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Innovation in the Retail Investment Market - UK - October 2019

“Innovation has a huge role to play in the democratisation of investments. Traditionally an old-fashioned world, consumer and provider perceptions towards automation in investing will be slow to change but a first step is to better communicate the strengths of robo-services when it comes to accessibility and affordability. Beyond technology, a new approach can be explored with thematic investing.”

– Irene Salazar, Senior Financial Services Analyst

This report examines the following issues:

  • The potential of thematic investing
  • Robo-advisers need to reinforce the message of affordability and accessibility

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Table of contents

  1. Overview

    • What you need to know
    • Executive Summary

        • The market
          • Drop in sales amid uncertainty
            • Figure 1: Value of gross and net retail sales, 2014-19
          • Stocks and shares ISAs grow in volume and value
            • Figure 2: Average subscription per ISA, by component, 2013/14-2017/18
          • Interest rates and savings ratios remain at historic lows
            • Figure 3: Household savings ratio, 2009-19 H1
          • FCA looks to improve competition on investment platforms
            • Companies and brands
              • Technology and innovation are seen as priorities but also as risks
                • High street banks continue to explore robo-advice
                  • Investment services in the FCA’s regulatory sandbox
                    • The consumer
                      • Stocks and shares ISAs are the most common investment products
                        • Figure 4: Investment product ownership, July 2019
                      • Saving for the long term is the most common goal
                        • Figure 5: Reasons for investing, July 2019
                      • Perceptions are markedly different depending on provider type
                        • Figure 6: Perceptions of selected types of investment providers, July 2019
                      • Human advisers are generally perceived to be superior to robo-advisers
                        • Figure 7: Robo-advisers vs human advisers, July 2019
                      • Fees and pricing are the main differentiator when choosing a provider
                        • Figure 8: Reasons for choosing one investment service over another, July 2019
                      • Majority of investors/potential investors interested in thematic investing
                        • Figure 9: Interest in investment themes, July 2019
                      • What we think
                      • Issues and Insights

                        • The potential of thematic investing
                          • The facts
                            • The implications
                              • Robo-advisers need to reinforce the message of affordability and accessibility
                                • The facts
                                  • The implications
                                  • The Market – What You Need to Know

                                    • Drop in sales amid uncertainty
                                      • Stocks and shares ISAs grow in volume and value
                                        • Interest rates and savings ratios remain at historic lows
                                          • FCA looks to improve competition on investment platforms
                                          • Market Environment

                                              • Drop in sales amid uncertainty
                                                • Figure 10: Value of gross and net retail sales, 2014-19
                                              • … but stocks and shares ISAs grow in volume and value
                                                • Figure 11: Average subscription per ISA, by component, 2013/14-2017/18
                                            • Market Drivers

                                              • Interest rates remain at historic lows …
                                                • Figure 12: Effective interest rates on household deposit balances and official base rate, January 2010-July 2019
                                              • … as is the case with savings ratios
                                                • Figure 13: Household savings ratio, 2009-19 H1
                                              • FCA to improve competition on investment platforms
                                                • Industry examples: the STAR initiative
                                                  • New rules announced for the P2P sector
                                                    • FCA to focus on outcome indicators
                                                    • Companies and Brands – What You Need to Know

                                                      • Technology and innovation are seen as priorities but also as risks
                                                        • High street banks continue to explore robo-advice
                                                          • Investment services in the FCA’s regulatory sandbox
                                                          • Competitive Strategies

                                                            • Technology and innovation are high on established brands’ priorities …
                                                              • … but are also seen as risks
                                                                • Some brands are more specific
                                                                  • Investments and Open Banking: platforms, partnerships and personalisation
                                                                  • Launch Activity and Innovation

                                                                    • Santander and HSBC launch online services …
                                                                      • … with more expected to follow suit …
                                                                        • … but others are moving away from robo-advice
                                                                          • Investment services in the FCA’s regulatory sandbox
                                                                            • Distributed Ledger Technology
                                                                              • Platforms
                                                                                • Other propositions
                                                                                • The Consumer – What You Need to Know

                                                                                  • Stocks and shares ISAs are the most common investment products
                                                                                    • Saving for the long term is the most common goal
                                                                                      • Perceptions are markedly different depending on provider type
                                                                                        • Human advisers are generally perceived to be superior to robo-advisers
                                                                                          • Fees and pricing are the main differentiator when choosing a provider
                                                                                            • Majority of investors/potential investors interested in thematic investing
                                                                                            • Investor Profile

                                                                                              • Stocks and shares ISAs are the most widely held investment product
                                                                                                • Figure 14: Investment product ownership, July 2019
                                                                                              • Investors more likely to have substantial investable assets
                                                                                                • Figure 15: Level of investable assets, July 2019
                                                                                              • Investors are less risk-averse
                                                                                                • Figure 16: Level of comfort taking risks with savings, July 2019
                                                                                            • Reasons for Investing

                                                                                              • Saving for the long term is the most common goal
                                                                                                • Figure 17: Reasons for investing, July 2019
                                                                                              • Investing vs saving
                                                                                                • Investing: beyond saving
                                                                                                  • Majority of investors have more than one reason
                                                                                                    • Figure 18: Repertoire of reasons for investing, July 2019
                                                                                                • Perceptions of Types of Investment Providers

                                                                                                  • Traditional investment providers are seen as experts
                                                                                                    • Figure 19: Perceptions of selected types of investment providers, July 2019
                                                                                                  • Banks are associated with accessibility, convenience and security
                                                                                                    • Online-only platforms and robo-advisers associated with innovation
                                                                                                    • Robo-advisers vs Human Advisers

                                                                                                      • Human advisers generally perceived to be superior to robo-advisers …
                                                                                                        • … except at being unbiased
                                                                                                          • Figure 20: Robo-advisers vs human advisers, July 2019
                                                                                                        • Mixed results across the generations
                                                                                                          • Figure 21: Share of investors/potential investors who say robo-advisers are better than human advisers, by age, July 2019
                                                                                                        • Parents need convincing of affordability of robo-advisers
                                                                                                          • Figure 22: Robo-advisers vs human advisers: making investing more affordable – CHAID tree output, July 2019
                                                                                                      • Reasons for Choosing an Investment Service

                                                                                                        • Fees and pricing are the main differentiator
                                                                                                          • Figure 23: Reasons for choosing one investment service over another, July 2019
                                                                                                        • Accessibility is important to consumers …
                                                                                                          • … and so is the option of micro-investing
                                                                                                            • Reasons for choosing an investment service: TURF analysis
                                                                                                              • Figure 24: Reasons for choosing one investment service over another – TURF Analysis, July 2019
                                                                                                          • Interest in Investment Themes

                                                                                                            • Investors most interested in tech, type of company and industry
                                                                                                              • Figure 25: Interest in investment themes, July 2019
                                                                                                            • Environmental and ethical credentials are appealing
                                                                                                              • Half of over-65s not likely to be interested in theme investing
                                                                                                                • Figure 26: Disinterest in investment themes, by age, July 2019
                                                                                                              • Younger investors more passionate about a single subject
                                                                                                                • Figure 27: Repertoire of interest in investment themes, by age, July 2019
                                                                                                            • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                • Abbreviations
                                                                                                                  • Consumer research methodology
                                                                                                                    • CHAID analysis methodology
                                                                                                                      • Figure 28: Robo-advisers vs human advisers – CHAID Table output, July 2019
                                                                                                                    • TURF analysis methodology
                                                                                                                      • Figure 29: Reasons for choosing one investment service over another – TURF Analysis table output, July 2019

                                                                                                                  Innovation in the Retail Investment Market - UK - October 2019

                                                                                                                  £1,995.00 (Excl.Tax)