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The Future of European Investment Distribution

Datamonitor
August 28, 2007
36 Pages - SKU: DFMN1558905

Abstract Table of Contents Search inside this report Related Reports

Countries covered: Europe

Introduction

This brief looks at the future of distribution of long-term investment products in Europe. The market for long term investment products is projected to grow strongly in coming years. Demographic change, regulatory developments and the evolution of the pensions landscape is driving a diversification in distribution channels and opening up the markets for new entrants.

Scope

Sizes and forecasts the European market for retail assets and high net worth individuals Examines the key issues facing distributors in these markets Assesses how regulatory changes will impact distribution in these geographies Provides action points for firms operating in these changing markets

Highlights

Datamonitor believes that a significant opportunity exists to develop profitable distribution strategies for long term investment products in Europe over the next five years. The expanding pool of wealth will drive demand both for financial advice and for investment products Although bancassurance has been traditionally dominant in most European markets, shifts in the pensions landscape coupled with regulation to improve the standards adhered to by financial advisors, is opening up the distribution landscape.

Reasons to Purchase

Gain insight into the scale and

Scope

of the European investment distribution market. Understand the nature of the regulatory environment in Europe Obtain invaluable information as to the state of the distribution landscape in Europe, along with potential opportunities for market entry.

DATAMONITOR VIEW

CATALYST

SUMMARY

EXECUTIVE SUMMARY

MARKET SIZE

The European market for private investments is robust and growing

Market growth is having an important effect on the distribution landscape

Liquid assets in Germany and the UK are particularly high

Liquid assets across the key European markets are projected to grow strongly in value

The growth in the value of long term investment assets is more variable across Europe

The UK is home to a proportionally large number of high net worth individuals

The number of mass affluent and high net worth individuals is projected to grow steadily

Overall growth in the high net worth sector is predicted to be even stronger

The sophistication of the financial advisory sector varies widely across Europe

The financial intermediary population is often swelled by largely unqualified advisors

The regulatory purity of investment markets in Europe varies widely

Limited regulation in Germany may open up opportunities for quality investment advice

The UK and Switzerland are subject to detailed regulatory guidelines

The IFA sector in the UK is particularly well developed

Single tied advisors dominate the advisory markets in a majority of European countries

Bancassurance is currently the dominant distribution channel in Europe

A significant proportion of long term investment assets are distributed via the bancassurance channel

France is the largest bancassurance market in Europe

The distribution landscape in Germany is slowly diversifying

The UK and Switzerland represent exceptions to the rule

Data

MARKET DRIVERS

The bancassurance channel is very strong across most of Europe

In continental Europe, the bancassurance channel dominates the distribution of retail investment products

Consumers in much of Europe are unused to paying for financial advice

The strength of the banking channel is driving the development of bancassurance partnerships

Demographic change is stretching state pension schemes to breaking point

The support ratio is decreasing in almost all European countries

The closure of defined benefit schemes is polarizing the market

Mass market consumers are driving demand for long term investments via the bancassurance channel

However, as defined benefit schemes close, more affluent consumers are seeking independent advice

In turn, this has driven the development of partnerships with firms of financial advisors

In the UK, foreign and domestic banks are responding to consumer demand for long term investments

Foreign banks have identified an opportunity to compete with the IFA sector in the UK for top end clients

Domestic banks are considering developing their own distribution channels

REGULATION

Regulatory change has had a key impact on the investment and savings landscape in Europe

The Financial Services Action Plan was intended to create a unified financial services market in Europe

Insurance Mediation Directive

Markets in Financial Instruments Directive (MiFID)

Other pieces of national legislation are also having an impact on the investment distribution landscape

A new financial advice certificate is being developed in Spain

The new status of Conseiller en Investissement Financier has been established in France

The effects of depolarization in the UK are slowly effecting a shift in the distribution landscape

The Treating Customers Fairly initiative in the UK was intended to ensure the quality of financial advice

ACTION POINTS

European markets offer strong potential for distributing investment products

Demand for investment products is growing across Europe

Increasing demand combined with the impact of regulation is opening up the distribution landscape

Distribution strategies must be tailored to different markets and market segments

Each market and consumer segment requires a clearly differentiated strategy

In order to develop effective distribution networks, partnerships can be highly effective

As the pensions market evolves, opportunities emerge to sell new investment products

Variable annuities may become a more prominent feature in the European investment landscape

APPENDIX

Definitions

Further reading

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Disclaimer

List of Tables

Table 1: Value of liquid assets in Europe in 2006e, EURbn

Table 2: Projected value of European liquid assets, 2005 - 2010f, EURbn

Table 3: European life and pensions assets, 2006e - 2010f EURbn

Table 4: European mutual funds assets, 2006e - 2010f EURbn

Table 5: Number of wealthy individuals in Europe, 2006e (000s)

Table 6: Number of mass affluent individuals in Europe, 2006e - 2010f

Table 7: Number of high net worth individuals in Europe, 2006e - 2010f

Table 8: Financial intermediaries in Europe segmented by type, 2005

Table 9: Financial intermediaries in Europe segmented by channel (%), 2005

List of Figures

Figure 1: Value of liquid assets in Europe in 2006, EURbn

Figure 2: Projected value of European liquid assets, 2005 - 2010f, EURbn

Figure 3: European life and pensions assets, 2006e - 2010e EURbn

Figure 4: European mutual funds assets, 2006e - 2010e EURbn

Figure 5: Number of wealthy individuals in Europe, 2006

Figure 6: Number of mass affluent individuals in Europe, 2006e - 2010f

Figure 7: Number of high net worth individuals in Europe, 2006e - 2010f

Figure 8: Individual financial intermediaries in Europe segmented by country, 2005

Figure 9: Modified number of Individual financial intermediaries in Europe segmented by country, 2005

Figure 10: Comparative size and sophistication of European investment markets

Figure 11: Financial intermediaries in Europe segmented by channel (%), 2005

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The Future of European Investment Distribution

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