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The German Financial Advice Market 2005Published by: Datamonitor Published: Apr. 4, 2005 - 102 Pages Table of ContentsTABLE OF CONTENTS EXECUTIVE SUMMARY 3 Market context 3 Financial advisers and their attitudes 3 The German Financial Advice Market 4 INTRODUCTION 16 What is this report about? 16 Definition of an independent financial adviser 16 The independent financial advice market is growing rapidly 17 Who is the target reader? 17 How to use this report 18 MARKET OVERVIEW 20 Introduction 20 Key findings 20 Banks continue to be the most important channel for the distribution of financial services products in Europe 21 Banks hold more than 50% investment and protection distribution 21 Tied and multi-tied agents are an important force in European financial services distribution 21 Insurance company employees are declining in importance in the European market 22 Brokers and independent financial advisers have had a limited role in European financial services distribution 22 The European financial advice market is highly fragmented 22 Europe remains some distance from developing a pan-European financial advice market 24 Lack of consumer demand and lack of legislation have deterred the development of pan European competitors. 25 Technological and regulatory change will encourage the development of some pan-European competitors going forward 25 Product providers will push the market for financial advice in Europe in the next five years 26 Pan-European Financial Advice Associations and Standards bodies are attempting to unify the European financial advice market 27 Financial advisers are somewhat more important in the mutual fund than in the life and pensions markets 30 Independent advisers hold around 8% of mutual fund distribution in Europe 30 Independent advisers currently hold a small part of life and pensions distribution market 31 Private pensions are the products with the potential to have the biggest impact on the European financial advice industry 32 The private pensions market is yet to deliver results for financial advisers 32 The life-based investment market has become less attractive 32 Hedge funds and fund-of-hedge funds are starting to figure for financial advisers 33 Structured and derivative-based products are growing rapidly in popularity in Germany 34 European regulation presents a major threat to the fledgling financial advice market in Europe 34 Financial advisers are in danger of regulation overload 34 Professional indemnity and capital adequacy ‘double whammy’ will put up to 30% of financial advisers out of business 35 The Financial Services Action Plan (FSAP) will radically change the regulatory environment in Europe 36 Independent advisers’ core customers group - the wealthy and financially aware - continue to grow in number across Europe 38 The affluent market in Europe continues to grow 38 European consumers are becoming more financially aware 39 Data 40 EUROPEAN FINANCIAL ADVISERS AND THEIR OPINIONS 43 Introduction 43 Key findings 43 Financial advice firms in Europe are typically small and independently owned 44 A minority of financial advisers surveyed are owned by product providers 44 Most financial advice firms have less than 20 staff 45 Financial advisers in Europe focus on developing a close relationship with a focused customer base 47 The French and Spanish financial advice markets are particularly highly focused on affluent customers 47 The pre-retirement market is key for financial advisers in Europe 48 Many financial advisers have expatriate customer bases 49 Close relationships are crucial to financial advisers’ success 50 The key to financial advice in Europe is direct contact between the adviser and the client 50 Customers with whom advisers are in frequent contact dominate revenues 52 Customers breed customers: the majority of new business in the financial advice channel comes through customer referals 53 Equity-based investments are the most important products for financial advisers in Europe 55 The dominance of commission is an issue for the European financial advice market 56 86% of financial advisers’ business is commission-based 56 European consumers don’t want to pay for financial advice 57 The preference for commission-based selling increases the danger of mis-selling 58 European advisers are technologically aware, but providers are yet to take advantage 58 European financial advisers are not technophobes 59 Most financial adviser-to-provider communication continues to be directed through traditional channels 60 Providers need to focus on service in order to appeal to financial advisers 61 Data 63 THE GERMAN FINANCIAL ADVICE MARKET 70 Introduction 70 Key findings 70 Germany has a wide and varied financial services distribution landscape 71 German banks have been accused of dropping the ball with their domestic consumers 71 The German market is seeing closures in the insurance sales force and tied agent channels 71 Large financial advice competitors are accused of being product pushers 72 The German financial intermediary landscape is crowded 72 There 300,000 financial intermediaries in the German market 72 German independent financial advisers currently target the whole market 73 German independent advisers hold a significant part of the distribution market 73 Independent intermediaries hold 11% of mutual fund distribution in Germany 73 Independents hold 20% of life and pensions distribution 74 The boundaries between different types of competitor in the German market are blurred 75 The majority of financial advice companies in the German market are independently owned 76 Leading Strukturvertriebe are some of the largest financial advice companies in Europe 76 The level of German financial advisers’ sales coming from life assurance products is not sustainable 78 46% of current financial advice sales are through the financial advice channel 79 Portfolio management is dominated by private banks and stockbrokers 79 Private pensions will benefit from decreasing tax advantages for life insurance products 80 The German market for innovative products shows danger signals for financial advisers 80 Property investment and mortgages are important products for German financial advisers 81 Life and pensions are the products on which German financial advisers are most likely to offer open architecture 82 New regulation will shrink and polarize the market for financial advice in Germany 82 German financial advice has an image problem with German consumers 83 Over the next five years German independent financial advisers will ride the regulatory storm 86 Regulation is a double-edged sword for independent advisers 86 Independent advisers will do more business going forward 86 THE FUTURE DECODED 89 Introduction 89 European financial advisers show muted optimism 90 Datamonitor believes that the next five years will see independent financial advice start to gain a foot-hold in the major continental European countries 91 APPENDIX 94 Supplementary data 94 Definitions of investment and protection distribution channels 98 Insurance company employee 98 Tied agent 98 Multi-tied agent 98 Independent financial adviser 98 Independent broker 99 Bank/ bancassurer 99 Other 99 Other definitions 99 Research methodology 101 Datamonitor’s European Financial Advice Survey, Oct 2004 101 New Consumers Insights European Consumer Survey October 2004 101 Future readings 101 SPP writing team 102 LIST OF TABLES Table 1: Financial intermediaries in Europe (individuals), 2004 40 Table 2: Financial intermediaries in Europe (firms) 2004 40 Table 3: Share of the mutual fund market held by financial advisers, 2003 41 Table 4: Share of the life and pensions market held by independent financial advisers, 2004e 41 Table 5: Professional financial advice associations by country France, Germany, Italy and Spain 2004 42 Table 6: Ownership of European financial advisers 63 Table 7: Average number of client-facing staff per firm in European financial advice firms 63 Table 8: Average number of customers per financial advice firm (percentage of financial advisers) 64 Table 9: Proportion of financial advisers’ client base in different asset bands 64 Table 10: The financial advice market in my country is focused on high net worth individuals? 65 Table 11: Proportion of financial advice customers in different age groups 65 Table 12: Proportion of financial advisers whose client base includes expatriates 66 Table 13: Proportion of communication between client and financial adviser by channel 66 Table 14: Proportion of financial advisers’ business by customer type 67 Table 15: Channels used by financial advisers to gain new customers 67 Table 16: Proportion of financial adviser business by charging structure 68 Table 17: Technological hardware used by financial advisers 68 Table 18: Factors in financial advisers’ choice of product provider 69 Table 19: German consumers: To what extent do you agree with the statements? 84 Table 20: German consumers: Which source of information would you most rely on if you were considering... 87 Table 21: German financial advisers: Who owns your company? 87 Table 22: What percentage of your current customer base has assets of? 88 Table 23: What proportion of your sales comes from the following products? 88 Table 24: German financial advisers: How many provider’s products do you offer in the following areas? 88 Table 25: Financial advisers view of the future of their market 93 Table 26: Percentage of life and pensions new business sold by independent financial advisers 93 Table 27: Total individuals offering intermediary financial services by country, additional countries, 2004 94 Table 28: Professional financial advice associations by country, additional countries, 2004 95 Table 29: Financial advisers’ perceptions of their reputation, 2004 96 Table 30: To what extent do you agree that financial advice is a growing element of the financial services distribution market in your country 96 Table 31: Which statement is most true about financial advisers in your country? 97 Table 32: Proportion of different products sold by European financial advisers, 2004 97 LIST OF FIGURES Figure 1: The European Financial Advice Market, report process 18 Figure 2: Germany has by far the largest number of financial intermediaries in continental Europe, 2004 23 Figure 3: Germany has more financial intermediary firms than any other European market, 2004 24 Figure 4: German financial advisers hold the largest proportion of the mutual fund distribution market, 2003 30 Figure 5: Independent advisers hold 10% or less of life and pensions distribution in the major European countries, 2004e 31 Figure 6: Most financial advice firms in Europe are independently owned, 2004 44 Figure 7: Only a small number of financial advice companies have more than 20 employees, 2004 45 Figure 8: Germany has the largest proportion of large financial advice companies, 2004 46 Figure 9: More than 30% of financial advisers’ clients are High Net Worth 47 Figure 10: The Spanish and French financial advice markets are concentrated on the pre-retirement age group 48 Figure 11: A large proportion of financial advisers in France service expatriate customers 49 Figure 12: Face-to-face and telephone communication remain the dominant forms of communication in the financial advice market 51 Figure 13: Financial advisers gain most of their revenues from customers with whom they have frequent contact 52 Figure 14: How do you go about finding new customers? 53 Figure 15: Mutual funds and stock broking are leading activities for European financial advisers 55 Figure 16: What proportion of your business is on average? 57 Figure 17: On average financial advisers’ computers are 2-3 years old 59 Figure 18: Telephone remains the most common means of communicating with providers 60 Figure 19: Service is more important than performance or commissions to European financial advisers 62 Figure 20: Intermediaries make up 11% of mutual fund sales in the German market 74 Figure 21: The vast majority of financial advice firms in Germany are independently owned 76 Figure 22: Life assurance is the key product for German financial advisers 79 Figure 23: Few German financial advisers are tied to a single provider in any area 82 Figure 24: German consumers are most likely to seek recommendations from an adviser when buying a savings or investment policy 85 Figure 25: Confidence in the future of the financial advice channel is muted among financial advisers 90 Figure 26: Most European countries can expect strong growth in the financial advice market over the next five years 92 AbstractIntroductionGermany has more financial services intermediaries than any other continental European country. However the independent financial adviser market remains small. The financial services intermediary market is being reformed, but will this be a positive or a negative thing for the independent financial advice sector? Scope This brief covers the German market but gives crucial background information about the wider European market It covers the market share held by financial advisers in the mutual fund and life and pensions markets and forecasts forwards It includes analysis of the market for financial advice, including types of advisers, key products and leading associations It contains survey information drawn from interviews with more than 20 key financial advice companies in Germany Highlights One of the advantages of the German financial advice market is that unlike in most financial advice markets in Europe financial advisers in Germany target the whole market, rather than simply targeting the wealthy segment. German advisers highlighted 45% of their customer base as being 'mass market'. The German financial advice market includes some of the largest financial advice firms in Europe. Between them AWD, OVB, DVAG and MLP alone service nearly 7m clients. While there continue to be a large number of small financial advice firms in the German market, increased regulation is driving further consolidation. The majority of financial advisers in Germany believe that German financial advisers have issues with the way they have been perceived by the public. 60% believed that financial advisers either currently have a bad reputation or have had one in the past. Reasons to Purchase Understand the attitudes and opinions of key players in this crucial distribution channel in order to market to it more successfully going forward. Size the proportion of the life and pensions and mutual fund products currently being sold by financial advisers. Assess the importance of this channel for distribution strategies going forward. Get Full Details About This Report >> |
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