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Savings and Investments Intermediary Focus - UK - December 2012

“The savings and investment intermediary market is about to embark on a year of transition. The issue that will affect the market the most over the next 12 months is the RDR. Intermediaries are at risk of losing a proportion of their customer base which will impact revenues and many will have to adopt new business models and new technology in order to adapt to the changes. In order to survive this unprecedented market reform, intermediaries will have to focus on their customer relationship management skills and on servicing their clients to the highest possible standards.”

– Stephanie Absolom– Financial Services Analyst

Some questions answered in this report include:

  • How can technology help intermediaries improve their offering?
  • How can IFAs add value for their customers?
  • Is the IFA market set to focus on outsourcing?
  • How can intermediaries continue to service low-value clients?

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Table of contents

  1. Introduction

      • Abbreviations
        • Definitions
          • Retail investment products
            • Independent financial advice guidance – post-RDR
              • Restricted advice – post-RDR
              • Executive Summary

                  • The market
                    • Number of DA firms in the market expected to decrease slightly as RDR approaches
                      • Figure 1: Number of directly authorised retail intermediary firms, by sector (primary category only) September 2008-September 2012
                    • Intermediaries dominate unit trust and OEIC sales
                      • Figure 2: Estimated share of gross retail unit trust and OEIC sales, by distribution channel, 2012
                    • Market factors
                      • Regulatory changes – the RDR
                        • Consumer attitudes towards saving
                          • Figure 3: Intended equity buying and selling indices, Q3/Q4 2002-Q3/Q4 2012
                        • Networks
                          • Companies, products and innovations
                            • Competitive context
                              • Technology innovations driving the market
                                • Top 100 IFA firms
                                  • The IFA
                                    • IFAs are seeing their clients holding their current position
                                      • Figure 4: Investment environment impact on client investment behaviour, August 2012
                                    • Clients are looking to spread and reduce risk
                                      • Figure 5: Economic environment impact on client investment preferences, August 2012
                                    • More than two thirds of IFAs set to focus on high value clients in 2013
                                      • Figure 6: Plans for impending business changes, August 2012
                                    • Increase in restricted advice offerings expected post-RDR
                                      • Figure 7: Current and expected operating models post-RDR, August 2012
                                    • IFAs have fears about the impact of the RDR
                                      • Figure 8: Perceived impact of market developments on own business over the next 12 months, August 2012
                                    • What we think
                                    • Issues in the Market

                                        • How can technology help intermediaries improve their offering?
                                          • How can IFAs add value for their customers?
                                            • Is the IFA market set to focus on outsourcing?
                                              • How can intermediaries continue to service low-value clients?
                                              • Trend Application

                                                • Positive changes will come from the RDR
                                                  • Knowing your customer offers the chance to deliver a personalised service
                                                    • Intermediaries must develop their online presence
                                                    • Market Drivers

                                                      • Key points
                                                        • Retail investment appetite encouraging…
                                                          • Figure 9: Intended equity buying and selling indices, Q3/Q4 2002-Q3/Q4 2012
                                                        • … despite the stock market doing little to build consumer confidence
                                                          • Figure 10: FTSE 100 and FTSE All-Share – daily index movements, January 2004-August 2012
                                                        • Base rate levels keep savings returns low
                                                          • Figure 11: Average monthly changes in the Bank of England base rate, CPI and RPI-UK, 2004-12
                                                        • Decline in performance fee numbers
                                                          • IFA networks – all change?
                                                            • FSCS Levy and Money Advice Service fees upset intermediaries
                                                              • Outsourcing could be the answer to navigate regulatory changes
                                                                • Key regulatory developments
                                                                  • Regulation – the RDR will change the advisory landscape
                                                                    • A large number of IFAs have not joined a platform prior to RDR changes
                                                                      • Restricted advice models set to increase in post-RDR world
                                                                        • PRIPS
                                                                          • MiFID proposals to improve the investing landscape
                                                                            • Ban on platform rebates upheld
                                                                            • Competitor Channels

                                                                              • Key points
                                                                                • A note on Product Sales Data
                                                                                  • High street lenders dominate investment product sales
                                                                                    • Figure 12: Volume of regulated retail sales of investment products, year to March 2012
                                                                                  • Banks look to attract the IFA target market
                                                                                    • Platform market
                                                                                      • Size of the platform market
                                                                                        • Execution only stockbrokers are key competition for IFAs
                                                                                          • Figure 13: Online trades as a percentage of execution-only trades, 2007-11
                                                                                      • Who’s Innovating

                                                                                        • Key points
                                                                                          • Technology innovations
                                                                                            • Guardian Wealth Management offers Skype advice
                                                                                              • Compare your adviser service launches
                                                                                                • Fund houses combine to develop D2C online proposition
                                                                                                  • Aviva launches funds for infrastructure project investing
                                                                                                  • Market SWOT Analysis

                                                                                                      • Figure 14: SWOT analysis for the saving and investing intermediary market, 2012
                                                                                                  • Adviser Share of the Investments Business

                                                                                                    • Key points
                                                                                                      • Ownership of savings and investment products
                                                                                                        • Figure 15: Ownership of saving and investment products, May 2012
                                                                                                      • Gross retail sales of unit trusts and OEICs set to decrease in 2012
                                                                                                        • Figure 16: Gross retail sales of unit trusts and OEICs, by distribution channel, 2008-12
                                                                                                      • Fund platform distribution of retail unit trust and OEIC sales increases
                                                                                                        • Figure 17: Estimated share of gross retail unit trust and OEIC sales, by distribution channel, 2012
                                                                                                      • IFAs dominate investment bond sales
                                                                                                        • Figure 18: New investment bond premiums, by sales channel, 2009-12
                                                                                                    • Adviser Market Size and Firm Rankings

                                                                                                      • Key points
                                                                                                        • IFA marketplace changing
                                                                                                          • Intermediary numbers will decrease further
                                                                                                            • Figure 19: Estimate of number of directly authorised retail intermediary firms, September 2010-September 2013
                                                                                                          • Financial adviser numbers are holding up well
                                                                                                            • Figure 20: Estimate of number of directly authorised retail intermediary firms, by sector (primary category only), September 2008-September 2013
                                                                                                          • Sesame remains largest IFA firm by turnover
                                                                                                            • Figure 21: Top 15 financial advisers in the UK, based on advisory turnover, 2011/12
                                                                                                        • Companies and Products

                                                                                                          • Brewin Dolphin
                                                                                                            • Sesame Bankhall
                                                                                                              • Openwork
                                                                                                                • Hargreaves Lansdown
                                                                                                                • Advertising and Promotion

                                                                                                                  • Key points
                                                                                                                    • Financial advice and intermediary-related adspend decreased in 2011-12
                                                                                                                      • Figure 22: Advertising by financial intermediaries, by sub-sector, 2010-12
                                                                                                                    • Press and internet are the dominant intermediary-related advertising
                                                                                                                      • Figure 23: Proportional distribution of intermediary-related and financial advice advertising, by media type, 2011/12
                                                                                                                    • A note on adspend
                                                                                                                    • The IFA – Client Preferences and Behaviour

                                                                                                                      • Key points
                                                                                                                        • About Mintel’s IFA research
                                                                                                                          • Clients are holding out until the storm passes
                                                                                                                            • Figure 24: Investment environment impact on client investment behaviour, August 2012
                                                                                                                          • Client investment preferences are diversifying
                                                                                                                            • Figure 25: Economic environment impact on client investment preferences, August 2012
                                                                                                                        • The IFA – Impact of the RDR

                                                                                                                          • Key points
                                                                                                                            • High-value clients set to become the focus of many IFAs
                                                                                                                              • Figure 26: Plans for impending business changes, August 2012
                                                                                                                            • The shift online
                                                                                                                              • Increase in restricted advice expected post-RDR
                                                                                                                                • Figure 27: Current and expected operating models post-RDR, August 2012
                                                                                                                            • The IFA – Impact of Market Developments

                                                                                                                              • Key points
                                                                                                                                • Nearly half of IFAs expect the RDR to negatively impact their business
                                                                                                                                  • Figure 28: Perceived impact of market developments on own business over the next 12 months, August 2012
                                                                                                                                • Majority of IFAs expect a negative impact from the RDR
                                                                                                                                  • Figure 29: Impact of the RDR on business over next 12 months, January 2009-August 2012
                                                                                                                                • Lack of investor confidence in the stock market is an IFA concern
                                                                                                                                  • Figure 30: Impact of consumer confidence in stockmarket-based investments over next 12 months, January 2009-August 2012
                                                                                                                                • Consumer confidence in the housing market troubling majority of IFAs
                                                                                                                                  • Figure 31: Impact of consumer confidence in the housing market over next 12 months, January 2009-August 2012
                                                                                                                                • Reputation of the financial services industry remains a concern
                                                                                                                                  • Figure 32: Impact of the overall reputation of the financial services industry amongst consumers over next 12 months, January 2009-August 2012
                                                                                                                                • Feelings of positivity around NEST are decreasing
                                                                                                                                  • Figure 33: Impact of the introduction of NEST over the next 12 months, January 2009-August 2012
                                                                                                                                  • Figure 34: Impact of the introduction of auto enrolment over the next 12 months, August 2012

                                                                                                                              Companies Covered

                                                                                                                              • Aegon UK
                                                                                                                              • Aviva Plc
                                                                                                                              • AXA UK plc
                                                                                                                              • Bankhall Investment Associates Ltd
                                                                                                                              • Barclays Bank plc
                                                                                                                              • Brewin Dolphin Holdings PLC
                                                                                                                              • Hargreaves Lansdown Plc
                                                                                                                              • Henderson Global Investors
                                                                                                                              • Investment Funds Direct Limited
                                                                                                                              • Octopus Investments
                                                                                                                              • Openwork
                                                                                                                              • Premier Mortgage Services
                                                                                                                              • Prudential Financial, Inc
                                                                                                                              • Threadneedle Investment Services Ltd
                                                                                                                              • Zurich Financial Services

                                                                                                                              Savings and Investments Intermediary Focus - UK - December 2012

                                                                                                                              US $2,648.76 (Excl.Tax)