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UK Consumers and Direct Investment market report

"Direct-to-consumer investing has grown steadily in the last five years and this growth will continue in the coming years. As well as positive market conditions for growth, there is also consumer demand for direct services. People are keen to take control of their finances and will look for the tools that allow them to do so. Crucially, few are willing or able to pay for more traditional advice, leaving direct services in a strong position."

- Deborah Osguthorpe, Category Director, UK Financial Services Research

This report will cover the following areas:

  • Robo-advice will become a bigger feature of the D2C market
  • How much choice do people want from direct-to-consumer platforms?
  • Mobile investment services are growing, but demand is limited

Competition in the market is growing with new entrants from across the asset manager, life insurance and banking sectors. This has prompted the development of a range of solutions from platforms that offer access to thousands of funds, to more guided services that help people to match their risk profile with a limited range of funds or portfolios. The low level of engagement among mass-market consumers means that truly self-directed investors are relatively rare, and robo-advice services are being rolled out in the hope that they can help bridge the advice gap and provide investors with some degree of personalised advice.

This Report examines the direct-to-consumer market, providing an overview of the current size of the market, as well as the key market drivers and regulatory and legislative environment. It considers the strategies of some of the leading providers in the market, as well as key product launches and developments. Mintel's exclusive consumer research explores the level of interest in direct investing, as well as the factors that are likely to prompt people to consider direct investment. Interest in mobile investment services is also considered, along with attitudes towards advice.

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Table of contents

  1. Overview

    • What you need to know
      • Definitions included in this Report
      • Executive Summary

          • The market
            • Direct sales account for more than a fifth of retail sales
              • Figure 1: Overall distribution split of gross retail sales, 2015
            • Direct platforms grow at the expense of direct fund manager sales
              • Growth in direct investing driven by range of factors
                • Regulator to tackle opaque pricing…
                  • …and supports development of online advice models
                    • Companies and brands
                      • Hargreaves Lansdown leads the way in D2C market
                        • Interactive Investor and TD Direct merge to create major player
                          • Banks launch new D2C services
                            • Asset managers take different positions towards D2C services
                              • Life companies look to D2C and robo-advice channels following pension freedoms
                                • The consumer
                                  • Using D2C investment services to reach Generation X
                                    • Direct services are rivalling more traditional advised channels
                                      • Figure 2: Preferred methods of arranging future investments, July 2016
                                    • Strong appetite for D2C investment services
                                      • Generational differences in demand for online advice services
                                        • Figure 3: Consumer agreement with statements regarding direct investment and financial advice, July 2016
                                      • Positive factors drive interest in direct investing
                                        • Figure 4: Consumer attitudes towards direct investing and advice, July 2016
                                      • Investors expect mobile access, but have limited interest in trading via mobile devices
                                        • Figure 5: Appetite for mobile investment services, July 2016
                                      • What we think
                                      • Issues and Insights

                                        • Robo-advice will become a bigger feature of the D2C market
                                          • The facts
                                            • The implications
                                              • How much choice do people want from direct-to-consumer platforms?
                                                • The facts
                                                  • The implications
                                                    • Mobile investment services are growing, but demand is limited
                                                      • The facts
                                                        • The implications
                                                        • The Market – What You Need to Know

                                                          • Direct sales account for more than a fifth of retail sales
                                                            • Growth in direct platforms, while direct business with fund managers falls
                                                              • Growth in direct investing driven by range of factors
                                                                • Regulator to tackle opaque pricing…
                                                                  • …and supports development of online advice models
                                                                  • Market Size

                                                                    • Direct sales account for more than a fifth of retail investment sales
                                                                      • Figure 6: Overall distribution split of gross retail sales, 2015
                                                                    • AUM on D2C platforms grows to more than £150 billion in 2016
                                                                      • Figure 7: Assets under management, direct-to-consumer platforms, 2012-16
                                                                    • Direct fund manager sales in decline
                                                                      • Figure 8: Direct-to-fund-manager gross retail sales, 2012-16
                                                                  • Market Environment

                                                                    • Low levels of investible assets limit participation in market
                                                                      • Figure 9: Value of consumer investible assets, July 2016
                                                                    • Low tolerance for products that carry risk
                                                                      • Figure 10: Consumers’ comfort with taking risks with savings, July 2016
                                                                    • Low rates drive interest in investing
                                                                      • Figure 11: Bank of England base rate, June 2007-October 2016
                                                                    • Brexit creates uncertainty in markets but as yet little has changed for consumers
                                                                      • Figure 12: Net retail sales, September 2015-September 2016
                                                                    • Pension freedoms provide opportunities and challenges for D2C providers
                                                                      • Advice gap drives growth in D2C services but also creates strategic difficulties for firms
                                                                      • Regulatory and Legislative Environment

                                                                        • FCA proposes to tackle opaque charging and improve transparency
                                                                          • FAMR encourages development of automated advice and guidance…
                                                                            • …and looks to provide clearer definitions for advice and guidance
                                                                              • New Lifetime ISA product could boost engagement in long-term savings
                                                                                • FCA proposes tougher rules for CFDs
                                                                                  • Further regulation on the horizon – PRIIPs and MiFID II
                                                                                    • PRIIPs
                                                                                      • MiFID II
                                                                                        • Brexit adds further uncertainty to the mix
                                                                                        • Companies and Brands – What You Need to Know

                                                                                          • Hargreaves Lansdown leads the way in D2C market
                                                                                            • Banks refine their D2C services
                                                                                              • Asset managers take different positions towards D2C services
                                                                                                • Life companies look to D2C and robo-advice channels following pension freedoms
                                                                                                • Competitive Strategies

                                                                                                  • Hargreaves Lansdown shores up its position as market leader
                                                                                                    • Asset managers take different positions towards D2C services
                                                                                                      • Life companies look to D2C and robo-advice channels following pension freedoms
                                                                                                        • M&A activity in the platform market during 2016
                                                                                                          • Interactive Investor and TD Direct
                                                                                                            • Cofunds and Aegon
                                                                                                              • Standard Life and AXA Elevate/AXA Self Investor
                                                                                                              • Launch Activity and Innovation

                                                                                                                • Banks launch new D2C services
                                                                                                                  • Barclays launches an integrated investment and banking platform
                                                                                                                    • Santander launches Investment Hub
                                                                                                                      • Other new entrants to the D2C sector
                                                                                                                        • Brewin Dolphin moves up wealth scale but fills gap with D2C proposition
                                                                                                                          • Saga joins investment market with Tilney Bestinvest tie-up
                                                                                                                            • Select digital innovations
                                                                                                                              • MoneyFarm launches first app-based digital wealth platform
                                                                                                                                • AJ Bell Youinvest to partner with Amazon Echo/Facebook
                                                                                                                                  • Moneybox app aiming to nudge people into investing
                                                                                                                                  • The Consumer – What You Need to Know

                                                                                                                                    • Using D2C investment services to reach Generation X
                                                                                                                                      • Scope to grow the scale of direct sales
                                                                                                                                        • Two thirds of investors are happy to make investment decisions on their own
                                                                                                                                          • Generational differences in demand for online advice services
                                                                                                                                            • Positive factors drive interest in direct investing
                                                                                                                                              • Interest in mobile services is for information, not transactions
                                                                                                                                              • Investment Product Ownership and Future Ownership Plans

                                                                                                                                                • Company shares are most widely held type of investment
                                                                                                                                                  • Figure 13: Investment product ownership and plans to take out investments in next 12 months, July 2016
                                                                                                                                                • Scope to expand investment ownership among Generation X
                                                                                                                                                  • Figure 14: Investment product ownership, by generation, July 2016
                                                                                                                                                • Nudge technology helps Millennials to access investments
                                                                                                                                                    • Figure 15: Investment product ownership, by value of investible assets, July 2016
                                                                                                                                                • Expected Channels for Future Investment

                                                                                                                                                  • Consumers continue to look to banks to play a role in the investment market
                                                                                                                                                    • Direct services can rival more traditional advised channels
                                                                                                                                                      • Figure 16: Preferred methods of arranging future investments, July 2016
                                                                                                                                                    • Balancing advised and direct services is a challenge
                                                                                                                                                      • Few have high enough investible assets to access bespoke advice…
                                                                                                                                                        • …but many of those who do are open to using direct investing channels
                                                                                                                                                          • Banks play important role for mass-affluent investors
                                                                                                                                                            • Figure 17: Expected channels for future investments, by value of investible assets, July 2016
                                                                                                                                                        • Consumer Interest in Direct Investment

                                                                                                                                                          • Strong appetite for direct-to-consumer and robo-advice services
                                                                                                                                                              • Figure 18: Consumer agreement with statements regarding direct investment and financial advice, July 2016
                                                                                                                                                            • Generational differences in demand for online advice services
                                                                                                                                                                • Figure 19: Consumer agreement with statements regarding direct investment and financial advice, by age, July 2016
                                                                                                                                                              • Growth in direct channels reflects demand among the wealthy
                                                                                                                                                                  • Figure 20: Consumer agreement with statements regarding direct investment and financial advice, by value of investible assets, July 2016
                                                                                                                                                              • Consumer Attitudes towards Direct Investing and Advice

                                                                                                                                                                • Positive factors drive interest in direct investing
                                                                                                                                                                    • Figure 21: Consumer attitudes towards direct investing and advice, July 2016
                                                                                                                                                                  • Only a fifth are looking for a wide range of investment options
                                                                                                                                                                      • Figure 22: Consumer agreement with statements regarding direct investment and financial advice – Cross-analysis of selected statements, July 2016
                                                                                                                                                                    • Investor confidence increases with wealth
                                                                                                                                                                        • Figure 23: Consumer agreement with statements regarding direct investment and financial advice, by value of investible assets, July 2016
                                                                                                                                                                    • Attitudes towards Investment Fees and Charges

                                                                                                                                                                      • Confusion about fees and charges is a barrier to direct investing
                                                                                                                                                                        • Figure 24: Attitudes towards investment fees and charges, July 2016
                                                                                                                                                                    • Appetite for Mobile Investment Services

                                                                                                                                                                      • Investors expect mobile access, but there’s limited interest in trading via mobile devices
                                                                                                                                                                        • Figure 25: Appetite for mobile investment services, July 2016
                                                                                                                                                                      • Few over-55s are interested in mobile investment services
                                                                                                                                                                        • Figure 26: Agreement with the statement ‘I would not be interested in using a smartphone to manage or take out investments’, by gender and age, July 2016
                                                                                                                                                                      • Most potential D2C investors still need convincing about mobile trading
                                                                                                                                                                        • Figure 27: Consumer appetite for mobile investment services, by selected expected channels for future investment, July 2016
                                                                                                                                                                      • The most affluent show the least interest in mobile investments
                                                                                                                                                                        • Figure 28: Consumer appetite for mobile investment services, by value of investible assets, July 2016
                                                                                                                                                                    • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                        • Abbreviations
                                                                                                                                                                          • Consumer research methodology

                                                                                                                                                                          Companies Covered

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