Since the Covid-19 crisis, the savings rate of European households has risen sharply.
While some of this excess saving may be forced saving, given the various restrictions that have hit the territory, it would also seem that the current economic and financial uncertainty has created reasons for precaution. Despite a relative increase in the rate of investment in unit-linked products during the crisis, individuals tend to turn to low-risk liquid investments, to the detriment of returns. Already scarred by the 2008 financial crisis, savers’ risk aversion seems to have increased. The returns on euro funds in life insurance policies are at half-mast and secure savings accounts no longer protect against inflation. As a result, the profitability of banks and other financial institutions is under threat. So how can we boost the savings of European households? The solution could well be found where we least expect it…
Life insurance contract: the need to ensure the transition from the euro fund to unit-linked products
Once lucrative, available, and guaranteed, the euro fund has lost its shine over the years.
While individuals are relatively aware of this gradual shift from guaranteed to non-guaranteed savings, some still need encouragement to do so.
To convince cautious investors to take a little more risk, beyond the notion of return, you can play on their desire to give meaning to their investment, whether by encouraging them to invest in the real economy or by relying on their appetite for sustainable finance.
Capitalize on investors’ search for meaning to boost their savings
1. Boosting savings by stimulating investment in the real economy
In the light of the crisis in Covid-19 and the deficit of the European states, investment by individuals is essential to revive the economy in the short term. In the long term, it is also necessary to alert the younger generations to the fact that it will probably no longer be possible to count on the same social protection as in the past.
While the financial economy may be distrusted by individuals, or even seem obscure, the real economy generally appears much more tangible to them. The idea of investing in the growth of local VSEs and SMEs to create jobs can easily appeal. To encourage investors to take this route, it is necessary to highlight the opportunity to make a concrete contribution to the development of the local and national economy, with the possibility of better understanding how one’s money is used. Not to mention that in France, tax advantages have been put in place to encourage individuals to support the economic fabric, and specific savings products have even been created by the BPI (a French public investment bank.) PEA (Equity Savings Plan allowing acquisition of European companies shares), PEA-PME (securities account aimed at funneling personal savings to small and medium enterprises), crowdfunding, CTO (ordinary securities account allowing to invest in the stock market on French or foreign financial markets)… This type of investment is riskier, but potentially more profitable.
2. Building on investors’ appetite for sustainable finance
60% of savers and 80% of Millenials are looking for impact in their investments, according to a 2020 Devere Group study. This growing demand for meaningful investments goes hand in hand with the MiFIDII regulation that comes to frame the collection of ESG preferences in the suitability test. This is also good news for financial institutions, as most ESG financial products currently fall into the unit-linked category… Sustainable finance could therefore be a particularly interesting growth area, provided that the right product is offered to the right investor.
Mitigating climate change, protecting biodiversity, preventing pollution… If green investment is on the rise, the impact objectives can vary greatly from one investor to another. Some will be more interested in developing the circular economy, while others will swear by the preservation of marine resources. Hence the classification of ESG products by the European taxonomy and the need to assess investors’ ESG preferences during the suitability test. To encourage savers to diversify their investments via unit trusts, institutions must therefore equip themselves with high-performance digital tools to assess the expectations of individuals in terms of sustainable finance. This is the purpose of ESGprofiler.
ESGprofiler: a unique tool to boost investments
Neuroprofiler, a specialist in behavioral finance and gamification, has developed a powerful tool to capture investor preferences to sell more ESG products. ESGprofiler takes the form of an investment game and provides a precise understanding of the impacts investors are looking for. Using a behavioral finance algorithm, the tool is then able to automatically identify the ESG product that best matches the client’s values. You are thus able to capitalize on the new expectations of investors to offer them unit-linked investments and at the same time return to profitability. Are you looking to boost your clients’ investments? Request a demo of ESGprofiler!