Table of Contents
Issues in the Market
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- Key issues
- Abbreviations
- Advertising data
Future Opportunities
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- ‘Influentials’ can play a key role in generating new business
- Be your own advisor with retail investor friendly fund supermarkets
- Putting the focus on the real rate of return
- RDR and UCITS should help reduce churn
Market in Brief
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- New sales on the rise in 2009
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- Figure 1: Net retail sales of UK-domiciled unit trusts/OEICs, 1999-2009
- Low interest rates and rise in the stock market help boost demand
- Internal Market Environment and Regulatory Environment
- Intermediaries play the key role in distribution
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- Figure 2: Proportion of unit trust/OEIC gross retail sales, by distribution channel, 2005-09 (Q2)
- Credit crunch leads to market share shake-up
- Promotional activity has been tamed by financial crisis
- Key consumer research findings
- Investment ownership
- What consumers are looking for in a long-term investment
- Attitudes towards risk
- Sources of advice
Internal Market Environment
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- Key points
- Investor sentiment improving but still fragile
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- Figure 3: 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 2009
- Investors are generally risk-averse
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- Figure 4: Attitudes towards risk, April 2009
- Affordability and sufficient knowledge also prominent barriers
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- Figure 5: Barriers to buying shares or other stockmarket-based investments, April 2009
- Regulatory environment
- The Retail Distribution Review
- Tories refuse to commit to RDR deadline
- Impact of the 18% flat rate of CGT
- Tax relief on equity ISAs not all it’s hyped up to be
- 10% tax credit must be reinstated to make ISAs truly tax-free
- EU – UCITS Directives promote a more competitive marketplace
- Tax Elected Funds (TEF) legislation
- Positive impact of MiFID at the upper end of the market for advice
Broader Market Environment
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- Key points
- Uncertain economic conditions cloud expectations
- Collectives and stock market performance
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- Figure 6: FTSE 100 and FTSE All Share – daily index movements, June 2003-June 2009
- All-time-low base rate should help boost risk appetite
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- Figure 7: Monthly changes in the rate of annual inflation* and Bank of England base rate – UK, June 2002-June 2009
- Inflation considerations
- More focus should be put on the real rate of return
- Demographic trends favour growth in demand
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- Figure 8: Socio-demographic composition of United Kingdom population, 1994-2014
Competitive Context
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- Key points
- Collective investment alternatives
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- Figure 9: Penetration of savings and investment products, April 2009
- Cash ISA subscriptions increase while equity ISA subscriptions fall
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- Figure 10: Number of ISA accounts and amounts subscribed, segmented by type, 1999-2000-2008/09
- NS&I has benefited from a flight to safety
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- Figure 11: Amounts invested in NS&I annually and total funds held, 2003/04-2008/09
- Personal pensions compete for individuals’ funds
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- Figure 12: New APE* individual pension premiums, by product type, 2003-08
- Direct equity holdings on the decline
- Investment bonds
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- Figure 13: Total number of new single-premium investment bond contacts and value of new premiums, 2002-08
- Buy-to-let loses its appeal as house prices decline
Strengths and Weaknesses in the Market
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- Figure 14: Collective Investments – SWOT analysis, 2009
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Who’s Innovating?
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- Key points
- Innovation is cyclical, and fund-driven
- Absolute return funds see a flurry of activity…
- … and encouraging level of new sales
- An emphasis on security…
- … with some taking an innovative approach
- A return to split capital trusts?
- Platinum 120 Funds range endeavors to give retail investors a head start
- Recent investment fund activity
- Friends provident adds funds designed to take advantage of volatility
- New Investec fund focuses on capital protection
- LV= launches three funds targeted at diverse risk profiles
- Low-charging Vanguard launches 11 tracker funds in the UK
- HSBC slashes Index tracking fund fees and eliminates commission
- The continued rise of ETFs
- HSBC jumps into the European ETF market
Trade Perspective
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- The effects of the financial crisis
- Credit Crunch means less innovation
- Relationship with IFAs
- Collectives and this year’s ISA season
- Increase in annual ISA limits welcomed but poorly executed
- What to expect in the ISA market going forward
Market Size and Forecast
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- Key points
- Gross retail sales back up in 2009
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- Figure 15: Gross retail sales of UK-domiciled unit trusts/OEICs, 1999-2009
- Net retail sales recovery
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- Figure 16: Net retail sales of UK-domiciled unit trusts/OEICs, 1999-2009
- The ISA season boost in retail sales
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- Figure 17: Gross and net ISA sales of unit trusts and OEICs, April 2007-June 2009
- Collectives the main investment held in stocks and share ISAs
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- Figure 18: Market value of ISA funds, stocks and shares component, as of 5 April 2008, by type of qualifying investment, 2004-08
- Asset allocation – equities playing a lesser role
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- Figure 19: UK-domiciled funds under management, by asset class, 2004-08
- Forecast
- Gross retail sales set for further growth
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- Figure 20: Forecast of gross retail sales of UK domiciled unit trusts/OEICs, 2004-14
- Passively managed funds pose a competitive threat
- Factors incorporated
Market Share
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- Key points
- Retail and private client funds under management
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- Figure 21: Retail and private client funds under management (minimum lump sum is less than or equal to £50,000), by fund manager, June 2008 and 2009
- Retail funds under management
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- Figure 22: Retail funds under management (minimum lump sum is less than or equal to £10,000), by fund manager, June 2008 and 2009
- Market share in the ISA market holds steady with Fidelity at the top
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- Figure 23: UK ISA funds under management, June 2008 and 2009
Companies and Products
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- Major players
- FIL Investment Management Limited
- Invesco Perpetual
- Jupiter Unit Trust Managers Limited
- M&G Securities Limited
- Threadneedle Investment Services Ltd
- Key fund supermarkets
Brand Communication and Promotion
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- Key points
- Advertising spend down nearly a third in the year to April 2009
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- Figure 24: Collective investment advertising expenditure, by sub-category, 2005-09
- F&C and Invesco responsible for a third of total adspend
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- Figure 25: Advertising expenditure, by the top ten collective investment advertisers, 2008 and 2009
- Most advertising goes through the press and direct mail
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- Figure 26: Collective investment advertising expenditure, by media type, 12 months to April 2009
Channels to Market
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- Key points
- Intermediaries primary distribution channel
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- Figure 27: Proportion of unit trust/OEIC gross retail sales, by distribution channel, 2005-09 (Q2)
- Fund supermarkets play a major role in fund selection
- Over 40% of sales within ISAs via fund supermarkets
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- Figure 28: Proportion of unit trust/OEIC ISA sales, by distribution channel, 2005-09 (Q2)
The Consumer – Investment Ownership
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- Key points
- A strong preference for low risk savings and investments
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- Figure 29: Investment ownership, April 2009
- Investment ownership jumps significantly after 35
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- Figure 30: Savings and investment products owned, by age, April 2009
- Positive link between affluence and investment ownership
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- Figure 31: Savings and investment products owned, by gender and socio-economic group, April 2009
- Personal wealth the main factor in investment ownership
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- Figure 32: Savings and investment products owned, by level of investible assets, April 2009
The Consumer – What Consumers Are Looking For in a Long-term Investment
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- Key points
- Capital preservation and proven success top priorities
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- Figure 33: Important factors when choosing a long-term investment, April 2009
- Engagement with long-term savings and investing increases with age
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- Figure 34: Important factors when choosing a long-term investment, by gender and age, April 2009
- Affluent demand more...
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- Figure 35: Important factors when choosing a long-term investment, by socio-economic group, April 2009
- ... and are most likely to consider tax benefits
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- Figure 36: Important factors when choosing a long-term investment, by gross annual household income, April 2009
The Consumer – Attitudes Towards Risk
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- Key points
- An overall low risk threshold
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- Figure 37: Attitudes towards risk, April 2009
- Risk tolerance tends to match up with product owned
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- Figure 38: Product ownership, by attitudes towards risk, April 2009
- A small number of investors likely unaware of their exposure to risk
- Willingness to take on risk decreases with age
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- Figure 39: Attitudes towards risk, by gender and age, April 2009
- More affluent have higher risk tolerance levels
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- Figure 40: Attitudes towards risk, by socio-economic group and gross annual household income, April 2009
The Consumer – Sources of Advice
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- Key points
- Banks, building societies and IFAs top sources of investment advice
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- Figure 41: Source of financial advice, April 2009
- Word of mouth an under-rated way to generating new business
- Owners of riskier investments turn to IFAs for advice
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- Figure 42: Product ownership, by source of financial advice, April 2009
- Advice and risk tolerance
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- Figure 43: Source of financial advice, by attitudes towards risk, April 2009
- Professional advice becomes increasingly prevalent as one ages
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- Figure 44: Source of financial advice, by gender and age, April 2009
- The growing influence of the internet
- Wealthy consult professionals as well as friends and family
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- Figure 45: Source of financial advice, by socio-economic group and gross annual household income, April 2009
The Consumer – Targeting Opportunities
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- Key points
- Key target groups
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- Figure 46: Long-term saving and investing target groups, April 2009
- Safe and Secure
- Can’t afford it
- Savvy and Demanding
- Unresponsive
- The Safe and Secure can be targeted with cautious funds
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- Figure 47: Target groups, by product ownership, April 2009
- Target group attitudes to risk and the importance of investor education
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- Figure 48: Target groups, by attitudes towards risk, April 2009
- Savvy and demanding more likely to seek professional advice
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- Figure 49: Target groups, by source of financial advice, April 2009
- High-earners populate the Savvy and Demanding group
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- Figure 50: Target group, by demographics, April 2009
Appendix – Market Background and Definitions
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- Investment risk
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- Figure 51: Risk profile of selected savings and investments
- Collective investment types
- Fund supermarkets
Appendix – The Consumer – Investment Ownership
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- Figure 52: Most popular ownership of select savings and investment products, by demographics, April 2009
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- Figure 53: Next most popular ownership of select savings and investment products, by demographics, April 2009 (continued)
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Appendix – The Consumer – What Consumers Are Looking For in a Long-term Investment
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- Figure 54: Product ownership, by important factors when choosing a long-term investment, April 2009
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- Figure 55: Most popular important factors when choosing a long-term investment, by demographics, April 2009
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- Figure 56: Next most popular important factors when choosing a long-term investment, by demographics, April 2009 (continued)
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Appendix – The Consumer – Attitudes Towards Risk
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- Figure 57: Attitudes towards risk, by demographics, April 2009
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Appendix – The Consumer – Sources of Advice
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- Figure 58: Preferred sources of investment advice, by demographics, April 2009
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Appendix – The Consumer – Targeting Opportunities
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- Figure 59: Target group, by demographics, April 2009
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