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Equity Investing - UK - September 2019

Covered in this report

  • Exchange-traded Funds (ETFs) are investment products that track an index (eg FTSE 100) by investing in the same stocks and shares that make up that index

  • Individual company shares are issued by businesses to raise equity or capital; these shares are offered to investors to purchase
  • Investment bonds are life insurance policies where a lump sum is invested in an investment fund selected by a consumer or an adviser
  • Stocks and Shares ISAs (Individual Savings Accounts) are a taxefficient method of investing in a variety of different investments
  • A Real Estate Investment Trust is a company or a group that owns and manages property on behalf of shareholders
  • An Investment Trust Fund is a form of collective investment that allows investors to pool their money to purchase a variety of assets

“Amid difficult economic and political conditions, consumers looking to make the most of their money are adapting their attitudes towards risk. Technology has made investing, even in lower amounts, easier and cheaper. Regulators are looking to improve competition, lowering barriers to entry and exit, which will further democratise access and switching. Despite the challenges, opportunities abound for providers willing to expand the reach of their services and differentiate themselves.”
– Irene Salazar, Senior Financial Services Analyst

This report looks at the following areas:

  • Opportunities amid uncertainty and volatility
  • 25-34 year olds are the key group to target

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this Report
      • Executive Summary

          • The market
            • Sales fall amid uncertainty
              • Figure 1: Forecast of the value of gross retail sales, 2014-24
            • Stocks and shares ISAs grow in volume and value
              • Figure 2: Average subscription per ISA, by component, 2013/14-2017/18
            • Mixed results by distribution channel
              • Figure 3: Advised and non-advised new sales based upon sales data of bonds, stocks and shares ISAs, trusts and OEICs, 2014-H1 2018
            • Interest rates remain low but savings ratio increases slightly
              • Figure 4: Household savings ratio, 2009-18
            • FCA looks to improve competition on investment platforms
              • Companies and brands
                • BlackRock is the top asset manager by total retail funds
                  • Figure 5: Top 10 asset managers, by total retail funds under management, March 2018 and March 2019
                • High street banks continue to explore robo-advice
                  • New ISAs offer opportunity to attract savers and investors
                    • The consumer
                      • Levels of investable assets are low
                        • Figure 6: Level of investable assets, July 2019
                      • Appetite for risk has increased
                        • Figure 7: Level of comfort taking risks with savings, July 2019
                      • Almost half of UK savers own an investment product
                        • Figure 8: Investment product ownership, July 2019
                      • 11% of savers likely to start investing
                        • Figure 9: Intentions to start investing in the coming year, July 2019
                      • Big potential for micro-investing
                        • Figure 10: Minimum amount needed to consider opening an investment account, July 2019
                      • Investors largely satisfied with their main account
                        • Figure 11: Overall satisfaction with main investment account, July 2019
                      • Room for improvement on clarity of fees and exit conditions
                        • Figure 12: Satisfaction with features of main investment account, July 2019
                      • Engagement is high but there are gaps
                        • Figure 13: Investing behaviours and attitudes, July 2019
                      • What we think
                      • Issues and Insights

                        • Opportunities amid uncertainty and volatility
                          • The facts
                            • The implications
                              • 25-34 year olds are the key group to target
                                • The facts
                                  • The implications
                                  • The Market – What You Need to Know

                                    • Sales fall amid uncertainty
                                      • Stocks and shares ISAs grow in volume and value
                                        • Mixed results by distribution channel
                                          • Interest rates remain low but savings ratio increases slightly
                                            • FCA looks to improve competition on investment platforms
                                            • Market Size and Forecast

                                              • Sales fall amid uncertainty
                                                • Figure 14: Value of gross and net retail sales, 2014-19
                                              • Investors turn their backs on bonds
                                                • Figure 15: Unit-linked, guaranteed and with-profit bonds, 2014-18
                                              • Almost half of UK savers own an investment product
                                                • Figure 16: Investment product ownership, July 2019
                                              • Gross fund sales are expected to see ups and downs amid uncertainty
                                                • Figure 17: Forecast of the value of gross retail sales, 2014-24
                                                • Figure 18: Forecast of the value of gross retail sales, at current prices, 2014-24
                                              • Forecast methodology
                                              • Market Segmentation

                                                • Net retail sales suffer in 2018
                                                  • Figure 19: Net retail sales of funds, by asset class, 2014-18
                                                • ISAs and unit trusts are the most widely sold investment products
                                                  • Figure 20: New retail investment sales, by investment product type, 2013-H1 2018
                                                • Number of stocks and shares ISAs grows by 10%…
                                                  • Figure 21: Number of ISAs subscribed to each component, 2008/09-2017/18
                                                • …while the value increases by 29%
                                                  • Figure 22: Amounts subscribed to each ISA component, 2008/09-2017/18
                                                • Average ISA subscriptions grow
                                                  • Figure 23: Average subscription per ISA, by component, 2013/14-2017/18
                                              • Channels to Market

                                                • Mixed results by distribution channel
                                                  • Figure 24: Gross retail sales, by distribution channel, 2014-18
                                                • Fund platforms lead retail sales
                                                  • Figure 25: Gross retail sales, by distribution channel, 2018
                                                • Share of non-advised sales continues to grow
                                                  • Figure 26: Advised and non-advised new sales based upon sales data of bonds, stocks and shares ISAs, trusts and OEICs, 2014-H1 2018
                                              • Market Drivers

                                                • Interest rates remain low
                                                  • Figure 27: Effective interest rates on household deposit balances and official base rate, January 2010-June 2019
                                                • Savings ratio increases for first time since 2015
                                                  • Figure 28: Household savings ratio, 2009-18
                                                • Investment firms perform poorly when it comes to overall trust…
                                                  • Figure 29: Extent to which consumers trust financial services companies to treat them fairly, August 2018
                                                • …including on holding data securely
                                                  • Figure 30: Proportion of consumers who trust financial services providers to hold data securely, August 2018
                                              • Regulatory and Legislative Changes

                                                • FCA announces measures to improve competition on investment platforms
                                                  • Protecting investors against high-risk products
                                                    • FCA to introduce new rules for the P2P sector
                                                      • Permanent Restrictions on retail CFDs and CFD-like options
                                                        • FCA continues to evaluate the advice sector
                                                          • Assessment of the impact of RDR and FAMR
                                                            • Second Assessing Suitability Review
                                                              • FCA follows up on recently introduced legislation
                                                                • Consultation on new prudential regime for MiFID investment firms
                                                                  • Evaluating the PRIIPs review
                                                                    • Consultation on illiquid assets and open-ended funds
                                                                      • FCA to track and publish outcome indicators
                                                                      • Companies and Brands – What You Need to Know

                                                                        • BlackRock is the top asset manager
                                                                          • High street banks continue to explore robo-advice
                                                                            • New ISAs offer new opportunity to attract savers and investors
                                                                            • Market Share

                                                                              • BlackRock is the top asset manager
                                                                                • Figure 31: Top 10 asset managers, by total retail funds under management, March 2018 and March 2019
                                                                            • Competitive Strategies

                                                                              • High street banks continue to explore robo-advice…
                                                                                • Santander launches Digital Investment Adviser
                                                                                  • HSBC introduces My Investment
                                                                                    • ...while LBG’s wealth management aims to cover all bases
                                                                                      • Robo-advice appeal increases with the scale of its reach
                                                                                        • New ISAs offer new opportunity to attract savers and investors
                                                                                          • More providers offering LISAs
                                                                                            • LISAs are a key product to draw new customers
                                                                                              • IFISAs start to take off but concerns are raised regarding associated risk
                                                                                                • AJ Bell calls for ‘One ISA’
                                                                                                  • Investments and Open Banking
                                                                                                    • Platforms, partnerships and personalisation
                                                                                                      • New platform InvestEngine to compete on fees
                                                                                                        • Challengers providing more than investments
                                                                                                          • New provider Dozens launches bonds and investment platform
                                                                                                            • Zopa combines digital banking with P2P investing
                                                                                                            • Advertising and Marketing Activity

                                                                                                              • Fidelity and Baillie Gifford are the largest advertisers
                                                                                                                • Figure 32: Total above-the-line, online display and direct mail advertising expenditure on investment products, by advertiser, 2016/17-2018/19
                                                                                                              • End of tax year is crucial for advertisers
                                                                                                                • Figure 33: Total above-the-line, online display and direct mail advertising expenditure on investment products, by advertiser, August 2014-July 2019
                                                                                                              • Nutmeg focuses on ISA season
                                                                                                                • Figure 34: Nutmeg ad on the London Underground, March 2019
                                                                                                              • Aviva aims to widen its reach
                                                                                                                • Figure 35: Aviva ad on the London Underground, March 2019
                                                                                                              • Nielsen Ad Intel coverage
                                                                                                              • The Consumer – What You Need to Know

                                                                                                                • Levels of investable assets are low
                                                                                                                  • Appetite for risk has increased
                                                                                                                    • Almost half of UK savers own an investment product
                                                                                                                      • 11% of savers likely to start investing
                                                                                                                        • Big potential for micro-investing
                                                                                                                          • Investors largely satisfied with their main account
                                                                                                                            • Engagement is high but there are gaps
                                                                                                                            • Investable Assets

                                                                                                                              • One in five have no savings…
                                                                                                                                • …and a further 22% have less than £5,000
                                                                                                                                  • Figure 36: Level of investable assets, July 2019
                                                                                                                                • 25-34 year olds are in a good position to start investing
                                                                                                                                  • Figure 37: Level of investable assets, by age, July 2019
                                                                                                                              • Appetite for Investment Risk

                                                                                                                                • People are split in their attitude towards risk
                                                                                                                                  • Figure 38: Level of comfort taking risks with savings, July 2019
                                                                                                                                • Appetite for risk has increased…
                                                                                                                                  • Figure 39: Level of comfort taking risks with savings, 2016-19
                                                                                                                                • …and is highest among 25-34s
                                                                                                                                  • Figure 40: Level of comfort taking risks with savings, by age, July 2019
                                                                                                                              • Investment Product Ownership

                                                                                                                                • Almost half of UK savers own an investment product
                                                                                                                                  • Figure 41: Investment product ownership, July 2019
                                                                                                                                • Half of investors have more than one product
                                                                                                                                  • Figure 42: Repertoire of investment products owned, July 2019
                                                                                                                              • Intentions to Invest in Next 12 Months

                                                                                                                                • 11% of savers expect to start investing…
                                                                                                                                  • Figure 43: Intentions to start investing in the coming year, July 2019
                                                                                                                                • …with lower levels of investable wealth
                                                                                                                                  • Figure 44: Investable assets, by likelihood to invest, July 2019
                                                                                                                              • Minimum Amount to Consider Opening an Investment Account

                                                                                                                                • Big potential for micro-investing…
                                                                                                                                  • Figure 45: Minimum amount needed to consider opening an investment account, July 2019
                                                                                                                                • …especially among savers not yet investing
                                                                                                                                  • Figure 46: Minimum amount needed to consider opening an investment account, by likelihood of investing, July 2019
                                                                                                                              • Usage of Selected Investment Brands

                                                                                                                                • 26% of consumers report using Aviva
                                                                                                                                    • Figure 47: Usage of selected investment brands, July 2019
                                                                                                                                  • Open Banking offers opportunities and threats for the market
                                                                                                                                    • Figure 48: Repertoire of number of investments providers used, by age, July 2019
                                                                                                                                • Satisfaction with Investment Account

                                                                                                                                  • People are largely happy with the basics
                                                                                                                                    • Providers could offer more resources and interactive tools
                                                                                                                                      • Scope for more clarity regarding fees…
                                                                                                                                        • Figure 49: Satisfaction with features of main investment account, July 2019
                                                                                                                                      • …but vast majority of investors are ultimately satisfied with their account
                                                                                                                                        • Figure 50: Overall satisfaction with main investment account, July 2019
                                                                                                                                    • Satisfaction – Key Driver Analysis

                                                                                                                                        • Weighting the positives…
                                                                                                                                          • …against the most pressing issues
                                                                                                                                            • Room for improvement: choice and support
                                                                                                                                              • Figure 51: Key drivers of overall satisfaction with main investment account, July 2019
                                                                                                                                              • Figure 52: Overall satisfaction with main investment account – key driver output, July 2019
                                                                                                                                          • Investing Behaviours and Attitudes

                                                                                                                                            • Engagement levels are high…
                                                                                                                                              • Figure 53: Investing behaviours and attitudes, July 2019
                                                                                                                                              • Figure 54: Level of engagement with investments, July 2019
                                                                                                                                            • …but many lack the confidence to take action
                                                                                                                                              • The advice gap
                                                                                                                                                • Robo-advice and trust
                                                                                                                                                  • From robo- to hybrid-advice
                                                                                                                                                    • Figure 55: Usage of investing advice, July 2019
                                                                                                                                                  • Clarity on what constitutes ethical investing needed for differentiation
                                                                                                                                                      • Figure 56: Understanding of ethical investments, by age, July 2019
                                                                                                                                                  • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                      • Abbreviations
                                                                                                                                                        • Consumer research methodology
                                                                                                                                                          • Consumer research methodology: Key Driver Analysis
                                                                                                                                                            • Interpretation of results
                                                                                                                                                              • Figure 57: Overall satisfaction with main investment account – key driver output, July 2019
                                                                                                                                                              • Figure 58: Satisfaction with main investment account, July 2019
                                                                                                                                                          • Appendix – Market Size and Forecast

                                                                                                                                                            • Forecast methodology
                                                                                                                                                                • Figure 59: Forecast of the value of new gross sales, 2019-24

                                                                                                                                                            Equity Investing - UK - September 2019

                                                                                                                                                            £1,995.00 (Excl.Tax)