Table of Contents
Issues in the Market
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- Key issues
- Market background and definitions
- Investment risk
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- Figure 1: Risk profile of selected savings and investments
- Collective investment types
- Fund supermarkets
- Capital Gains Tax
- Tax on income
- Abbreviations
- Advertising data
Insights and Opportunities
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- Younger people stand to benefit most from long-term investing
- Passive share ownership could be a conduit to collective investments
- Investors need to remember that collectives are for the long-term
- More opportunities yet to be explored via the internet
- Collectives can be a valuable investment when starting a family
Market in Brief
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- Sales are slumping as investors pull out
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- Figure 2: Net retail sales of UK-domiciled unit trusts/OEICs, 1998-2008
- Market share
- Intermediaries dominate retail distribution
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- Figure 3: Proportion of unit trust/OEIC gross retail sales, by distribution channel, 2001-08
- Investor sentiment falls
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- Figure 4: Intended purchases of shares and equity-based unit trusts, government and corporate bonds and bond-based unit trusts and sales of equities and unit trusts, Q3/Q4 2002-Q1/Q2 2008
- Limited funds available for investing
- Key consumer research findings
- Collective investments a minority pursuit
- Strong aversion to risk
- Face-to-face advice preferred
- Consumers seek capital preservation and guaranteed returns
- Collective investment alternatives
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- Figure 5: Main collective investment alternatives
Fast Forward Trends
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- Trend 1: No Middleman
- Fund supermarkets are changing the way collectives are bought and sold
- Are fund supermarkets a threat to IFAs or will they empower them?
- Trend 2: Collective Intelligence
- Do fund managers know what they are doing?
- Passively managed funds likely to gain in popularity
Internal Market Environment
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- Key points
- Investor confidence
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- Figure 6: Central position of confidence in consumers' attitudes towards investment, 2008
- Weak investor sentiment
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- Figure 7: Intended purchases of shares and equity-based unit trusts, government and corporate bonds and bond-based unit trusts and sales of equities and unit trusts, Q3/Q4 2002-Q1/Q2 2008
- Very few willing to take risks when investing…
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- Figure 8: Attitudes towards risk, April 2008
- …nor do many understand their investment
- Investors can face myriad charges
- Fund supermarkets can help investors minimise costs
- Poor fund classification puts retail investor at a disadvantage
- Bad press undermines consumer confidence
- The ability of fund managers is in question
- Regulatory developments
- Significant changes in Capital Gains Tax
- EU directives aim to create a more competitive marketplace
- The Retail Distribution Review
Broader Market Environment
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- Key points
- Population is ageing and growing in affluence
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- Figure 9: Projected socio-demographic composition of United Kingdom population, 1993-2013
- Difficult conditions could limit consumer spending…
- …but it is unlikely that consumers will have much spare cash to invest
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- Figure 10: Monthly changes in annual inflation rates* for RPI and CPI – UK, June 2001-June 2008
- Inflationary pressures on returns
- Scope for base rate cuts limited by inflation
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- Figure 11: Bank of England base rate, January 2000-July 2008
- Collective investments and the base rate
- Stockmarket performance and collective investments
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- Figure 12: FTSE 100 and FTSE All Share – daily index movements, January 2000-June 2008
- Volatility will always be inherent to the market
- Collectives are for the long haul
Competitive Context
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- Key points
- Collective Investment Alternatives
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- Figure 13: Main collective investment alternatives
- Safe-haven savings products
- Cash ISAs sales outpace stocks and shares ISAs
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- Figure 14: Amounts subscribed to ISAs, by cash and stocks and shares components, 2002/03-2007/08
- NS&I savings products benefit from uncertainty
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- Figure 15: Amounts invested in NS&I annually and total funds held, 2001/02-2006/07
- Pensions compete for individual funds
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- Figure 16: Total new premiums paid into individual and insurance-administered occupational pensions,
- Investment Bonds a niche competitor
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- Figure 17: Total number of new single-premium investment bond contacts and value of new premiums, 2001-07
- Investors appear to be moving away from direct equity holdings
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- Figure 18: Total value of equity owned (ordinary shares) by individuals in the UK, 1997-2006
- Buy-to-let losing its appeal as house prices fall
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- Figure 19: Value and volume of buy-to-let mortgages in the UK, 2000-08
Strengths and Weaknesses in the Market
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- Figure 20: Collective Investments – SWOT analysis, 2008
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Who’s Innovating?
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- Key points
- Producing a regular income from capital gains
- Other potential innovations from changes in CGT regime
- Shariah-compliant funds could become mainstream
- The Oligarch Asset Tracker
Trade Perspective
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- Market development
- Regulation
- Distribution
- Collective investment outlook for 2008 and beyond
- The impact of volatility
- Potential for innovation
Market Size and Forecast
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- Key points
- Growth in retail sales slowing down after reaching a new high in 2007
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- Figure 21: Gross retail sales of UK-domiciled unit trusts/OEICs, 1998-2008
- Net retail sales are slumping as investors pull out
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- Figure 22: Net retail sales of UK-domiciled unit trusts/OEICs, 1998-2008
- Frequent switching of funds may be counterproductive
- More access to European-style funds should tame frequent switching
- The rising popularity of ETFs
- Asset allocation has become more defensive
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- Figure 23: UK-domiciled funds under management, by asset class, 2001-07
- Time and again retail sales jump during ISA season
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- Figure 24: Gross and net ISA sales of unit trusts and OEICs, April 2006-May 2008
- Collectives are the primary asset class held in stocks and shares ISAs
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- Figure 25: Market value of ISA funds, stocks and shares component, as of 5 April 2007, by type of qualifying investment, 2002-07
- Forecast
- Short-term dip, but long-term growth
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- Figure 26: Forecast of gross retail sales of UK domiciled unit trusts/OEICs, 2003-13
- Factors incorporated
Market Share
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- Key points
- Retail and Private Client funds under management
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- Figure 27: Retail and private client funds under management (minimum lump sum is less than or equal to £50,000), by fund manager, May 2008
- Retail funds under management
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- Figure 28: Retail funds under management (minimum lump sum is less than or equal to £10,000), by fund manager, May 2008
- Fidelity top player when it comes to ISA funds under management
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- Figure 29: UK ISA funds under management, May 2008
Companies and Products
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- Key points
- The residual effects of the credit crunch
- Absolute return funds a fast-growing sector
- Restricted withdrawals on property funds
- More inflation-proof ETFs being offered by iShares
- Key fund supermarkets
- Broker activity
- TD Waterhouse has been able to reduce charges for its clients
- Other brokerages are covering the cost of switching
Brand Communication and Promotion
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- Key points
- Overall Collective Investment adspend declining steadily since 2006
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- Figure 30: Collective investment advertising expenditure, by sub-category, 2004-08
- Top ten advertiser adspend declines by a fifth in 2008
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- Figure 31: Advertising expenditure by the top ten collective investment advertisers, 2007 and 2008
- Press the most favoured advertising medium for collectives
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- Figure 32: Collective investment advertising expenditure, by media type, 2007/08
Channels to Market
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- Key points
- Intermediaries dominate retail distribution
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- Figure 33: Proportion of unit trust/OEIC gross retail sales, by distribution channel, 2001-08
- Fund supermarkets to continue to grow
- Fund supermarkets account for close to 40% of ISA sales
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- Figure 34: Proportion of unit trust/OEIC ISA sales, by distribution channel, 2001-08
The Consumer: Investment Ownership
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- Key points
- Very few consumers invest in collectives…
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- Figure 35: Investment ownership, April 2008
- …but do ‘passive’ shareholders realise the risk they’re taking on?
- Investors in collectives likely to hold a wide range of financial products
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- Figure 36: Cross-analysis of ownership, by selected type of savings/investment product, April 2008
- With age comes more activity in saving and investing
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- Figure 37: Ownership of select savings and investment products, by gender, age, marital status and lifestage, April 2008
- Demographics could boost the market
- Investing needs to be made more appealing to younger people
- Affluent most likely to have funds available for investing
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- Figure 38: Ownership of select savings and investment products, by socio-economic group, working status, gross annual household income and household tenure, April 2008
- Building up to equity investment
- Lower chargers and improved access to advice needed
- Media usage and investing
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- Figure 39: Ownership of select savings and investment products, by newspaper readership, technology usage and internet usage, April 2008
- The full potential of the internet in financial services still to be realised
The Consumer: Attitudes towards Risk
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- Key points
- Interested in investing – but not in taking any risks
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- Figure 40: Attitudes towards risk, April 2008
- How to highlight the risk/reward trade-off?
- Those investing in shares and collectives most prepared to take on risk
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- Figure 41: Product ownership, by attitudes towards risk, April 2008
- There is evidence some investors don’t realise they are taking on risk
- Age negatively correlated with risk taking
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- Figure 42: Attitudes towards risk, by gender, age, marital status and lifestage, April 2008
- The more affluent and wealthy the more prepared to take on risk
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- Figure 43: Attitudes towards risk, by socio-economic group, working status, gross annual household income and household tenure, April 2008
- Broadsheet readers and heavy internet users show less aversion to risk
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- Figure 44: Attitudes towards risk, by newspaper readership, tecnology usage and internet usage, April 2008
The Consumer: Sources of Advice
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- Key points
- Banks or building societies and IFAs remain top sources of advice
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- Figure 45: Source of financial advice, 2003-08
- More than a quarter don’t invest or are not interested in doing so
- IFAs a source of advice for 50% of those investing in collectives
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- Figure 46: Product ownership, by source of financial advice, April 2008
- Those who do their own research are more prepared to take on risk
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- Figure 47: Source of financial advice, by attitudes towards risk, April 2008
- Seeking info online becoming more prevalent among older age groups
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- Figure 48: Preferred sources of investment advice, by gender, age, marital status and lifestage, April 2008
- Affluent and wealthy utilising multiple sources
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- Figure 49: Preferred sources of investment advice, by socio-economic group working status, gross annual household income and household tenure, April 2008
- Word of mouth a powerful tool in generating new business
- Broadsheet readers consult a number of sources
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- Figure 50: Preferred sources of investment advice, by newspaper readership, technology usage and internet usage, April 2008
The Consumer: Attitudes towards Long-Term Savings and Investment
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- Key points
- Investors desire guaranteed returns with no threat to original investment
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- Figure 51: Important factors when choosing a long-term investment, April 2008
- People investing in collectives show greater engagement
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- Figure 52: Product ownership, by important factors when choosing a long-term investment, April 2008
- More factors come into play with age
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- Figure 53: Most important factors when choosing a long-term investment, by gender, age, marital status and lifestage, April 2008
- Affluent and wealthy are the most demanding
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- Figure 54: Most important factors when choosing a long-term investment, by socio-economic group, working status, gross annual household income and household tenure, April, 2008
- Media usage and important factors when investing
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- Figure 55: Most important factors when choosing a long-term investment, by newspaper readership, technology usage and internet usage, April 2008
The Consumer: Further Analysis
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- Key points
- Key target groups
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- Figure 56: Key target groups for investment products, April 2008
- Hands off Investors (36%)
- Capital Preservers (23%)
- Going for Capital Gains (22%)
- IFA and Self-Informed (18%)
- IFA and Self-Informed most likely to hold collectives
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- Figure 57: Key target groups, by product ownership, April 2008
- Finding their own way?
- IFA and Self-Informed most prepared to take on risk
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- Figure 58: Key target groups, by attitudes towards risk, April 2008
- Repertoire analysis
- When multiple sources are used friends and family are very important
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- Figure 59: Source of advice, by number of sources used, April 2008
- Friends and family important in generating word-of-mouth advertising
- The internet can strengthen links between advisers and clients
- Affluent and wealthy most likely to consult multiple sources
Appendix – The Consumer: Investment Ownership – Full Demographics
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- Figure 60: Ownership of select savings and investment products, by gender, age, socio-economic group, marital status, lifestage, working status, gross annual household income, household tenure, TV region, ACORN groups, technology usage, internet usage, newspaper readership and supermarket usage, April 2008
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Appendix – The Consumer: Attitudes towards Risk – Full Demographics
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- Figure 61: Attitudes towards risk, by gender, age, socio-economic group, marital status, lifestage, working status, gross annual household income, household tenure, TV region, ACORN groups, technology usage, internet usage, newspaper readership and supermarket usage, April 2008
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Appendix – The Consumer: Sources of Advice – Full Demographics
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- Figure 62: Preferred sources of investment advice, by gender, age, socio-economic group, marital status, lifestage, working status, gross annual household income, household tenure, TV region, ACORN groups, technology usage, internet usage, newspaper readership and supermarket usage, April 2008
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Appendix – The Consumer: Attitudes towards Long-Term Savings and Investment – Full Demographics
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- Figure 63: Most important factors when choosing a long-term investment, by gender, age, socio-economic group, marital status, lifestage, working status, gross annual household income, household tenure, TV region, ACORN groups, technology usage, internet usage, newspaper readership and supermarket usage, April 2008
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- Figure 64: Next most important factors when choosing a long-term investment, by gender, age, socio-economic group, marital status, lifestage, working status, gross annual household income, household tenure, TV region, ACORN groups, technology usage, internet usage, newspaper readership and supermarket usage, April 2008
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Appendix – The Consumer: Further Analysis – Full Demographics
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- Figure 65: Key target groups, by gender, age, socio-economic group, lifestage and gross annual household income
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- Figure 66: Number of sources used, by gender, age, socio-economic group, lifestage and gross annual household income
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