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Savings and Investments - Intermediary Focus - UK - November 2011

“The next 12 months are set to be very challenging for intermediaries, as firms make their final preparations for the RDR and strive to make a profit in a tumultuous investment climate. IFAs will need to adjust both their service propositions and charging models to succeed under the new regime.”

– Sarah Hitchcock, Senior Analyst – Financial Services

Some questions answered in the report include:

  • How confident are IFAs feeling about their business prospects?
  • And how are investors responding to the unsettled market conditions?
  • Which asset classes are IFAs recommending to their clients during these difficult times?
  • How are IFAs preparing for the RDR in one year’s time?
  • What impact will the new rules have on the advice market?
  • And will it really improve consumer access to advice?

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Table of contents

  1. Introduction

      • Market definitions
        • Abbreviations
        • Executive Summary

            • The market
              • A contracting market
                • Figure 1: Number of directly authorised retail intermediary firms, by primary category sector, 2006-11
              • Key factors
                • Advisers facing increased regulatory pressure…
                  • …and increased capital requirements
                    • Trading environment deteriorates
                      • IFAs have a dominant share of the investment fund and investment bond markets
                        • Company, brands and innovation
                          • Competitive context
                            • Online advances create opportunity
                              • The largest intermediary firms
                                • Increase in sector adspend
                                  • The adviser
                                    • Adviser confidence continues to ebb away
                                      • Figure 2: Confidence in own business prospects compared to six months ago, January 2009-September 2011
                                    • Sovereign debt crisis prompts shift in investor strategy…
                                      • Figure 3: Impact of economic and investment environment – top six client behaviours, September 2011
                                    • …and adviser recommendations
                                      • Figure 4: Top seven asset classes most frequently recommended over the past six months, May 2009-September 2011
                                    • More IFAs think the RDR will have a negative than positive impact on their business
                                      • Figure 5: Perceived impact of regulatory and other market developments on own business over the next 12 months, September 2011
                                    • Many firms expect to move towards a fee-charging structure over the coming year
                                      • Figure 6: Business intentions over the next 12 months, September 2011
                                    • What we think
                                    • Issues in the Market

                                        • How confident are IFAs feeling about their business prospects?
                                          • And how are investors responding to the unsettled market conditions?
                                            • Which asset classes are IFAs recommending to their clients during these difficult times?
                                              • How are IFAs preparing for the RDR in one year’s time?
                                                • What impact will the new rules have on the advice market?
                                                  • And will it really improve consumer access to advice?
                                                  • Future Opportunities

                                                      • Trend: The rise of the DIY investor
                                                        • Trend: Retail investors need help in adapting to changing conditions
                                                        • Internal Market Environment

                                                          • Key points
                                                            • One year to go before RDR rules come into force
                                                              • FSA launches draft guidance to clarify position on legacy commission
                                                                • Many advisers still have a way to go before becoming fully RDR-compliant
                                                                  • Figure 7: Adviser preparation of the RDR, Q1 2011
                                                                • Concerns raised over whether charging fees will put consumers off seeking advice
                                                                  • Money Advice Service launched
                                                                    • Barclays closes financial planning arm
                                                                      • FSA delays decision on platform rebate rules…
                                                                        • … and postpones the capital adequacy rules by two years
                                                                          • FSA overhaul and FSCS levy
                                                                            • New MiFID proposals could restrict DIY investing
                                                                            • Broader Market Environment

                                                                              • Key points
                                                                                • Slow earnings growth, rising inflation and a low base rate limit savings activity
                                                                                  • Eurozone debt crisis could jeopardise UK’s economic recovery
                                                                                    • Share prices plunge amid eurozone crisis and prospect of Greek default
                                                                                      • Figure 8: FTSE 100 and FTSE All-Share – daily index movements, January 2003-October 2011
                                                                                    • Low base rate means there’s little return on cash savings
                                                                                      • Figure 9: Average annual changes in the Bank of England base rate, CPI and RPI – UK, 2003-12
                                                                                    • Weak activity outlook for retail investments
                                                                                      • Figure 10: Intended equity buying and selling indices, Q3/Q4 2002-Q3/Q4 2011
                                                                                  • Competitive Context

                                                                                    • Key points
                                                                                      • FSA Product Sales Data report shows advisers retaining dominant market share
                                                                                        • Figure 11: Volume of regulated retail sales of investment products, year to March 2011
                                                                                      • Growing adoption of platform technology by intermediaries
                                                                                        • Size of the platform market
                                                                                          • It is no longer a case of either/or
                                                                                            • Figure 12: Channels used to buy shares and other investments, July 2011
                                                                                          • The online space will face growing competition
                                                                                            • IFAs are mixed on whether more investors are going down the DIY route
                                                                                              • Figure 13: Assessing the potential threat of direct-to-consumer platforms, September 2011
                                                                                          • Who’s Innovating?

                                                                                            • Key points
                                                                                              • RDR training and support programmes launched by the larger networks
                                                                                                • Recent developments in the platform arena
                                                                                                  • Other developments in the online space
                                                                                                  • Market SWOT Analysis

                                                                                                      • Figure 14: Financial advice market – summary of strengths, weaknesses, opportunities and threats, 2011
                                                                                                  • Market Size

                                                                                                    • Key points
                                                                                                      • Contraction in the number of DA intermediary firms continues
                                                                                                        • Figure 15: Total number of directly authorised retail intermediary firms, 2006-11
                                                                                                      • So what is the key to surviving these harsh times?
                                                                                                        • The financial advice sector has been the most resilient
                                                                                                          • Figure 16: Number of directly authorised retail intermediary firms, by sector (primary category only), 2006-11
                                                                                                        • Number of finance ARs has also fallen over the past two years
                                                                                                          • Figure 17: Number of financial advice ARs and DA intermediary firms, by type, 2007-11
                                                                                                      • Adviser Share of Investment Business

                                                                                                        • Key points
                                                                                                          • Two thirds of UK adults own savings or investments
                                                                                                            • Figure 18: Ownership of savings and investment products, May 2011
                                                                                                          • Intermediaries retain their dominant share of the retail investment fund market…
                                                                                                            • Figure 19: Gross retail sales of unit trusts and OEICs, by distribution channel, 2007-11
                                                                                                          • …with a growing proportion of sales being made via platforms
                                                                                                            • Figure 20: Estimated share of gross retail unit trust and OEIC sales, by distribution channel, 2011
                                                                                                          • IFAs also dominate the sale of investment bonds
                                                                                                            • Figure 21: New investment bond premiums, by sales channel, 2008-11
                                                                                                        • Adviser Firm Rankings

                                                                                                          • Key points
                                                                                                            • A fragmented marketplace, which is continually contracting
                                                                                                              • Sesame is the largest IFA firm by turnover
                                                                                                                • Figure 22: Top 15 financial advisers in the UK, based on advisory turnover, 2010/11
                                                                                                            • Companies and Products

                                                                                                                • Brewin Dolphin
                                                                                                                  • Smith & Williamson
                                                                                                                    • Sesame Bankhall
                                                                                                                      • Openwork
                                                                                                                      • Advertising and Promotion

                                                                                                                        • Key points
                                                                                                                          • Intermediaries increase adspend
                                                                                                                            • Figure 23: Advertising expenditure by financial intermediaries, by sub-sector, 2009-11
                                                                                                                          • Press advertising accounts for the majority of the expenditure
                                                                                                                            • Figure 24: Proportional distribution of intermediary advertising expenditure, by media type, 2010/11
                                                                                                                          • Top IFA firms are conspicuous by their absence
                                                                                                                            • Figure 25: Advertising expenditure by financial intermediaries, by top ten advisers, 2010 and 2011
                                                                                                                        • IFA Business Confidence

                                                                                                                          • Key points
                                                                                                                            • About Mintel’s IFA research
                                                                                                                              • Around one in four IFAs are feeling less confident about their own business prospects than six months ago...
                                                                                                                                • Figure 26: Confidence in own business prospects compared to six months ago, January 2009-September 2011
                                                                                                                              • ...while nearly one in three are feeling less positive about the prospects for the financial services market as a whole
                                                                                                                                • Figure 27: Confidence in the financial services market compared to six months ago, January 2009-September 2011
                                                                                                                            • Client Behaviour and Investment Approach

                                                                                                                              • Key points
                                                                                                                                • Investors becoming more risk-averse
                                                                                                                                  • Figure 28: Impact of economic and investment environment on client behaviour, September 2011
                                                                                                                                • Falling share prices and a low base rate encourage the more adventurous to invest in equities
                                                                                                                                  • Many investors are having to draw on savings to meet living expenses
                                                                                                                                  • Asset Class Recommendations

                                                                                                                                    • Key points
                                                                                                                                      • Adviser recommendations, across most asset classes, have fallen over the past year
                                                                                                                                        • Figure 29: Asset classes most frequently recommended over the past six months, May 2009-September 2011
                                                                                                                                      • Gilts have lost much of their previous attraction
                                                                                                                                        • Sustained interest in property
                                                                                                                                        • Impact of RDR and Other Market Factors

                                                                                                                                          • Key points
                                                                                                                                            • Half of all IFAs expect the RDR to negatively affect their business over the coming year
                                                                                                                                                • Figure 30: Perceived impact of regulatory and other market developments on own business over the next 12 months, September 2011
                                                                                                                                              • As the RDR deadline draws nearer, more advisers are concerned about its impact
                                                                                                                                                • Figure 31: Perceived impact of the RDR on own business over the next 12 months, January 2009-September 2011
                                                                                                                                              • Introduction of NEST is increasingly being viewed as a positive development
                                                                                                                                                • Figure 32: Perceived impact of NEST on own business over the next 12 months, January 2009-September 2011
                                                                                                                                              • Still work to be done to improve the reputation of financial services industry
                                                                                                                                                • Figure 33: Perceived impact of financial industry’s reputation on own business over the next 12 months, January 2009-September 2011
                                                                                                                                              • Three in five IFAs are concerned about low investor confidence hitting their business
                                                                                                                                                • Figure 34: Perceived impact of consumer confidence in stock market-based investments on own business over the next 12 months, January 2009-September 2011
                                                                                                                                                • Figure 35: Perceived impact of consumer confidence in the housing market on own business over the next 12 months, January 2009-September 2011
                                                                                                                                            • Future Business Intentions

                                                                                                                                              • Key points
                                                                                                                                                • Still only two fifths of IFAs moving to fee-charging models over the coming year
                                                                                                                                                  • Figure 36: Business intentions over the next 12 months, January 2009-September 2011

                                                                                                                                              Companies Covered

                                                                                                                                              • AXA UK plc
                                                                                                                                              • Cater Allen Ltd
                                                                                                                                              • Friends Provident plc
                                                                                                                                              • International Franchise Association (IFA)
                                                                                                                                              • JPMorgan Invest LLC (BrownCo)
                                                                                                                                              • Misys Plc
                                                                                                                                              • Octopus Investments
                                                                                                                                              • Skandia UK
                                                                                                                                              • Smith & Williamson
                                                                                                                                              • Threadneedle Investment Services Ltd

                                                                                                                                              Savings and Investments - Intermediary Focus - UK - November 2011

                                                                                                                                              £1,995.00 (Excl.Tax)