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Consumers and Direct Investment - UK - October 2017

“Increasing numbers of people, from across the wealth spectrum, are choosing to invest directly rather than use an intermediary – and this trend is set to continue. Based on the findings of our consumer research, many consumers are planning to start investing over the coming year. Most of these expect to self-invest, and many are open to the idea of using an online investment platform or similar service.”
– Sarah Hitchcock, Senior Financial Analyst

This Report looks at the following areas:

  • Engage with prospective investors and nurture the relationship
  • Convincing the risk-averse with informal, entry-level propositions

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Table of contents

  1. Overview

    • What you need to know
      • Report scope and market definitions
      • Executive Summary

          • The market
            • D2C investment market is worth £272 billion
              • Regulatory changes in the advice market have driven growth of non-advised sales…
                • Figure 1: Volume of advised and non-advised regulated retail investment sales, 2011-16
              • …although the distribution of more complex products remain heavily intermediated
                • A mix of factors are driving the trend towards DIY investment
                  • Investment providers must adapt in a more transparent and competitive environment
                    • FCA launches investigation into the platform sector
                      • Companies and brands
                        • The largest D2C platforms
                          • Figure 2: Top five D2C platforms, by share of assets, 2016
                        • Some platforms favour a fixed pricing model
                          • More brands enter the D2C space, increasing competition
                            • The rise of the robo-advisers
                              • Hargreaves Lansdown is the leading D2C investment brand
                                • Figure 3: Usage of selected investment brands, by investors who have self-invested within the past three years, July 2017
                              • The consumer
                                • Around two thirds of UK adults have savings or investments
                                  • Figure 4: Ownership of cash savings and investment products, July 2017
                                • 40% of investment-holders have self-invested within the past three years
                                  • Figure 5: Method of investing used with past three years, by amount of investible assets, July 2017
                                • 27% of self-directed investors usually use their mobile to invest
                                  • 58% of investors are comfortable choosing their own investments and working out the charges
                                    • Figure 6: Level of comfort with choosing own investments and monitoring them, comparing charges and understanding tax implications, July 2017
                                  • 11% of savers plan to start investing within the next 12 months
                                    • Figure 7: Method most likely to use to arrange or buy new investments, by existing and prospective investors, July 2017
                                  • Significant interest in online platforms and similar services
                                    • Investors want a simple and competitive pricing structure
                                      • Figure 8: Features most wanted from an online share dealing service or investment platform, July 2017
                                    • What we think
                                    • Issues and Insights

                                      • Engage with prospective investors and nurture the relationship
                                        • The facts
                                          • The implications
                                            • Convincing the risk-averse with informal, entry-level propositions
                                              • The facts
                                                • The implications
                                                • The Market – What You Need to Know

                                                  • D2C investment market administers assets worth £272 billion
                                                    • Since 2012 there has been a shift towards non-advised channels…
                                                      • …although this has not happened uniformly across all sectors
                                                        • Advances in digital technology are helping to drive the trend towards DIY investment
                                                          • Wealth managers face mounting pressure to improve governance and transparency
                                                          • Market Size

                                                            • D2C investment market worth £272 billion at the end of 2016
                                                              • Figure 9: Retail investor assets under administration, by distribution channel, 2016
                                                            • Direct channels account for a quarter of gross retail investment fund sales in value terms…
                                                                • Figure 10: Gross retail investment fund sales, by distribution channel, 2015-16
                                                              • …while three fifths of regulated retail investment product sales are now non-advised
                                                                • Figure 11: Volume of advised and non-advised regulated retail investment sales, 2011-16
                                                            • Market Segmentation

                                                              • Distribution mix varies according to product type
                                                                • Figure 12: Volume of advised and non-advised regulated retail investment sales, by product type, 2012-16
                                                            • Market Drivers

                                                              • Growth in DIY investment linked to advice gap created by RDR
                                                                • Factors driving the growth of self-directed investing:
                                                                  • Summary of main market inhibitors:
                                                                    • Only 28% of UK adults are comfortable with taking risks with their money
                                                                      • Figure 13: Level of comfort with taking risks with savings, July 2017
                                                                  • Regulatory and Legislative Changes

                                                                    • FCA announces a raft of remedies to reform the asset management industry…
                                                                      • …and turns its attention to investment platforms
                                                                        • MiFID II deadline looms
                                                                          • FCA set to publish final guidance on FAMR imminently
                                                                          • Companies and Brands – What You Need to Know

                                                                            • The largest D2C platforms
                                                                              • Some platforms favour a fixed pricing model
                                                                                • A plethora of entrants and new propositions intensify competition
                                                                                  • Hargreaves Lansdown is the leading D2C investment brand
                                                                                  • Competitive Strategies and Innovation

                                                                                    • Hargreaves Lansdown is the largest D2C platform in the UK by some margin…
                                                                                      • Figure 14: Top five D2C platform providers, by AUA, 2016 (year-end)
                                                                                    • …but is set to face tougher competition from established rivals…
                                                                                      • Barclays revamps its direct investment proposition to appeal to a wider audience
                                                                                        • Smaller players holding their ground and performing well
                                                                                          • …and from new low-cost entrant, Vanguard
                                                                                            • Largest platforms cater for advisers
                                                                                              • Proliferation of robo-advisers and online investment services
                                                                                                • NatWest targets its online banking customers with a simplified investment solution
                                                                                                  • Platforms respond by launching new simplified solutions…
                                                                                                    • …while some seek to differentiate themselves with a fixed pricing model
                                                                                                      • Recent mergers and acquisitions
                                                                                                      • Investment Brand Awareness and Usage

                                                                                                        • Many investment brands suffer from low awareness…
                                                                                                          • Figure 15: Awareness and usage of selected investment brands, July 2017
                                                                                                        • …with newer entrants having a steeper road to climb than longer established brands
                                                                                                          • Hargreaves Lansdown and Aviva record the highest usage rates
                                                                                                            • Barclays rebrands to broaden its appeal
                                                                                                              • Hargreaves Lansdown is the clear market leader
                                                                                                                • Figure 16: Usage of selected investment brands, by investors who have self-invested within the past three years, July 2017
                                                                                                            • The Consumer – What You Need to Know

                                                                                                              • The more wealth people have the more likely they are to invest
                                                                                                                • Recent investors are just as likely to have gone direct as used an adviser
                                                                                                                  • Three fifths are comfortable making their own investment choices
                                                                                                                    • Going direct, means going online
                                                                                                                      • Good growth prospects for D2C investment over the coming year
                                                                                                                        • Investors want a low-cost, transparent proposition from a trusted brand
                                                                                                                        • Level of Investible Assets and Product Ownership

                                                                                                                          • 30% of UK adults have £10,000 or more in savings
                                                                                                                            • Figure 17: Level of investible assets, July 2017
                                                                                                                          • Savers remain faithful to cash despite the paltry returns on offer
                                                                                                                              • Figure 18: Ownership of cash savings and investment products, July 2017
                                                                                                                            • 28% of people with £50,000+ to invest are keeping all their money in cash
                                                                                                                              • Figure 19: Ownership of cash savings and investment products, by amount of investible assets, July 2017
                                                                                                                          • Method of Investment

                                                                                                                            • Retail investors are as likely to self-invest as they are to use an adviser
                                                                                                                              • Figure 20: Method of investing used with past three years, by amount of investible assets, July 2017
                                                                                                                            • 6% used an investment club to invest
                                                                                                                            • Level of Comfort Engaging in Self-directed Activities

                                                                                                                              • Many investors are comfortable making their own investment decisions
                                                                                                                                • 40% of investors would be happy to try new guidance technology…
                                                                                                                                  • Figure 21: Level of comfort with choosing own investments, trying new guidance technology and mobile investing, July 2017
                                                                                                                                • …mirroring a broader consumer trend
                                                                                                                                  • More than half are confident of working out the charges and tax implications of different products
                                                                                                                                    • Figure 22: Level of comfort with keeping track of investments, comparing charges, understanding tax implications and switching provider, July 2017
                                                                                                                                • Investment Frequency and Channel Preference

                                                                                                                                  • 60% of self-directed investors invest at least once a month…
                                                                                                                                    • Figure 23: Frequency of trading/investing, by method of investing, July 2017
                                                                                                                                  • …and 90% invest online
                                                                                                                                    • Figure 24: Channel usually used to invest, by method of investing, July 2017
                                                                                                                                • Investment Intentions over the Coming Year

                                                                                                                                  • 2.8 million are keen to start investing…
                                                                                                                                    • Figure 25: Identifying potential first-time investors, July 2017
                                                                                                                                  • …most of which are under the age of 45
                                                                                                                                    • Half of all existing investors expect to add to their portfolios over the coming year…
                                                                                                                                      • Figure 26: Investment plans over the coming year (existing investors only), July 2017
                                                                                                                                    • …and around three quarters of these plan to invest directly
                                                                                                                                      • Figure 27: Method most likely to use to arrange or buy new investments, by existing and prospective investors, July 2017
                                                                                                                                  • Investor Usage of and Interest in D2C Platforms

                                                                                                                                    • 59% of prospective investors would consider using an investment platform
                                                                                                                                      • Figure 28: Usage and future consideration of online investment platforms/share dealing services, by existing and prospective investors, July 2017
                                                                                                                                  • What Investors Most Want from an Investment Platform

                                                                                                                                    • Competitive price is top consideration
                                                                                                                                      • Figure 29: Features most wanted from an online share dealing service or investment platform, July 2017
                                                                                                                                    • Around one in four wants online guidance
                                                                                                                                    • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                      • Data sources
                                                                                                                                        • Abbreviations
                                                                                                                                          • Consumer research methodology

                                                                                                                                          Companies Covered

                                                                                                                                          To learn more about the companies covered in this report please contact us.

                                                                                                                                          Consumers and Direct Investment - UK - October 2017

                                                                                                                                          US $2,648.76 (Excl.Tax)