such as fear and lack of trust, lack of knowledge and understanding about investment and lack of support and advice.
But the overall net wealth of Irish households has more than doubled in absolute terms in the last decade, according to the document, which goes on to say that “while in many cases Irish households have the financial capacity to invest, our historical experience means that many of these households do not have the necessary knowledge or level of comfort with investment options”.
Banking and Payments Federation Ireland (BPFI) also issued a report this week, noting the general failure of Irish households to invest their money, choosing instead the safety of demand deposit accounts even though they are losing money there as interest does not match the rate of inflation.
Will the Government’s new plan speed up the delivery of vital infrastructure projects?
The BPFI was using this consumer research as part of an ongoing campaign to lobby the Government to introduce a new form of easy-to-understand savings and investment account with clear tax benefits and wide flexibility on how much is invested and when it is drawn down.
But if the central bank research is to be believed, the BPFI’s own members are a part of the problem when it comes to investments.
“We strongly encourage more consumers to seek information on how their investment products work,” said the BPFI. Perhaps they might be better advised to encourage their members to present information on how the products they are looking to sell work in clear, unambiguous, and accessible language.
As Kincaid said: “A properly functioning financial market must reflect and serve the needs and preferences of all consumers and investors.”
