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Eye on intermediaries - Savings and Investment - UK - November 2009

Investors are clearly still nervous, despite the stock market rally. Half of IFAs surveyed by Mintel reported that clients were taking a more defensive approach to investments.

  • It's not just their attitude towards risk that has changed. Many IFAs reported that people were more reluctant to lock their money away in long-term investments, with the continuing economic uncertainty meaning that they want to make sure their money is accessible in an emergency.
  • IFAs themselves are rightly reluctant to throw caution to the wind. Half had recommended corporate bond funds over the last six months, and a third gilt funds - classic defensive investments.
  • However, there has been a shift in sentiment compared to similar results from May 2009, and IFA confidence seems to be recovering. More are recommending emerging markets and global equities, and this trend is likely to feed through into retail investor demand over the coming months.
  • There's further signs of optimism among IFAs when it comes to the impact that consumer sentiment will have on their business in the coming months. Seven in ten say that investor confidence in the equity market will have a positive impact on their business.
  • The widespread positivity, though, is unlikely to put a stop to the consolidation seen in the intermediary market. The number of firms has fallen sharply over the last few years, and Mintel's trade contacts expect this trend to continue, thanks largely to the burden that regulatory developments place on smaller firms.

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Table of contents

  1. Issues in the Market

      • Key issues explored
        • Market definitions
          • Abbreviations
          • Future Opportunities

            • When it comes to client fund selection it’s better to offer less than more
              • People need the occasional nudge
                • Too much choice can lead to inaction
                  • Choice architecture – an aid to decision-making
                    • IFAs can capitalise on consumer dissatisfaction with the banks
                      • More people are turning to the internet to share experiences and advice
                      • Market in Brief

                        • A contracting market
                          • Advisers face increased regulation
                            • Trading environment picks up after a very difficult period
                              • Collective investment market recovers well in 2009
                                • Online advances create new opportunities
                                  • Advertising activity cut back
                                    • IFA census – key findings
                                      • Adviser confidence improves
                                        • Crisis reshapes investor strategy and adviser recommendations
                                          • Advisers split over whether RDR will have a positive or negative impact on their business
                                            • Many firms expect to move towards a fee-charging structure over the coming year
                                            • Regulatory Context

                                              • Key points
                                                • Current regulatory structure of the advice market
                                                  • Figure 1: Overview of the UK advice market, 2009
                                                • RDR brings more change
                                                  • Making a clear distinction between ‘independent’ and ‘restricted’ advice
                                                    • Figure 2: Proposed regulatory landscape, 2013
                                                  • The general election could add an extra level of uncertainty
                                                    • National roll-out of Money Guidance service could begin in 2010
                                                      • Introducing a new standard for independence
                                                        • Removing commission bias
                                                          • Implications for product providers
                                                            • Firms generally welcome RDR proposals
                                                              • From consultation to implementation
                                                                • Prudential requirements
                                                                  • The impact of MiFID
                                                                  • The Size of the Intermediary Market

                                                                    • Key points
                                                                      • Contraction in the number of DA intermediary firms set to continue
                                                                        • Figure 3: Total number of directly authoritised retail intermediary firms, 2006-09
                                                                      • The financial advice sector has been the most resilient
                                                                        • Figure 4: Number of directly authoritised retail intermediary firms, by sector (primary category only), 2006-09
                                                                      • More IFAs switch to AR status
                                                                        • Figure 5: Number of financial advice ARs and DA intermediary firms, by type, 2006-09
                                                                    • Economic and Investment Environment

                                                                      • Key points
                                                                        • Recovery hopes heighten, despite GDP contracting again in Q3 2009
                                                                          • Investment activity subdued
                                                                            • Stock market rallies, but is it sustainable?
                                                                              • Figure 6: FTSE 100 and FTSE All Share – daily index movements, September 2000-September 2009
                                                                            • Implication and opportunity
                                                                              • Consumers are starting to save again
                                                                                • Figure 7: Total PDI, consumer expenditure and savings ratio, at current prices, 2004-13
                                                                              • Implication and opportunity
                                                                                • Hedging for tomorrow’s rise in inflation
                                                                                  • Figure 8: Average annual changes in the Bank of England base rate, CPI and RPI – UK, 2000-09
                                                                                • Implication and opportunity
                                                                                • Trade Perspective

                                                                                    • About the respondents
                                                                                      • RDR viewpoint – still some finer points to be worked out
                                                                                        • RDR impact – further market consolidation likely
                                                                                          • Investor behaviour – some confidence has returned, but caution still reigns
                                                                                            • Online threat? Well that depends on your position
                                                                                              • Market outlook – we’re not out of the woods yet
                                                                                              • Asset Ownership and Investor Behaviour

                                                                                                • Key points
                                                                                                  • Crisis leaves its mark on household wealth
                                                                                                    • Figure 9: Net worth of the household sector, 2004-08
                                                                                                  • Cash is king – bad news for intermediaries
                                                                                                    • Figure 10: Penetration of savings and investment products, April 2009
                                                                                                  • The crunch effect on investor behaviour
                                                                                                    • Products in and out of favour
                                                                                                      • Figure 11: General trends in consumer demand for investment and pension products, 2009
                                                                                                    • Consumer confidence lifts…
                                                                                                      • Figure 12: GfK Consumer Confidence Barometer – UK, January 1988-September 2009
                                                                                                    • … but overall expected financial activity remains weak…
                                                                                                      • Figure 13: Consumers’ savings, investment, borrowing and debt repayment activity (two quarter moving average), Q3/Q4 2002-Q3/Q4 2009
                                                                                                    • … and investment intentions are still subdued
                                                                                                      • Figure 14: Intended equity buying and selling indices, Q3/Q4 2002-Q3/Q4 2009
                                                                                                  • Online Developments in the Intermediary Market

                                                                                                    • Key points
                                                                                                      • Using online technology to fill a gap in the advice market
                                                                                                        • Platform progress
                                                                                                          • Market differentiation
                                                                                                            • More platforms emerging
                                                                                                              • Most IFAs view new DIY investor technology as a minor potential threat
                                                                                                                • Figure 15: Assessing the potential threat of the internet and a new breed of DIY investor, September 2009
                                                                                                              • Insight and opportunity
                                                                                                              • SWOT Analysis

                                                                                                                  • Figure 16: Financial advice market – summary of strengths, weaknesses, opportunities and threats, 2009
                                                                                                              • Adviser Share of Investment Business

                                                                                                                • Key points
                                                                                                                  • IFAs sell the majority of single-premium insurance-related investments
                                                                                                                    • Figure 17: New insurance-related investment business, by distribution channel, 2005-09
                                                                                                                  • Intermediary share of gross fund sales increases to nearly 90%
                                                                                                                    • Figure 18: Gross retail sales of UK-domiciled unit trusts and OEICs, by distribution channel, 2005-09
                                                                                                                  • Implication and opportunity
                                                                                                                  • Adviser Firm Rankings

                                                                                                                    • Key points
                                                                                                                      • Sesame and Openwork are the largest IFA firms by turnover
                                                                                                                        • Figure 19: Top 20 financial advisers in the UK, based on relevant turnover, 2008/09
                                                                                                                    • Companies and Products

                                                                                                                        • Barclays Financial Planning
                                                                                                                          • Bluefin Group
                                                                                                                            • Brewin Dolphin
                                                                                                                              • Hargreaves Lansdown
                                                                                                                                  • Figure 20: Proportional contribution to group revenues, by business unit, 2008/09
                                                                                                                                • HSBC
                                                                                                                                  • Intrinsic Financial Services
                                                                                                                                    • Openwork
                                                                                                                                        • Figure 21: Openwork’s products and providers, 2008/09
                                                                                                                                      • Positive Solutions
                                                                                                                                        • Sesame
                                                                                                                                          • Smith & Williamson
                                                                                                                                            • Tenet Group
                                                                                                                                              • Towry Law Financial Services
                                                                                                                                              • Advertising and Promotion

                                                                                                                                                • Key points
                                                                                                                                                  • Intermediaries cut adspend
                                                                                                                                                    • Figure 22: Advertising expenditure by financial intermediaries, by sub-sector, 2007-09
                                                                                                                                                  • Press advertising accounts for the majority of the expenditure
                                                                                                                                                    • Figure 23: Proportional distribution of intermediary advertising expenditure, by media type, 2008/09
                                                                                                                                                  • Top IFA firms are conspicuous by their absence
                                                                                                                                                    • Figure 24: Advertising expenditure by financial intermediaries, by top 20 advisers, 2007-09
                                                                                                                                                • The IFA – Business Confidence

                                                                                                                                                  • Key points
                                                                                                                                                    • About Mintel’s IFA research
                                                                                                                                                      • IFAs feeling more confident about their own prospects than at the start of the year…
                                                                                                                                                        • Figure 25: Confidence in own business prospects compared to six months ago, January, May and September 2009
                                                                                                                                                      • … and those of the financial services market as a whole
                                                                                                                                                        • Figure 26: Confidence in the financial services market compared to six months ago, January, May and September 2009
                                                                                                                                                    • The IFA – Crisis Impact on Client Behaviour

                                                                                                                                                      • Key points
                                                                                                                                                        • Investors move to protect their wealth
                                                                                                                                                          • Figure 27: Impact of slowdown on client behaviour, September 2009
                                                                                                                                                        • Low savings rates helps equities
                                                                                                                                                          • More interest in property as exit constraints are lifted
                                                                                                                                                            • Some investors have sold off assets to meet living expenses
                                                                                                                                                            • The IFA – Asset Allocation

                                                                                                                                                              • Key points
                                                                                                                                                                • Interest in bonds may be starting to wane…
                                                                                                                                                                  • Figure 28: Asset classes most frequently recommended over the past six months, May and September 2009
                                                                                                                                                                • …while there is greater interest in overseas equities
                                                                                                                                                                  • Fewer IFAs now recommending gilts
                                                                                                                                                                  • The IFA – Impact of RDR & Other Factors

                                                                                                                                                                    • Key points
                                                                                                                                                                      • Two fifths of IFAs expect the RDR to negatively affect their business over the coming year
                                                                                                                                                                          • Figure 29: Perceived impact of regulatory and other industry developments on own business over the next 12 months, September 2009
                                                                                                                                                                        • RDR is polarising opinion
                                                                                                                                                                          • Figure 30: Perceived impact of the RDR on own business over the next 12 months, Jan-September 2009
                                                                                                                                                                        • Renewed consumer confidence will have a positive impact on business over the coming year
                                                                                                                                                                          • Figure 31: Perceived impact of consumer confidence in stockmarket-based investments on own business over the next 12 months, Jan-September 2009
                                                                                                                                                                          • Figure 32: Perceived impact of consumer confidence in the housing market on own business over the next 12 months, Jan-September 2009
                                                                                                                                                                        • Most IFAs see wrap and fund platforms as a positive development
                                                                                                                                                                          • Figure 33: Perceived impact of wrap and fund platforms on own business over the next 12 months, Jan-September 2009
                                                                                                                                                                      • The IFA – Future Business Intentions

                                                                                                                                                                        • Key points
                                                                                                                                                                          • Two fifths of IFAs plan to start charging fees over the coming year
                                                                                                                                                                            • Figure 34: Business intentions over the next 12 months, January, May and September 2009

                                                                                                                                                                        Companies Covered

                                                                                                                                                                        • Aegon UK
                                                                                                                                                                        • AXA UK plc
                                                                                                                                                                        • Bank of England
                                                                                                                                                                        • Barclays Bank plc
                                                                                                                                                                        • Brewin Dolphin Holdings PLC
                                                                                                                                                                        • Facebook, Inc.
                                                                                                                                                                        • Fidelity Investment Services Limited
                                                                                                                                                                        • Financial Ombudsman Service
                                                                                                                                                                        • Financial Services Authority (The)
                                                                                                                                                                        • Friends Provident plc
                                                                                                                                                                        • Fundsdirect
                                                                                                                                                                        • Gfk NOP
                                                                                                                                                                        • Hargreaves Lansdown Plc
                                                                                                                                                                        • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                                        • HSBC Private Bank (UK) Limited
                                                                                                                                                                        • Invesco Perpetual
                                                                                                                                                                        • Investment Management Association
                                                                                                                                                                        • John Gilbert Financial Research
                                                                                                                                                                        • Lehman Brothers [UK]
                                                                                                                                                                        • Lighthouse Group Plc
                                                                                                                                                                        • National Savings & Investments
                                                                                                                                                                        • Norwich Union
                                                                                                                                                                        • Royal London Group
                                                                                                                                                                        • Scottish Widows Bank plc
                                                                                                                                                                        • Simply Biz plc
                                                                                                                                                                        • Skandia UK
                                                                                                                                                                        • Skipton Group (The)
                                                                                                                                                                        • Standard Life Bank Limited
                                                                                                                                                                        • Threadneedle Investment Services Ltd
                                                                                                                                                                        • UBS Wealth Management UK Ltd

                                                                                                                                                                        Eye on intermediaries - Savings and Investment - UK - November 2009

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