The findings have prompted IFP corporate member Axa Wealth to hit out at investment jargon, which it says, is putting off the younger generation.
According to the Populus survey of 2,000 18-34 year olds in the UK, 31% lack understanding about what Stocks and Shares Isas are and what they do.
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Yet, 40% would consider taking one out if the product was better explained.
Some 30% were deterred from taking one out for fear of high charges or hidden costs and 27% would consider it if there were no difficulties or penalties for exiting early.
Mike Kellard, chief executive of AXA Wealth, which commissioned the research, said: "The findings prove something we have long suspected – people, particularly young people, are being fundamentally put off investing in Stocks and Shares Isas because of the investment jargon that clouds the product's offering and makes it difficult to invest.
"Isas were designed to be widely accessible and transparent.
"With the UK's ageing population and dwindling pension pots, it is vitally important that young people are made aware of the value of investing and that Stocks and Shares Isas are one tax-efficient way of doing it.
"The Government wants to get people saving and investing, but it is evident that the Isa system as it currently stands could function more efficiently.
"The Government, along with business, needs to look at ways in which they can encourage people to diversify their investments."