Raising awareness of the benefits of long-term savings to retail investors will help to rebuild confidence in the European asset management industry, according to EFAMA’s member survey.
The poll aimed to understand the industry’s perspective on why there has been a fall in household savings in financial assets and what it believes are the solutions to address these concerns and encourage long-term savings for the future.
The survey was completed by a range of senior asset management experts at 46 corporate members, one associate organisation plus 10 associations - the equivalent of 57 responses from 21 European countries.
It reveals that two-thirds (65%) of industry participants thought that in current market dynamics lack of trust, market risk and poor performance were the most relevant factors behind the fall in savings in financial assets.
The survey also revealed that the majority of the industry believes that better communication (81%), better advice (75%) and better understanding of investor needs (74%) is required at a distribution level to strengthen trust over market risk, highlighting the importance of investor education.
91% of respondents believe that retail investors still need to become aware of the benefits of long-term savings, most importantly of the fact that long-term savings tend to generate higher returns than short-term savings. More than three-quarters (77%) of industry experts polled said the most relevant reason for this is because long-term savings provide access to equity risk premium and liquidity premium.
The majority (72%) of members surveyed believe the most relevant way for the asset management industry to raise awareness of the importance of long-term savings is through convincing authorities at EU and national level to encourage long-term /retirement savings. The European industry also supported (58%) the idea of launching a common information initiative on long-term savings benefits to help raise awareness.
Finally, the poll looked at factors that would encourage asset managers to develop funds specifically targeting long-term savings, 82% of respondents felt the most relevant factor would be to create greater incentives for retirement savings, followed by greater household demand for long-term savings products (65%) and 54% felt that a common EU framework dedicated to long-term investments for retail investors is needed.
Claude Kremer, President of EFAMA, comments: “Holdings of investment funds via retirement savings has continued to rise since 2008 but the overall acquisition of financial assets has fallen with demand for investment assets taking a big dip. This retreat from direct acquisitions of investment assets raises many question about the causes, remedies and potential impact on economic growth.
“The survey reveals that the industry believes that rebuilding trust with retail investors will come through the promotion of long-term savings, which have the ability to generate higher returns than short-term savings. This means the European fund and asset management industry must work to educate investors at the distribution level about the need to extend their investment horizon. Furthermore, the industry must continue to engage with European and national governments to create incentives for investors to save for the long-term and their retirement.”