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Innovation in the Retail Investment Market - UK - October 2019

OVERVIEW
What you need to know
EXECUTIVE SUMMARY
The market
Drop in sales amid uncertainty
Figure 1: Value of gross and net retail sales, 2014-19
Stocks and shares ISAs grow in volume and value
Figure 2: Average subscription per ISA, by component, 2013/14-2017/18
Interest rates and savings ratios remain at historic lows
Figure 3: Household savings ratio, 2009-19 H1
FCA looks to improve competition on investment platforms
Companies and brands
Technology and innovation are seen as priorities but also as risks
High street banks continue to explore robo-advice
Investment services in the FCA’s regulatory sandbox
The consumer
Stocks and shares ISAs are the most common investment products
Figure 4: Investment product ownership, July 2019
Saving for the long term is the most common goal
Figure 5: Reasons for investing, July 2019
Perceptions are markedly different depending on provider type
Figure 6: Perceptions of selected types of investment providers, July 2019
Human advisers are generally perceived to be superior to robo-advisers
Figure 7: Robo-advisers vs human advisers, July 2019
Fees and pricing are the main differentiator when choosing a provider
Figure 8: Reasons for choosing one investment service over another, July 2019
Majority of investors/potential investors interested in thematic investing
Figure 9: Interest in investment themes, July 2019
What we think
ISSUES AND INSIGHTS
The potential of thematic investing
The facts
The implications
Robo-advisers need to reinforce the message of affordability and accessibility
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Drop in sales amid uncertainty
Stocks and shares ISAs grow in volume and value
Interest rates and savings ratios remain at historic lows
FCA looks to improve competition on investment platforms
MARKET ENVIRONMENT
Drop in sales amid uncertainty
Figure 10: Value of gross and net retail sales, 2014-19
… but stocks and shares ISAs grow in volume and value
Figure 11: Average subscription per ISA, by component, 2013/14-2017/18
MARKET DRIVERS
Interest rates remain at historic lows …
Figure 12: Effective interest rates on household deposit balances and official base rate, January 2010-July 2019
… as is the case with savings ratios
Figure 13: Household savings ratio, 2009-19 H1
FCA to improve competition on investment platforms
Industry examples: the STAR initiative
New rules announced for the P2P sector
FCA to focus on outcome indicators
COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
Technology and innovation are seen as priorities but also as risks
High street banks continue to explore robo-advice
Investment services in the FCA’s regulatory sandbox
COMPETITIVE STRATEGIES
Technology and innovation are high on established brands’ priorities …
… but are also seen as risks
Some brands are more specific
Investments and Open Banking: platforms, partnerships and personalisation
LAUNCH ACTIVITY AND INNOVATION
Santander and HSBC launch online services …
… with more expected to follow suit …
… but others are moving away from robo-advice
Investment services in the FCA’s regulatory sandbox
Distributed Ledger Technology
Platforms
Other propositions
THE CONSUMER – WHAT YOU NEED TO KNOW
Stocks and shares ISAs are the most common investment products
Saving for the long term is the most common goal
Perceptions are markedly different depending on provider type
Human advisers are generally perceived to be superior to robo-advisers
Fees and pricing are the main differentiator when choosing a provider
Majority of investors/potential investors interested in thematic investing
INVESTOR PROFILE
Stocks and shares ISAs are the most widely held investment product
Figure 14: Investment product ownership, July 2019
Investors more likely to have substantial investable assets
Figure 15: Level of investable assets, July 2019
Investors are less risk-averse
Figure 16: Level of comfort taking risks with savings, July 2019
REASONS FOR INVESTING
Saving for the long term is the most common goal
Figure 17: Reasons for investing, July 2019
Investing vs saving
Investing: beyond saving
Majority of investors have more than one reason
Figure 18: Repertoire of reasons for investing, July 2019
PERCEPTIONS OF TYPES OF INVESTMENT PROVIDERS
Traditional investment providers are seen as experts
Figure 19: Perceptions of selected types of investment providers, July 2019
Banks are associated with accessibility, convenience and security
Online-only platforms and robo-advisers associated with innovation
ROBO-ADVISERS VS HUMAN ADVISERS
Human advisers generally perceived to be superior to robo-advisers …
… except at being unbiased
Figure 20: Robo-advisers vs human advisers, July 2019
Mixed results across the generations
Figure 21: Share of investors/potential investors who say robo-advisers are better than human advisers, by age, July 2019
Parents need convincing of affordability of robo-advisers
Figure 22: Robo-advisers vs human advisers: making investing more affordable – CHAID tree output, July 2019
REASONS FOR CHOOSING AN INVESTMENT SERVICE
Fees and pricing are the main differentiator
Figure 23: Reasons for choosing one investment service over another, July 2019
Accessibility is important to consumers …
… and so is the option of micro-investing
Reasons for choosing an investment service: TURF analysis
Figure 24: Reasons for choosing one investment service over another – TURF Analysis, July 2019
INTEREST IN INVESTMENT THEMES
Investors most interested in tech, type of company and industry
Figure 25: Interest in investment themes, July 2019
Environmental and ethical credentials are appealing
Half of over-65s not likely to be interested in theme investing
Figure 26: Disinterest in investment themes, by age, July 2019
Younger investors more passionate about a single subject
Figure 27: Repertoire of interest in investment themes, by age, July 2019
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology
CHAID analysis methodology
Figure 28: Robo-advisers vs human advisers – CHAID Table output, July 2019
TURF analysis methodology
Figure 29: Reasons for choosing one investment service over another – TURF Analysis table output, July 2019

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