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Equity Investing - UK - September 2017

“Equity investing has become far more accessible over the last decade, but there are still many real and perceived barriers that hold people back. Simplicity is the key to extending the market, but a raft of regulation and remedies due in 2018 could hold progress back. Uncertainty over Brexit has discouraged investors from holding UK equities, but this means new opportunities for growth will emerge as confidence improves.”
– Patrick Ross, Senior Financial Services Analyst

This Report discusses the following key topics:

  • With-profits products offer potential as retirement income boosters
  • Simplification is the key to expanding the market

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Table of contents

  1. 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

                                                                                                                Equity Investing - UK - September 2017

                                                                                                                US $2,648.76 (Excl.Tax)