Daniel Shrimski
In a new Vanguard report, Core Components of a Successful Retail Investment System, Australia has been identified as one of only a handful of leading OECD countries where there is more money being held in savings accounts than in capital market investments.
Vanguard has proposed a series of retail investment reforms that could drive more Australians to invest their savings and achieve greater financial security.
These reforms include facilitating access to affordable financial advice, introducing tax incentives to boost investment outside of superannuation, improving financial literacy levels, and increasing fee transparency and competition.
Vanguard’s research estimates that if Australian households reallocated just 10% of their excess savings into investments, based on the amount of cash currently being held in Australian savings accounts, this could add as much as $185 billion into capital markets.
Daniel Shrimski, Managing Director, Vanguard Investments Australia, comments, “While Australia stacks up relatively well on a global stage in terms of supporting retail investors, there are key opportunities for Australian policymakers to further improve the investment landscape outside of superannuation.
“Many people are missing out on investment returns by holding too much cash and could significantly improve their long-term financial outcomes by being invested in capital markets.
“Australians hold some 23% of their household financial assets in cash and deposits, yet over the last decade the average annual return from cash has been just 2%. Other investments have produced much higher returns.
“Vanguard’s research provides key insights on the steps needed to motivate more Australians to invest outside of their super, including through new tax incentives and by helping more people to make the best investment decisions.
“We are keen to work with Australian policymakers to help further refine the existing regulatory system in a way that supports retail investor outcomes at all levels.”