Less incentives and more guarantees to entice households to invest in the real economy
With a capital guarantee at maturity, small investors would have more incentive to invest in illiquid products
All mobilised to direct household savings towards productive and sustainable investments in the real economy. For financial operators, legislators, authorities and, not least, the press, this has been the leitmotif of recent years.
Undoubtedly, this is a laudable and strategic initiative to enhance the value of Italians' savings. And the further proposals, in addition to the levers already concretely implemented at European and national level, always go in the direction of introducing tax incentives (tax exemptions, rate reductions and tax credits) to stimulate individuals to invest part of their savings in illiquid financial instruments that might not, however, allow them to quickly dispose of the invested capital.
But is this the path to follow to literally pave the way for the goal of channelling private resources towards the real economy? The results achieved so far are not exciting. In Italy we have the experience of the Pir (individual savings plans): which started off on a high note in terms of inflows in 2017 (in one year, around EUR 16 billion), the first jolt on the markets led to a general flight from investors unaccustomed to the ups and downs of the stock markets. A clear sign that the instrument had been mis-sold to the wrong people, who did not benefit from the 2-3 figure performance subsequently achieved by the Pir. For many savers, the tax incentives were not enough to keep them in the investment for at least five years.
In the meantime, the regulations have been tweaked several times, in part to give more flexibility to managers and placers. Pir alternatives and Eltifs have been packaged, which the distribution networks are proposing to retail investors. It is only to be hoped that these instruments - even more illiquid than ordinary Pirs - are not sold to savers unaccustomed to risk and unwilling to suffer the erratic prices of even unlisted securities.
Even the new model of savings and investment accounts (Sia - Savings Investment Account) that the European Commission intends to introduce to make investment in the capital markets simpler and more accessible to small savers, provides tax incentives and simplified procedures. Will these be sufficient to guarantee a stable and consistent flow of capital from private individuals to the real economy? To convince traditionally prudent savers like those in Italy, it would perhaps be better to offer a guarantee on maturity of the capital invested, even at the cost of losing some of the astonishing returns that have so far only been promised. The subprime mortgage bubble must not be just a distant memory.
