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Savings and Investments Intermediaries - UK - November 2010

This report explores these issues and examines the impact of changing regulations, technology and market conditions on this sector of the advice market, by drawing on a range of trade, consumer and desk research. The report also presents the findings of Mintel’s IFA survey, conducted by NMG.

  • IFAs are less confident about their business prospects and the wider financial services market than they were 12 months ago.
  • Advisers report that their clients are showing an increased appetite for risk-based investments.
  • More IFAs have been recommending emerging markets over the last year, but bonds and UK equity income funds top the table of IFA recommendations.
  • Adviser opinion on the RDR is split. However, more IFAs expect the reforms to have a negative impact on their business than a positive one over the coming year – 42% versus 35%.
  • Only 12% of advisers regard online financial management as an immediate, significant threat, even though they recognise that over the longer-term it is a direct threat.
  • Some 34% of consumers have a professional adviser - of which 14% use IFAs (7 million).

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Table of contents

  1. Issues in the Market

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

              • Trend: Resilience
                • Trend: Play Ethic
                • Market in Brief

                  • A contracting market
                    • Figure 1: Number of financial advice intermediary firms, December 2008-September 2010
                  • The shift to fee-based advice
                    • Seven million have an IFA
                      • Figure 2: The UK Financial advice market structure, 2009
                    • Online advances create new opportunities
                      • Political and economic uncertainty dominate investment climate
                        • Collective investment market recovers strongly in past 18 months
                          • IFA census – key findings
                            • Adviser confidence weakens
                              • More investors prepared to take on risk
                                • Advisers split over the RDR
                                  • Online financial management not an immediate threat
                                    • Adopting new business models
                                    • Regulatory Context – The RDR

                                      • Key points
                                        • All aboard the 2012 Financial Services Express
                                          • The RDR is here to stay
                                            • Improving clarity for consumers about advice services
                                              • Addressing the potential for commission bias
                                                • Achieving professionalism
                                                  • New rules for advisers
                                                    • Some advisers are still lobbying to overturn the RDR…
                                                      • …but trade bodies are reconciled to the adoption of the RDR
                                                        • A reticence to pay for financial advice
                                                          • Figure 3: Amount people are prepared to pay upfront for independent financial advice, February 2010
                                                        • Focusing on HNW clients
                                                          • New approaches for clients with modest means
                                                            • Support growing for restricted advice?
                                                              • New business models will evolve with the RDR
                                                                • Rising costs and the RDR leading to industry contraction
                                                                  • New capital adequacy requirements
                                                                    • FSA intends to raise FOS compensation limit to £150,000
                                                                    • Online Advice and Wrap Platforms

                                                                      • Key points
                                                                        • More people seeking financial advice online
                                                                          • Figure 4: Attitudes towards financial advice, February 2010
                                                                        • Developing an online presence
                                                                          • The role of platforms
                                                                            • Platforms and the RDR
                                                                            • Economic and Investment Environment

                                                                              • Key points
                                                                                • The UK economy faces tough years ahead
                                                                                  • Figure 5: UK Economic growth and consumer confidence, quarterly 1989-2010
                                                                                • Savings culture emerging
                                                                                  • Figure 6: Consumer financial priorities over the previous year and coming year, May 2010
                                                                                • Low interest rates and rising inflation form tough savings climate
                                                                                  • Figure 7: CPI inflation and Fixed rate bonds* with banks/building societies, Q1 2005-Q3 2010
                                                                                • Stock market intentions up; bond market intentions lower
                                                                                  • Figure 8: Intentions to purchase equities, government or corporate bonds and sell equities and FTSE 100 index, Q3/Q4 2002- Q3/Q4 2010*
                                                                                • Improvement in household wealth on back of equity market rally
                                                                                  • Figure 9: Net worth of the household sector, 2005-09
                                                                              • Competitive Context

                                                                                • Key points
                                                                                  • Non-professional sources of financial advice play a big role
                                                                                    • Figure 10: Trends for main sources of financial advice used, 2009 and 2010
                                                                                  • Banks set to benefit from RDR changes
                                                                                    • Life companies set to engage more directly with consumers and compete with IFAs?
                                                                                      • An online threat to IFAs
                                                                                      • Strengths and Weaknesses

                                                                                          • Figure 11: Savings and investment intermediary market SWOT analysis, 2010
                                                                                      • Who’s Innovating?

                                                                                        • Key points
                                                                                          • Google courts the IFA world
                                                                                            • Investment advice site set up
                                                                                              • IFA sales database to aid product development
                                                                                                • Providing RDR support to advisers
                                                                                                  • Project Eve –starting financial life planning
                                                                                                    • High-net-worth segmentation tool
                                                                                                      • ‘Insourced’ discretionary investment management
                                                                                                        • Considering different approaches
                                                                                                        • Trade Perspective

                                                                                                            • About the respondents
                                                                                                              • Main issues of industry concern
                                                                                                                • RDR viewpoints
                                                                                                                  • Online developments: threat or opportunity?
                                                                                                                    • Investor behaviour – sentiment up on a year ago
                                                                                                                      • Industry profitability – always a challenge
                                                                                                                        • Market and industry outlook
                                                                                                                        • Market Size

                                                                                                                          • Key points
                                                                                                                            • The number of IFAs is expected to fall over next few years
                                                                                                                              • Figure 12: Number of financial advice ARs and DA intermediary firms, by type 2007-10
                                                                                                                            • Around 17 million people are professionally advised
                                                                                                                              • Figure 13: The financial advice market structure, 2009
                                                                                                                            • More than half of key targets are non-advised
                                                                                                                            • Adviser Share of Investment Business

                                                                                                                              • Key points
                                                                                                                                • IFAs dominate the investment bond market
                                                                                                                                  • Figure 14: New insurance-related investment business, by distribution channel, 2006-10
                                                                                                                                • Unit trust and OEIC markets recover in 2009
                                                                                                                                  • Fund platforms take 37% market share
                                                                                                                                    • Figure 15: Gross retail sales of UK-domiciled unit trusts and OEICs, by distribution channel, 2010*
                                                                                                                                  • Looking forward
                                                                                                                                  • Adviser Firm Rankings

                                                                                                                                    • Key points
                                                                                                                                      • Sesame and Openwork are the largest IFA firms by turnover
                                                                                                                                        • Figure 16: Top 20 financial advisers in the UK, based on relevant turnover, 2009/10
                                                                                                                                      • Movement among the top 20 advisory firms
                                                                                                                                      • Advisory Firm Profiles

                                                                                                                                        • Brewin Dolphin
                                                                                                                                          • 2010 ranking
                                                                                                                                            • Advisory business breakdown
                                                                                                                                              • Company description
                                                                                                                                                • Product range
                                                                                                                                                  • Recent activity
                                                                                                                                                    • Key business/financial indicators
                                                                                                                                                      • Openwork
                                                                                                                                                        • 2010 ranking
                                                                                                                                                          • Advisory business breakdown
                                                                                                                                                            • Company description
                                                                                                                                                              • Product range
                                                                                                                                                                • Figure 17: Openwork’s products and providers, 2009/10
                                                                                                                                                              • Recent activity
                                                                                                                                                                • Key business/financial indicators
                                                                                                                                                                  • Figure 18: Financial performance of Openwork Limited, 2008 and 2009
                                                                                                                                                                • Sesame
                                                                                                                                                                  • 2010 ranking
                                                                                                                                                                    • Advisory business breakdown
                                                                                                                                                                      • Company description
                                                                                                                                                                        • Product range
                                                                                                                                                                          • Recent activity
                                                                                                                                                                            • Key business/financial indicators
                                                                                                                                                                            • Brand Communication and Promotion

                                                                                                                                                                              • Key points
                                                                                                                                                                                • Intermediaries continue to cut adspend
                                                                                                                                                                                  • Figure 19: Advertising expenditure by financial intermediaries, by sub-sector, 2008-10
                                                                                                                                                                                • Investments account for the majority of adspend to intermediaries
                                                                                                                                                                                  • Press advertising accounts for the majority of the expenditure
                                                                                                                                                                                    • Figure 20: Proportional distribution of intermediary advertising expenditure, by media type, 2009/10
                                                                                                                                                                                  • Top IFA firms are conspicuous by their absence
                                                                                                                                                                                    • Figure 21: Advertising expenditure by financial intermediaries, by top 20 advisers, 2009-10
                                                                                                                                                                                • The IFA – Business Confidence

                                                                                                                                                                                  • Key points
                                                                                                                                                                                    • About Mintel’s IFA research
                                                                                                                                                                                      • IFA business confidence has dropped since mid-2010
                                                                                                                                                                                        • Figure 22: Confidence in own business prospects compared to six months ago, September 2009, June, September 2010
                                                                                                                                                                                      • Demand for savings and investment products has fallen in 2010
                                                                                                                                                                                        • IFAs are also less confident about the wider financial services market
                                                                                                                                                                                          • Figure 23: Confidence in the financial services market compared to six months ago, September 2009, June, September 2010
                                                                                                                                                                                      • The IFA – Economic Environment and Client Behaviour

                                                                                                                                                                                        • Key points
                                                                                                                                                                                          • Investors appear prepared to take on more risk
                                                                                                                                                                                            • Figure 24: Impact of economic environment on client behaviour, September 2010
                                                                                                                                                                                          • Over a quarter of investors interested in the emerging economies…
                                                                                                                                                                                            • …..but a drop in advisers citing stock market investors
                                                                                                                                                                                              • Some improvement in longer term horizon
                                                                                                                                                                                                • Property investment a minority activity
                                                                                                                                                                                                • The IFA – Asset Allocation

                                                                                                                                                                                                  • Key points
                                                                                                                                                                                                    • Income generating assets are most popular
                                                                                                                                                                                                      • Figure 25: Asset classes most frequently recommended over the past six months, September 2009/2010
                                                                                                                                                                                                    • Advisers more optimistic about global economic recovery
                                                                                                                                                                                                      • Property and commodities hold greater appeal
                                                                                                                                                                                                        • Spreading risk – an increasingly popular strategy
                                                                                                                                                                                                          • Fewer IFAs now recommending gilts
                                                                                                                                                                                                            • Japan and technology and telecommunications at bottom of list
                                                                                                                                                                                                            • The IFA – Impact of RDR and Other Factors

                                                                                                                                                                                                              • Key points
                                                                                                                                                                                                                • Two fifths of IFAs expect the RDR to negatively affect their business
                                                                                                                                                                                                                    • Figure 26: Perceived impact of regulatory and other industry developments on own business over the next 12 months, September 2010
                                                                                                                                                                                                                  • Negative views prevail on the introduction of personal accounts (NEST)
                                                                                                                                                                                                                    • Stock market and housing market confidence is falling
                                                                                                                                                                                                                      • Figure 27: Impact of consumer confidence in stockmarket-based investments on business prospects, September 2009/10
                                                                                                                                                                                                                      • Figure 28: Impact of consumer confidence in the housing market on business prospects, September 2009/10
                                                                                                                                                                                                                    • Advisers expect consumer perception of financial services to impact business
                                                                                                                                                                                                                      • Figure 29: Impact of reputation of the financial services industry among consumers, September 2009/10
                                                                                                                                                                                                                  • The IFA – The Online Threat and Future Business Intentions

                                                                                                                                                                                                                    • Key points
                                                                                                                                                                                                                      • Rise of online financial capability regarded as a future challenge
                                                                                                                                                                                                                        • Figure 30: Impact of internet and managing finances online on IFAs, September 2010
                                                                                                                                                                                                                      • Two fifths of IFAs plan to start charging fees over the coming year
                                                                                                                                                                                                                        • Figure 31: Business intentions over the next 12 months, September 2009/10
                                                                                                                                                                                                                      • Some signs of optimism

                                                                                                                                                                                                                      Companies Covered

                                                                                                                                                                                                                      • Artemis Investment Management
                                                                                                                                                                                                                      • Association of Independent Financial Advisers
                                                                                                                                                                                                                      • Association of Investment Trust Companies
                                                                                                                                                                                                                      • Aviva Plc
                                                                                                                                                                                                                      • AXA Sun Life
                                                                                                                                                                                                                      • Bank of England
                                                                                                                                                                                                                      • Bank of New York Mellon Corporation, The
                                                                                                                                                                                                                      • Barclays Bank plc
                                                                                                                                                                                                                      • BlackRock, Inc.
                                                                                                                                                                                                                      • Brewin Dolphin Holdings PLC
                                                                                                                                                                                                                      • Cater Allen Ltd
                                                                                                                                                                                                                      • Charles Stanley Group plc
                                                                                                                                                                                                                      • Citizens Advice Bureau
                                                                                                                                                                                                                      • Fidelity Investment Services Limited
                                                                                                                                                                                                                      • Financial Ombudsman Service
                                                                                                                                                                                                                      • Friends Provident plc
                                                                                                                                                                                                                      • Gartmore Investment Management plc
                                                                                                                                                                                                                      • Hargreaves Lansdown Plc
                                                                                                                                                                                                                      • Henderson Global Investors
                                                                                                                                                                                                                      • HSBC Holdings plc
                                                                                                                                                                                                                      • Ignis Asset Management
                                                                                                                                                                                                                      • Intrinsic Financial Services
                                                                                                                                                                                                                      • Invesco Perpetual
                                                                                                                                                                                                                      • Investec
                                                                                                                                                                                                                      • Investment Management Association
                                                                                                                                                                                                                      • John Gilbert Financial Research
                                                                                                                                                                                                                      • Jupiter Unit Trust Managers Ltd
                                                                                                                                                                                                                      • Legal & General Group PLC
                                                                                                                                                                                                                      • Lehman Brothers [UK]
                                                                                                                                                                                                                      • Lighthouse Group Plc
                                                                                                                                                                                                                      • Lloyds Banking Group
                                                                                                                                                                                                                      • Misys Plc
                                                                                                                                                                                                                      • Nationwide Financial Services, Inc.
                                                                                                                                                                                                                      • Openwork
                                                                                                                                                                                                                      • Personal Finance Society
                                                                                                                                                                                                                      • Personal Touch Financial Services Limited
                                                                                                                                                                                                                      • Prudential plc
                                                                                                                                                                                                                      • Rensburg Sheppards
                                                                                                                                                                                                                      • SEI Investments Company
                                                                                                                                                                                                                      • Sesame Bankhall Group Limited
                                                                                                                                                                                                                      • Skandia UK
                                                                                                                                                                                                                      • Skipton Group (The)
                                                                                                                                                                                                                      • St James' Place Plc
                                                                                                                                                                                                                      • The Chartered Insurance Institute
                                                                                                                                                                                                                      • Towry Law Group
                                                                                                                                                                                                                      • UBS Wealth Management UK Ltd
                                                                                                                                                                                                                      • Zurich Financial Services

                                                                                                                                                                                                                      Savings and Investments Intermediaries - UK - November 2010

                                                                                                                                                                                                                      US $2,478.79 (Excl.Tax)