Table of Contents
Issues in the Market
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- Key issues
- Market background and definitions
- Overview of sources of financial advice
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- Figure 1: Different sources of financial advice
- Depolarisation – providing more choice
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- Figure 2: Overview of depolarisation
- High street banks since depolarisation
- HSBC and Barclays commit to multi-tie model
- Others focus on their own bancassurance operations
- Pension products
- Annuity-related terms and definitions
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- Figure 3: Overview of the annuity and retirement income market
- Common product types
- Single or joint life
- Cash lump sum
- Open market option
- Alternatives
- Pensions simplification and income drawdown
- Alternatively secured pensions
- Abbreviations
Future Opportunities
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- ‘Re-intermediation’ in times of uncertainty
- Staying Connected – IFAs finally taking advantage of web 2.0
- Helping consumers eliminate debt may boost IFA pension business
Market in Brief
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- The intermediary marketplace
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- Figure 4: Number of FSA directly authorised retail intermediary firms, by primary category, January 2006-September 2008
- Internal market environment
- Regulatory developments
- Long-term economic and demographic trends favourable
- Overview of individual pension and retirement income distribution
- New individual and group pension business slows in 2008
- 80% of new individual pension APE premiums sold through IFAs
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- Figure 5: New APE* premiums into individual pensions, by type of pension and distribution channel, 2008 (est)
- £7.2 billion in new annuity business generated by IFAs in 2008
- Key IFA research survey results
- Client advice and expectations
- Prospects and future business intentions
- Opinions on legislation
Internal Market Environment
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- Key points
- Occupational pension provision on the decline
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- Figure 6: Status of private and public sector schemes, 2007
- More people will have to make their own pension arrangements
- Past mistakes hold advice market back
- Just a quarter of consumers believe financial advisers have their customers’ best interests at heart
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- Figure 7: Agreement with statements about savings and investment advice, December 2008
- IFAs account for 12% of FOS complaints…
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- Figure 8: Financial services firms complained about, by sector, 2006/07
- … with only 5% of complaints regarding pensions advice
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- Figure 9: IFAs – Wwhich products were complained about, 2006/07
- FOS smaller firms’ taskforce
- FSA claims that many may have been given wrong pension advice
- Affordability is preventing many from contributing to a pension
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- Figure 10: Reasons for not saving, June 2008
- Consumer apathy also a significant barrier
- Psychological barriers also persist
- Increasingly complex products make getting advice essential
- The imminent arrival of Personal Accounts in 2012…
- …with a number of residual effects
- Many retirees unaware of their at-retirement options
- More consumers browsing the internet for information on finance
- Indemnity cover and regulation hits IFA’s bottom line
Broader Market Environment
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- Key points
- Improving longevity means longer retirements
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- Figure 11: Cohort life expectancy at age 60, by gender, 1981-2054
- More time spent in retirement but less money to fund it
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- Figure 12: Average gross weekly income of pensioner units*, by age, 2006/07
- A greater need for self-sufficiency and thus life and pension advice
- More than 8 out of 10 people over 50 still saving for retirement
- Increased job mobility and lifestyle changes present opportunities
- An increasingly affluent population increased demand for advice
- Many consumers are likely to find saving difficult in the near term
- Poor stock market performance undermining confidence
- Uncertainty can increase demand for advice
Regulatory Developments
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- Key points
- The Retail Distribution Review
- Clarity of services – Independent advice vs sales advice
- A move toward customer agreed remuneration (CAR)
- Raising professional standards
- New capital adequacy requirements…
- …May be too much for small IFAs
- Treating Customers Fairly initiative
- Industry reaction to TCF
- Thoresen Review – Money Guidance service
- Impact on market for financial advice
Consumer Context
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- Key points
- Savings and investment moving up the agenda
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- Figure 13: Savings, investment, borrowing and debt repayment – consumers’ expected activity, September 2007-September 2008
- Affluent and wealthy to increase activity levels
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- Figure 14: Expected financial activity, by socio-demographic and income groups, September 2008 and average for the last 26 quarters
- Mixed bag for life and pension intermediaries
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- Figure 15: Intended life and pensions* activity, Q3/Q4 2002-Q3/Q4 2008
- Investor sentiment remains weak
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- Figure 16: 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-Q3/Q4 2008
- Cash-based saving intentions rise but could fall along with inflation
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- Figure 17: Intended cash-based activities, Q3/Q4 2002-Q3/Q4 2008
Strengths and Weaknesses in the Market
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- Figure 18: Market for pension related advice– SWOT analysis, 2009
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Market Developments and Innovations
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- Key points
- Advisers expect rise in web-based client servicing
- paaleads.com – Online lead generation for IFAs
- Rubii.co.uk – the financial adviser search engine
- Aviva launches controlyourpension.com
- FSA introduces pension switching advice plan
- Barclays introduces alternative investment friendly pension products
Trade Perspective
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- The market for pensions
- Overall market conditions for advisers
- Client pension contribution levels
- Relationship with providers
- Opinions on bancassurance
- Mixed views on the potential of online distribution
The Intermediary Marketplace
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- Key points
- Overview of the intermediary marketplace
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- Figure 19: Number of FSA directly authorised retail intermediary firms, by primary category, January 2006 to September 2008
- An increase in the number of firms undertaking financial advice activities
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- Figure 20: Number of directly authorised financial advice firms, January 2006-September 2008
- But the next five years will be difficult
Distribution Overview
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- Key points
- IFAs drive new personal pension and annuity business
- EBC involvement in group pension sales
- 80% of new individual pension business sold via IFAs
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- Figure 21: Proportional distribution of new APE* premiums into individual pensions, by distribution channel, 2003-08
- Direct channels are growing their distribution share of annuities
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- Figure 22: Proportional distribution of new pension annuity premiums, by sales channel, 2003-08
- Income drawdown mainly sold through IFAs and tied-agents
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- Figure 23: Proportional distribution of new income drawdown premiums, by sales channel, 2003-08
- Individual pension distribution – detailed breakdown
- Tied agents gaining a greater share of personal pensions business
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- Figure 24: Proportional distribution of new APE* premiums into personal pensions, by distribution channel, 2003-08
- IFAs generated 90% of new GPP business in 2008
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- Figure 25: Proportional distribution of new APE* premiums into personal pensions, by distribution channel, 2003-08
- Two in five individual stakeholder pensions sold via bancassurance
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- Figure 26: Proportional distribution of new APE* premiums into individual stakeholder pensions, by distribution channel, 2003-08
- Company-sponsored stakeholder pensions mainly sold through IFAs
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- Figure 27: Proportional distribution of new APE* premiums into company sponsored stakeholder pensions, by distribution channel, 2003-08
- Most new SIPP business generated through IFAs
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- Figure 28: Proportional distribution of new APE* premiums into SIPPs, by distribution channel, 2003-08
Market Size – Individual and Group Pensions
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- Key points
- Individual vs. occupational pension schemes
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- Figure 29: Total new premiums paid into insurance-administered individual and occupational pensions, 2003-08
- New business down in 2008
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- Figure 30: New individual pension premiums, by product type, 2003-08
- New SIPP and GPP business has boosted the overall market
- In force business growth has been unimpressive
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- Figure 31: Total number of policies and regular premiums from individual pensions business in force, by pension type, 2003-07
Market Segmentation by Type of Intermediary – Individual and Group Pensions
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- Key points
- 80% of new APE premiums sold through IFAs
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- Figure 32: New APE* premiums into individual pensions, by type of pension and distribution channel, 2008 (est)
- IFAs responsible for £14 billion in new single premiums in 2008
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- Figure 33: Value of new premiums sold through independent intermediaries, by type of premium and pension, 2003-08
- Single-tie new APE single premiums rise 15% over the past year
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- Figure 34: Value of new premiums sold through single-tie agents, by type of premium and pension, 2003-08
- Non-intermediated new premium business declines
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- Figure 35: Value of non-intermediated new premiums, by type of premium and pension, 2003-08
- Bancassurance worth close to £1 billion in new single premiums
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- Figure 36: Value of new premiums sold through bancassurance, by type of premium and pension, 2003-08
Market Size – Annuities and Income Drawdown
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- Key points
- Annuity sales have been booming after A-Day
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- Figure 37: New pension annuity business – number of new contracts and the value of new premiums, 2003-08
- In-force pension annuity business
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- Figure 38: Pension annuity business in force – payments per annum, 1997-2007
- Income drawdown the main alternative to an annuity
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- Figure 39: Size of the pension annuities market versus the income drawdown market – new business, 2003-08
Market Segmentation by Type of Intermediary – Annuities and Income Drawdown
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- Key points
- £7.2 billion in new annuity business generated by IFAs in 2008
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- Figure 40: Value of new pension annuity premiums, by sales channel, 2003-08
- IFAs generate £2 billion in new income drawdown business
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- Figure 41: Value of new income drawdown premiums, by sales channel, 2003-08
Market Overview and Key Players
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- Market structure for financial advice
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- Figure 42: Basic overview of market for financial advice
- Key players in IFA market
- The Tenet Group
- Sesame
- Bankhall
- Simply Biz
- Key players in retail banking advice market
- Barclays Financial Planning
- Lloyds Banking Group plc/Scottish Widows
Brand Communication and Promotion
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- Key points
- Advertising financial advice
- £21.6 million spent advertising financial advice in 2008
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- Figure 43: Overview of total adspend on financial advice services, year to December 2004-08
- Direct mail and press most popular forms of advertising
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- Figure 44: Overview of media type used to advertise financial advice services, Year to December 2008
- Providers advertising products to intermediaries
- Pension providers intermediary directed adspend totals £1.7 million
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- Figure 45: Total intermediaries directed adspend, by product type, year to December 2004-08
- Top ten spend £1.3 million advertising pension and annuity products in 2008
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- Figure 46: Top ten advertisers of pension and annunity products to intermedaires, year to December 2004-08
- All advertising to intermediaries goes through the press
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- Figure 47: Top ten publications used by providers to advertise pension and annuity products to intermediaries, Year to December 2008
The IFA: Client Advice and Expectations
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- Key points
- 31% expect clients to reduce pension contribution levels
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- Figure 48: Expectations of how the economic slowdown will affect client pension contributions, January 2009
- Two thirds of IFAs are advising clients to invest in collectives
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- Figure 49: Where IFAs are recommending their clients invest their money, January 2009
- Corporate bonds are also looking more attractive
The IFA: Prospects and Future Business Intentions
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- Key points
- 60% of IFAs feeling less confident about prospects
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- Figure 50: Confidence in the financial services market compared to six months ago, January 2009
- Economy is the biggest challenge facing pension business
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- Figure 51: Biggest challenges facing pension intermediaries, January 2009
- IFAs looking to shift the balance of their business
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- Figure 52: Key business intentions over the next 12 months, January 2009
The IFA: Opinions on Legislation
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- Key points
- Over a third of IFAs believe that the RDR will have a negative impact
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- Figure 53: Opinions on the impact of the Retail Distribution Review on IFA business, January 2009
- Over two in five IFAs believe TCF will have no impact
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- Figure 54: Opinions on the impact of the Treating Customers Fairly initiative on IFA business, January 2009
- Half doubt the impact of the Thorensen Review on Generic Advice
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- Figure 55: Opinions on the impact of the Thorensen Review into Generic Advice on IFA business, January 2009
- Nearly half say that NPSS will have no impact on their business
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- Figure 56: Opinions on the impact of personal accounts on IFA business, January 2009
Appendix – Broader Market Environment
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- Figure 57: Projected socio-demographic composition of United Kingdom population, 2003-13
- Figure 58: FTSE 100 and FTSE All Share – daily index movements, January 2002-January 2009
- Figure 59: Monthly changes in annual inflation rates* for RPI and CPI – UK, January 2002-January 2009
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