We need to talk about your future, stick the kettle on ☕️

Hold the front page! F**k me, this sounds too bloody interesting to not read right!? OK, this is maybe not the sexiest of topics but bear with me as I think it will go some way to explaining why we believe there is a burning need for Pia.

James, Pia’s co-founder, here again. I recently talked about the journey we have been on to develop Pia as a business. In that post I explored the countless feedback sessions we hosted and the financial experts we spoke with to shape Pia. There has also been a far more quantitative approach to our research to compliment the qualitative angle. The numbers that underpin the business case for Pia are, at times, staggering and overwhelming.

No final salary pension for you

The argument has been made by many before me. The baby boomer generation enjoyed an unrivalled period of net-worth growth thanks to generous pensions, a highly favourable property market and high levels of overall economic growth. Meanwhile Generation X and Y have found the path more cluttered with obstacles.

I am unlikely to receive a state pension when I retire. Successive governments have moved the goal posts and now suggest that you and your employer have to hatch a plan to a comfortable retirement.

The World Economic Forum predict that by 2050 there will be a £25 trillion retirement savings gap in the UK.

This is the difference between what people expect to have in retirement versus what they may end up with. £25 trillion… That’s over 10x our annual GDP. You won’t find that under the sofa and the politicians won’t be there for you as shown by their actions over the past decade or so.

Workplace pensions are a start but we all need to realise they are just that, a start. There is more we all need to do to be able to retire in comfort, enjoy the later stages of our lives but most importantly of all set up our children with a sound financial footing to realise their full potential.

For the many not just the few

I grew up in the 80’s, my image of investing was Gordon Gekko, stock brokers with red braces and people hollering on a trading floor. Only when I started working in the mid-noughties did it occur to me that I too could invest and it still took me nearly 5 years from that point to make my first investment.

Nobody explained to me the concept of compounding returns nor did anyone show me the historic performance of the markets against the value of cash. The market was heavily weighted towards those that had high levels of wealth and the barriers were up for the every person. Ironically, the financial crash of 2008 started to shift this. The regulators and lawmakers pushed for greater financial openness and passed legislation that opened up investing for more and more people.

The Money Advice Service provide a very interesting categorisation of the UK financial market that helps to highlight how investing is becoming very much for the many and not the few. Their categorisations are:

• Struggling — 10.2 million people — Average household incomes of £21k with a median savings value of £50;
• Squeezed — 13.1 million people — Average household incomes of £32k with a median savings value of £580; and
• Cushioned — 28.8 million people — Average household incomes of £33k with a median savings value of £5,500.

Traditionally, the top 10% of the cushioned segment is the preserve of the wealth management industry. They were willing to pay for financial advice and happy for someone to manage their money on their behalf. That leaves a huge underserved market. Over 25 million people that could be benefitting from the growth that investing could deliver on their savings if only they knew where to start.

The rise of robo-advisors has gone some way to addressing this problem. Robo-advisors offer investors the chance to invest in a portfolio of Exchange Traded Funds (ETFs) at relatively low cost. However, there is still a huge amount of inaction that comes from a fear of investing, a fear of the unknown, a feeling that people don’t know who to trust and they are not sure where to start.

We believe that knowledge can be the key that will empower investors to take action and begin to unlock the huge untapped market of the cushioned segment in the UK.

Don’t just take our word for it

We are lucky enough to enjoy the support of some industry heavyweights from the world of savings and wealth management. Our advisory board have helped us shape our vision over the past few months but they have also connected us with likeminded entrepreneurs. People that, like us, feel that savings and investing needs to change to allow people to have a better chance at financial freedom as they get older.

A good example is Vinay Jayaram. Vinay is the CEO of a company called Envizage. They are using analytics and the power of data to help people identify, understand and manage the risks to their future plans and aspirations. We have met with Vinay on a number of occasions to talk about new ways to encourage people to save and invest for their futures. He recently shared with us some fascinating research they carried out by surveying over 3,000 UK residents over the age of 55.

This is a demographic group that are supposedly well served by the traditional wealth management sector. The results highlighted that actually all groups require a helping hand in a complex and confusing market:

• 1 in 2 have no idea how much they have saved;
• 4 in 5 lack confidence or are unsure about their future;
• 2 in 3 don’t know how much they need for retirement;
• 2 in 3 are concerned about their future expenses; and
• 2 in 3 would value something that helps them make better choices.

Source: http://envizage.me/

The industry is evolving in front of our eyes, the cold hard facts are pointing to change and the customers we speak to are excited about the part that Pia can play in helping them to invest. We are looking for more people to help us on this journey, head over to yourpia.com to join our community.