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February 26, 2018updated 27 Feb 2018 9:58am

UBS SmartWealth highlights “opportunity cost” of cash ISAs

By Saloni Sardana

Online wealth manager UBS SmartWealth has said UK savers would be £46bn richer today had they invested in stocks and shares ISAs instead of cash ISAs.

Following a freedom of information request to HMRC, UBS SmartWealth found that in the last five years UK savers have invested 70% of their ISA savings into cash.

A total of £239bn was invested into cash ISAs and £101bn was invested into stocks and share ISAs.

If these cash ISA investments had instead been made into stocks and shares ISAs during the five-year period, UBS said UK savers would be £46bn better off.

At a roundtable discussion attended by Private Banker International, UBS SmartWealth’s co-head, Nick Middleton, said: “People need to think about the opportunity cost of not putting money in stocks/shares.”

He added: “This trend coincides with one of the lowest-returning periods for cash as interest rates hit rock bottom and inflation rose. Over the period, the MSCI World Index has returned four times the returns of even the best-performing cash ISAs.”

Middleton said that people are biased to the “status quo” or to the present period of time. Therefore, they are reluctant to think about the future. They instead prioritise the current period.

Greg Davies, head of behavioural science at investor risk profiling company Oxford risk said the investment industry only focuses on optimising returns.

“We should focus on helping consumers take the first step. Optimising risk-adjusted returns is nonsense. People just want best anxiety returns.”

He added even getting investors to commit a certain transaction at a future date is often easier, than convincing them to invest today.

The roundtable also highlighted that women are often underrepresented as investors.

Sarah Pennels, founder of UK’s money website for women SavvyWoman said a key reason why women may not be investing as much as men is because “some women think the financial jargon used is too complex”.

She continued: “There is a lack of focus on outcomes. The industry should reflect the market it shows. It isn’t about painting pages pink or using flowery language”

Commenting on how “women friendly” the UBS SmartWealth platform is, Middleton said: “Part of the [UBS SmartWealth] website that is visible is all designed by women.”

Middleton added UBS Unique is on track to educate a million women on investments by 2020.

UBS Unique is a bank project by UBS aimed at better serving women and enabling them to make the most of their wealth.



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