Equity Investing - UK - September 2017

OVERVIEW
What you need to know
Products covered in this Report
EXECUTIVE SUMMARY
The market
Gross fund sales are expected to continue growing amid uncertainty
Figure 1: Forecast of the value of gross retail sales, 2012-22
UK fund platforms up as non-advised sales dominate
Figure 2: Advised and non-advised new sales based upon sales data of bonds, stocks and shares ISAs, trusts and OEICs, 2012-16 H1
Low investable assets and interest rates shape the market
2018: a year of regulatory change
Companies and brands
M&G takes top spot for retail funds under management
Figure 3: Top 10 asset managers, by total retail funds under management, as of March 2017
The consumer
More than half with savings or investments are uncomfortable with risk
Figure 4: Level of comfort with investment risk, July 2017
A third of people have at least one investment product
Figure 5: Investment product ownership, July 2017
Perceptions about profitability are holding potential investors back
Figure 6: Reasons for not investing, July 2017
Two thirds of investors intend to be active in the next year
Figure 7: Investors’ intentions, July 2017
Broad financial gains are the strongest drivers behind investing
Figure 8: Motivations for investing, July 2017
Investors’ attitudes suggest simpler investment services could appeal
Figure 9: Attitudes towards Investing, July 2017
What we think
ISSUES AND INSIGHTS
With-profits products offer potential as retirement income boosters
The facts
The implications
Simplification is the key to expanding the market
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Gross fund sales are expected to continue growing amid uncertainty
Performance has varied across asset types
UK fund platforms up as non-advised sales dominate
Low investable assets and interest rates shape the market
2018: a year of regulatory change
MARKET SIZE AND FORECAST
Net fund sales drop as investors respond to uncertainty
Figure 10: Value of gross and net retail sales, 2012-16
Guaranteed and with-profit bonds make considerable progress
Figure 11: Unit linked, guaranteed, and with profit bonds
A third of UK adults have at least one investment product
Figure 12: Investment product ownership, July 2017
Market forecast
Gross fund sales are expected to grow despite uncertainty
Figure 13: Forecast of the value of gross retail sales, 2012-22
Figure 14: Forecast of the value of gross retail sales, with current prices, 2012-22
Forecast methodology
MARKET SEGMENTATION
Significant variance in growth and decline of asset types
Figure 15: Net retail sales of funds, by asset class, 2012-16
Unit trusts/OEICs benefit from interest in spreading risk
Figure 16: New retail investment sales, by investment product type, 2012-16
Value of stocks and shares ISAs drops for first time in seven years
Figure 17: Number of ISAs, amounts subscribed to each component and average subscription per account, 2008-09/2015-16*
CHANNELS TO MARKET
UK fund platforms facilitate almost half of gross retail sales
Figure 18: Gross retail sales, by distribution channel, 2016
Figure 19: Gross retail sales, by distribution channel, 2012-16
Non-advised sales dominate the market
Figure 20: Advised and non-advised new sales based upon sales data of bonds, stocks and shares ISAs, trusts and OEICs, 2012-16 H1
Figure 21: Use of advice in the past 3 years, July 2017
Only 16% used face-to-face channels to buy investments in last six months
Figure 22: Typical investment methods, July 2017
MARKET DRIVERS
Low investable assets restrict investment potential
Figure 23: Value of people’s savings and investments, July 2017
Low interest rates motivate savers to seek better returns…
Figure 24: Average monthly quoted household deposit and cash ISA interest rates, March 2011-March 2017
…but many people still choose to hold their savings in cash
Figure 25: Cash savings product ownership, July 2017
Figure 26: Consumer confidence in choosing financial services products, Rebase, May 2016
Brexit has created uncertainty for investors
REGULATORY AND LEGISLATIVE CHANGES
EU MiFID II implementation clashes with other legislation due in 2018
MiFID II
PRIIPs
Senior Managers’ & Certification Regime
Summary
FCA publishes final findings on asset management…
…leading to a package of remedies
FCA to investigate investment platforms
COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
M&G takes top spot for retail funds under management
With-profits products, micro-investing and Lifetime ISAs offer promise
Advertising spend returns to growth in 2016-17
MARKET SHARE
M&G takes top spot for retail funds under management
Figure 27: Top 10 asset managers, by total retail funds under management, as of March 2017
COMPETITIVE STRATEGIES
Firms consider with-profits propositions to target retirement market
Prudential
Aviva
Foresters Friendly Society
Micro-investing encourages movement away from cash savings
Providers see opportunity in banks’ lacklustre response to Lifetime ISA
Downward pressure on fees mounts following Vanguard pledge
ADVERTISING AND MARKETING ACTIVITY
Advertising spend returns to growth in 2016-17
Figure 28: Total above-the line, online display and direct mail advertising expenditure on investment products, by product type, 2014/15-2016/17*
TD Direct up the ante in the direct-to-consumer platform market
Figure 29: Total above-the line, online display and direct mail advertising expenditure on investment products, by advertiser, 2014/15-2016/17*
Platform providers optimise SEO in bid to increase traffic
Nielsen Ad Intel coverage
THE CONSUMER – WHAT YOU NEED TO KNOW
More than half with savings or investments are uncomfortable with risk
A third of people have at least one investment product
Perceptions about profitability are holding potential investors back
Two thirds of investors intend to be active in the next year
Broad financial gains are the strongest drivers behind investing
Investors’ attitudes suggest simpler investment services could appeal
RISK SENSITIVITY AND INVESTABLE ASSETS
More than half with savings or investments are uncomfortable with risk
Figure 30: Level of comfort with investment risk, July 2017
Millennials more likely to feel comfortable with risk
Figure 31: Level of comfort with investment risk, July 2017
More investable assets foster a braver approach to risk-taking
Figure 32: Level of comfort with investment risk, by investable assets, July 2017
INVESTMENT PRODUCT OWNERSHIP
A third of people have at least one investment product
Different approaches to owning shares
Figure 33: Investment product ownership, July 2017
14% of people have more than one investment product
Figure 34: Number of investment products owned, excluding ‘other investments’, July 2017
Figure 35: Number of investment products owned, by investment products owned, July 2017
BARRIERS TO INVESTING AND LIKELIHOOD TO INVEST
Lack of funds and risk aversion are main barriers to investing
Perceptions about profitability are holding potential investors back
Figure 36: Reasons for not investing, July 2017
Figure 37: Number of reasons for not investing, July 2017
Non-investors aged 45-64 are difficult for providers to reach
Figure 38: Reasons for not investing, by age, July 2017
Those with £30,000 or more are the most risk averse
Figure 39: Reasons for not investing, by investable assets, July 2017
Only one in ten non-investors intends to invest in the coming year
Figure 40: Likelihood to start investing, July 2017
Younger people are more likely to say they will invest in the next year
Figure 41: Likelihood to start investing, by age, July 2017
Risk aversion is among the most enduring barriers to investing
Figure 42: Likelihood to start investing, by barriers to investing, July 2017
INVESTORS’ INTENTIONS FOR THE FUTURE
Two thirds of investors intend to be active in the next year
Figure 43: Investors’ intentions, July 2017
Half of Millennial investors intend to invest more in the next year
Figure 44: Investors’ intentions, by generation, July 2017
More than a third of people making new investments will go without advice
Figure 45: Investors’ investment intentions, July 2017
Millennials set to forge out on their own with new investments
Figure 46: Investors’ investment intentions, July 2017
MOTIVATIONS FOR INVESTING
Broad financial gains are the strongest drivers behind investing
Figure 47: Motivations for investing, July 2017
Generation X investors target retirement savings boost
Figure 48: Motivations for investing, by generation, July 2017
ATTITUDES TOWARDS INVESTING
Investors’ attitudes suggest simpler investment services could appeal
Figure 49: Attitudes towards Investing, July 2017
Comfortable risk-takers are most likely to think ethical investing is important
Figure 50: Attitudes towards ethical investing, by comfort with taking risk with savings, July 2017
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology
APPENDIX – MARKET SIZE AND FORECAST
Figure 51: Forecast of the value of new gross sales, 2017-22
Forecast methodology