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Equity Investing - UK - September 2016

“Low savings rates and new technology should make investing in equities an attractive proposition for those who have become disillusioned with the cash savings market. However, ownership across the adult population remains low and a risk-averse attitude continues to hamper the uptake of investment products, with recent market volatility off-putting for those who lack investment experience. Helping customers to navigate these concerns through education and access to advice will be crucial in expanding the pool of investors.”
– Scott McDonald, Financial Services Analyst

This report discusses the following key topics:

  • Generation X – A lost generation of investors
  • Ethical and green funds provide opportunity to engage with young investors

This Report examines the investment market, with a focus on equity investments. The Report looks at the different investment options available to consumers when investing in equities, these include stocks and shares, stocks and shares ISAs, unit trust funds, investment trust funds and open-ended investment companies.

For the purposes of this Report, Mintel has used the following definitions:

Exchange-traded Funds (ETFs) are investment products that track an index (e.g. FTSE 100) by investing in the same stocks and shares that make up that index. ETFs are passively managed, meaning that the fees for these types of investment are typically lower than other actively managed investments (such as Unit Trust Funds and OEICs). Exchange-traded funds are listed on stock exchanges and can bought in the same way as individual shares or an investment trust fund.

Individual Company Shares are issued by businesses to raise equity or capital, these shares are offered to investors to purchase. Once an investor purchases shares they become a part owner of that business. The prices of shares can go up and down, meaning that the value of an investment may go up or down depending on how well the business is performing or other market conditions. When a consumer wishes to sell their stake in a business this activity is referred to as Share dealing.

Investment Bonds are life insurance policies where a lump sum is invested in an investment fund selected by a consumer or an adviser. These policies are typically whole of life policies and the returns a consumer receives when these policies are cashed in will depend on the performance of the fund, much like other investment products.

An Investment Trust Fund is another form of collective investment that allows investors to pool their money to purchase a variety of assets. Investment trusts are set up as companies and are listed on the London Stock Exchange, this means thatan investment trust has to publish an annual report and audited statements. They also have a board of directors that are responsible for safeguarding an investor’s interest.

Investment trust funds are closed-ended investments, meaning that there are a limited number of shares that can be issued by the company, when an investor invests in this type of fund they become a shareholder of this company.

A Real Estate Investment Trust is a company or a group that owns and manages property on behalf of shareholders. This type of investment allows consumers to invest in property without having to purchase a property themselves. These types of investments do not purchase or hold equities, so will not be discussed in this Report, but they are referenced in The Consumer section of the Report.

Stocks and Shares ISAs are a tax-efficient method of investing in a variety of different investments. It is possible to invest in individual stocks and shares, unit trusts, open-ended investment companies, investment trusts and government and corporate bonds. Unlike a cash ISA there is some risk carried with a stocks and shares ISA as a consumer’s money is invested and therefore is subject to market fluctuations.

Unit Trust Funds and Open-ended Investment Companies (OEICs) are collective investment products that allow multiple investors to pool their money to purchase a variety of different assets. Fund managers purchase a variety of shares, bonds, property and cash assets, and other investments to create a diverse portfolio for investors.

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Table of contents

  1. Overview

    • What you need to know
      • Product definitions
      • Executive Summary

          • The market
            • Gross sales up but net sales down sharply following market volatility
              • Only a minority own investment products
                • Figure 1: Investment products owned, by investment type, July 2016
              • Sales volumes have stabilised after RDR
                • Rise in non-advised sales
                  • Figure 2: Advised and non-advised new sales based upon sales data of bonds, stocks and shares ISAs, trusts and OEICs, 2011-15
                • UK fund platforms account for 46% of new sales
                  • Figure 3: Gross retail sales, by distribution channel, 2015
                • Companies and brands
                  • Standard Life and Invesco Perpetual top the asset manager ranking by FUM
                    • Figure 4: Top 10 asset managers, by total retail funds under management, as of March 2016
                  • Mergers and acquisitions
                    • The consumer
                      • 51% of consumers are uncomfortable with investment risk
                        • Limited appetite for investment products
                          • Figure 5: Consumer investment plans over the next 12 months, July 2016
                        • Lack of investable assets puts consumers off
                          • Figure 6: Consumer reasons for not owning, or wanting to own investment products, July 2016
                        • Online platforms popular among investors
                          • Figure 7: Channels consumers expect to use to invest, July 2016
                        • Low interest rates boost investment opportunities
                          • Figure 8: Consumer agreement with statements regarding investing, July 2016
                        • What we think
                        • Issues and Insights

                          • Generation X – A lost generation of investors
                            • The facts
                              • The implications
                                • Ethical and green funds provide opportunity to engage with young investors
                                  • The facts
                                    • The implications
                                    • The Market – What You Need to Know

                                      • Gross sales up but net sales down sharply following market volatility
                                        • Only a minority own investment products
                                          • Sales volumes have stabilised after RDR
                                            • Rise in non-advised sales
                                              • UK fund platforms account for 46% of new sales
                                              • Market Size and Forecast

                                                • Investment growth slows
                                                  • Figure 9: Value of gross and net retail sales, 2012-15
                                                • 67% of the UK have £30,000 or less in savings or investments
                                                  • Figure 10: Value of consumers’ savings and investments, July 2016
                                                • Only 25% of adults own an investment product
                                                  • Figure 11: Investment products owned, by investment type, July 2016
                                                • Market forecast
                                                  • Figure 12: Forecast of the value of new gross sales, 2011-21
                                                  • Figure 13: Forecast of the value of new gross sales, 2011-21
                                                • Brexit impact on investments
                                                  • Investor behaviour during the last recession
                                                    • Figure 14: Alternative market scenarios for the post-Brexit investment market, at current prices, 2016-21
                                                    • Figure 15: Alternative market scenarios for the post Brexit investment market, at current prices, 2016-21
                                                  • Very little has changed for non-investors
                                                    • Forecast methodology
                                                    • Market Segmentation

                                                      • Equity investing comes in many forms
                                                        • Mixed growth among asset types
                                                          • Figure 16: Net retail sales of funds, by asset class, 2011-15
                                                        • Popularity of trusts and OEICs has increased
                                                          • Figure 17: New retail investment sales, 2011-15
                                                      • Channels to Market

                                                        • Main channels
                                                          • Retail sales dominated by fund platforms
                                                            • Figure 18: Gross retail sales, by distribution channel, 2015
                                                            • Figure 19: Gross retail sales, by distributions channel, 2011-15
                                                          • Sharp drop in advised sales
                                                            • Figure 20: Advised and non-advised new sales based upon sales data of bonds, stocks and shares ISAs, trusts and OEICs, 2011-15
                                                        • Market Drivers

                                                          • Low interest rates lead to increased interest in investments…
                                                            • Figure 21: Bank of England bank base rate, January 2000-July 2016
                                                          • …but consumers continue to rely on cash savings products
                                                            • Brexit creates some opportunities but also undermines investor confidence
                                                              • Pension reforms increase investment opportunities
                                                              • Regulatory and Legislative Changes

                                                                • MiFID II on the horizon
                                                                  • FCA publishes its findings on the advice market
                                                                    • Robo-advice unit gets the green light
                                                                      • Countdown to PRIIPs
                                                                      • Companies and Brands – What You Need to Know

                                                                        • Mergers and acquisitions
                                                                          • Asset managers reassess pricing strategies
                                                                            • New environmentally friendly funds announced
                                                                            • Market Share

                                                                              • Standard Life tops the table for retail funds under management
                                                                                • Figure 22: Top 10 asset managers, by total retail funds under management, as of March 2016
                                                                            • Competitive Strategies

                                                                              • Merger and acquisition activity
                                                                                • Cofunds to be sold to AEGON
                                                                                  • AXA’s Elevate sale
                                                                                    • Asset managers reassess pricing strategies
                                                                                      • M&G cut funds for direct investors
                                                                                        • Ballie Gifford cuts investment trust fees
                                                                                          • Speculation about zero-fee funds
                                                                                            • Ethical investing developments
                                                                                              • Jupiter launches environmentally friendly fund
                                                                                                • Morningstar launches ESG ratings
                                                                                                  • Third-party apps to increase investment opportunities
                                                                                                    • Aviva aims to make Britain’s savers smarter
                                                                                                    • Advertising and Marketing Activity

                                                                                                      • Aviva considerably increases adspend
                                                                                                        • Figure 23: Total above-the-line, online display and direct mail investment-related adspend, by advertiser, 2011/12-2015/16
                                                                                                      • Majority of adspend attributed to stocks and shares ISAs
                                                                                                        • Figure 24: Total above-the-line, online display and direct mail advertising expenditure on equity investment products, 2011/12-2015/16
                                                                                                      • Press advertisements dominate the market
                                                                                                        • Figure 25: Total above-the-line advertising, by media type, 2015/16
                                                                                                      • Nielsen Ad Intel coverage
                                                                                                      • The Consumer – What You Need to Know

                                                                                                        • 51% are uncomfortable with taking risks
                                                                                                          • Vast majority of consumers are uncomfortable with investment risk
                                                                                                            • Only around a quarter of adults own an investment product
                                                                                                              • Lack of investable assets puts consumers off
                                                                                                                • Online platforms popular among investors
                                                                                                                  • Low interest rates boost investment opportunities
                                                                                                                  • Investable Assets and Consumer Attitudes towards Investment Risk

                                                                                                                    • A third of consumers have £500 or less in savings or assets
                                                                                                                      • Figure 26: Value of consumers’ savings and investments, July 2016
                                                                                                                    • Many consumers uncomfortable with investment risk
                                                                                                                        • Figure 27: Consumers’ comfort with taking risks with savings, July 2016
                                                                                                                      • Appetite for risk decreases with age
                                                                                                                          • Figure 28: Consumers’ comfort with investment risk, by age, July 2016
                                                                                                                        • Amount of savings and investment affects risk appetite
                                                                                                                            • Figure 29: Consumers’ comfort with investment risk, by consumers’ savings and investments, July 2016
                                                                                                                        • Current and Future Ownership of Investment Products

                                                                                                                          • Majority of consumers do not own an investment product
                                                                                                                            • Figure 30: Investment products owned, by investment type, July 2016
                                                                                                                          • Majority of consumers only own one investment product
                                                                                                                            • Figure 31: Number of investment products owned, repertoire analysis, July 2016
                                                                                                                          • Generation X least likely to own an investment product
                                                                                                                            • Figure 32: Consumers who own an investment, by generation, July 2016
                                                                                                                          • 82% of consumers do not intend to take out an investment product in the next 12 months
                                                                                                                            • Figure 33: Consumer investment plans over the next 12 months, July 2016
                                                                                                                        • Barriers to Investing

                                                                                                                          • Lack of investable assets are a major barrier
                                                                                                                            • Figure 34: Consumer reasons for not owning, or wanting to own investment products, July 2016
                                                                                                                          • One in 10 are put off by fees and charges
                                                                                                                            • A third do not wish to take any risks with their savings
                                                                                                                              • Trust in investment companies lowest amongst older demographics
                                                                                                                                • Figure 35: Consumer agreement with the statement I do not trust investment companies’, by age, July 2016
                                                                                                                            • Reasons for Investing

                                                                                                                              • Motivations to save will influence how people approach investments
                                                                                                                                • Low rates provide motivation for older investors
                                                                                                                                  • Figure 36: Consumer reasons for investing, July 2016
                                                                                                                                • Almost a fifth of consumers invest for fun
                                                                                                                                  • Figure 37: Consumer reasons for investing, by age, July 2016
                                                                                                                              • Methods of Arranging Investments

                                                                                                                                • High street banks/building societies most popular option for arranging investments
                                                                                                                                  • Figure 38: Channels consumers expect to use to invest, July 2016
                                                                                                                                • Online platforms prove a popular option among older Millennials
                                                                                                                                  • Direct channels appeal to more than a third of potential investors
                                                                                                                                  • Consumer Attitudes towards Investing

                                                                                                                                    • Fall in interest rates boosts interest in investing
                                                                                                                                      • Figure 39: Consumer agreement with statements regarding investing, July 2016
                                                                                                                                    • Many consider ethical options but fail to act on it
                                                                                                                                    • Consumer Attitudes towards Fees

                                                                                                                                      • Direct investing seen as a cheaper option
                                                                                                                                          • Figure 40: Consumer agreement with statements regarding investment fees, July 2016
                                                                                                                                        • Consumers are unwilling to pay for actively managed funds
                                                                                                                                          • Comparing fees causes a headache for consumers
                                                                                                                                          • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                              • Abbreviations
                                                                                                                                                • Consumer research methodology
                                                                                                                                                • Appendix – Market Size and Forecast

                                                                                                                                                    • Figure 41: Forecast of the value of new gross sales, 2016-21
                                                                                                                                                  • Forecast methodology

                                                                                                                                                  Companies Covered

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

                                                                                                                                                  Equity Investing - UK - September 2016

                                                                                                                                                  US $2,583.33 (Excl.Tax)