Table of Contents
Issues in the Market
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- Key issues explored
- Market definitions
- Abbreviations
Future Opportunities
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- When it comes to client fund selection it’s better to offer less than more
- People need the occasional nudge
- Too much choice can lead to inaction
- Choice architecture – an aid to decision-making
- IFAs can capitalise on consumer dissatisfaction with the banks
- More people are turning to the internet to share experiences and advice
Market in Brief
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- A contracting market
- Advisers face increased regulation
- Trading environment picks up after a very difficult period
- Collective investment market recovers well in 2009
- Online advances create new opportunities
- Advertising activity cut back
- IFA census – key findings
- Adviser confidence improves
- Crisis reshapes investor strategy and adviser recommendations
- Advisers split over whether RDR will have a positive or negative impact on their business
- Many firms expect to move towards a fee-charging structure over the coming year
Regulatory Context
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- Key points
- Current regulatory structure of the advice market
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- Figure 1: Overview of the UK advice market, 2009
- RDR brings more change
- Making a clear distinction between ‘independent’ and ‘restricted’ advice
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- Figure 2: Proposed regulatory landscape, 2013
- The general election could add an extra level of uncertainty
- National roll-out of Money Guidance service could begin in 2010
- Introducing a new standard for independence
- Removing commission bias
- Implications for product providers
- Firms generally welcome RDR proposals
- From consultation to implementation
- Prudential requirements
- The impact of MiFID
The Size of the Intermediary Market
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- Key points
- Contraction in the number of DA intermediary firms set to continue
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- Figure 3: Total number of directly authoritised retail intermediary firms, 2006-09
- The financial advice sector has been the most resilient
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- Figure 4: Number of directly authoritised retail intermediary firms, by sector (primary category only), 2006-09
- More IFAs switch to AR status
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- Figure 5: Number of financial advice ARs and DA intermediary firms, by type, 2006-09
Economic and Investment Environment
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- Key points
- Recovery hopes heighten, despite GDP contracting again in Q3 2009
- Investment activity subdued
- Stock market rallies, but is it sustainable?
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- Figure 6: FTSE 100 and FTSE All Share – daily index movements, September 2000-September 2009
- Implication and opportunity
- Consumers are starting to save again
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- Figure 7: Total PDI, consumer expenditure and savings ratio, at current prices, 2004-13
- Implication and opportunity
- Hedging for tomorrow’s rise in inflation
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- Figure 8: Average annual changes in the Bank of England base rate, CPI and RPI – UK, 2000-09
- Implication and opportunity
Trade Perspective
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- About the respondents
- RDR viewpoint – still some finer points to be worked out
- RDR impact – further market consolidation likely
- Investor behaviour – some confidence has returned, but caution still reigns
- Online threat? Well that depends on your position
- Market outlook – we’re not out of the woods yet
Asset Ownership and Investor Behaviour
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- Key points
- Crisis leaves its mark on household wealth
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- Figure 9: Net worth of the household sector, 2004-08
- Cash is king – bad news for intermediaries
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- Figure 10: Penetration of savings and investment products, April 2009
- The crunch effect on investor behaviour
- Products in and out of favour
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- Figure 11: General trends in consumer demand for investment and pension products, 2009
- Consumer confidence lifts…
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- Figure 12: GfK Consumer Confidence Barometer – UK, January 1988-September 2009
- … but overall expected financial activity remains weak…
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- Figure 13: Consumers’ savings, investment, borrowing and debt repayment activity (two quarter moving average), Q3/Q4 2002-Q3/Q4 2009
- … and investment intentions are still subdued
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- Figure 14: Intended equity buying and selling indices, Q3/Q4 2002-Q3/Q4 2009
Online Developments in the Intermediary Market
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- Key points
- Using online technology to fill a gap in the advice market
- Platform progress
- Market differentiation
- More platforms emerging
- Most IFAs view new DIY investor technology as a minor potential threat
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- Figure 15: Assessing the potential threat of the internet and a new breed of DIY investor, September 2009
- Insight and opportunity
SWOT Analysis
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- Figure 16: Financial advice market – summary of strengths, weaknesses, opportunities and threats, 2009
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Adviser Share of Investment Business
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- Key points
- IFAs sell the majority of single-premium insurance-related investments
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- Figure 17: New insurance-related investment business, by distribution channel, 2005-09
- Intermediary share of gross fund sales increases to nearly 90%
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- Figure 18: Gross retail sales of UK-domiciled unit trusts and OEICs, by distribution channel, 2005-09
- Implication and opportunity
Adviser Firm Rankings
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- Key points
- Sesame and Openwork are the largest IFA firms by turnover
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- Figure 19: Top 20 financial advisers in the UK, based on relevant turnover, 2008/09
Companies and Products
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- Barclays Financial Planning
- Bluefin Group
- Brewin Dolphin
- Hargreaves Lansdown
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- Figure 20: Proportional contribution to group revenues, by business unit, 2008/09
- HSBC
- Intrinsic Financial Services
- Openwork
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- Figure 21: Openwork’s products and providers, 2008/09
- Positive Solutions
- Sesame
- Smith & Williamson
- Tenet Group
- Towry Law Financial Services
Advertising and Promotion
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- Key points
- Intermediaries cut adspend
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- Figure 22: Advertising expenditure by financial intermediaries, by sub-sector, 2007-09
- Press advertising accounts for the majority of the expenditure
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- Figure 23: Proportional distribution of intermediary advertising expenditure, by media type, 2008/09
- Top IFA firms are conspicuous by their absence
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- Figure 24: Advertising expenditure by financial intermediaries, by top 20 advisers, 2007-09
The IFA – Business Confidence
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- Key points
- About Mintel’s IFA research
- IFAs feeling more confident about their own prospects than at the start of the year…
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- Figure 25: Confidence in own business prospects compared to six months ago, January, May and September 2009
- … and those of the financial services market as a whole
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- Figure 26: Confidence in the financial services market compared to six months ago, January, May and September 2009
The IFA – Crisis Impact on Client Behaviour
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- Key points
- Investors move to protect their wealth
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- Figure 27: Impact of slowdown on client behaviour, September 2009
- Low savings rates helps equities
- More interest in property as exit constraints are lifted
- Some investors have sold off assets to meet living expenses
The IFA – Asset Allocation
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- Key points
- Interest in bonds may be starting to wane…
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- Figure 28: Asset classes most frequently recommended over the past six months, May and September 2009
- …while there is greater interest in overseas equities
- Fewer IFAs now recommending gilts
The IFA – Impact of RDR & Other Factors
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- Key points
- Two fifths of IFAs expect the RDR to negatively affect their business over the coming year
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- Figure 29: Perceived impact of regulatory and other industry developments on own business over the next 12 months, September 2009
- RDR is polarising opinion
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- Figure 30: Perceived impact of the RDR on own business over the next 12 months, Jan-September 2009
- Renewed consumer confidence will have a positive impact on business over the coming year
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- Figure 31: Perceived impact of consumer confidence in stockmarket-based investments on own business over the next 12 months, Jan-September 2009
- Figure 32: Perceived impact of consumer confidence in the housing market on own business over the next 12 months, Jan-September 2009
- Most IFAs see wrap and fund platforms as a positive development
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- Figure 33: Perceived impact of wrap and fund platforms on own business over the next 12 months, Jan-September 2009
The IFA – Future Business Intentions
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- Key points
- Two fifths of IFAs plan to start charging fees over the coming year
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- Figure 34: Business intentions over the next 12 months, January, May and September 2009
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