The Generational shift of Financial Advisors

Published by: Datamonitor

Published: Jul. 26, 2007 - 75 Pages

Table of Contents

Overview

Catalyst

Summary

Methodology

Executive Summary

Market Context:

Advisors are predominantly sole independent traders, with a low average case size

Advisors are cautiously optimistic over sales growth in the next 6 months

Distribution Dynamics:

Regulation and administration are the two biggest concerns for advisors in Q2

Advisors seem happy with the pace of change but are still uncomfortable with the idea of fee-based remuneration

Most advisor firms are small, but recruitment is not considered a problem

Table of Contents

Table of figures

Table of tables

MArket Context

The sample consists predominantly of sole traders

Advisors have retained an independent or whole of market model

The average case size in this sample is below £5,000

42% of advisors in this sample have a majority of high net worth clients

The majority of business is currently conducted in pensions and life-based investment products

Advisors are losing business to online sales for simpler products

There have been few changes since Q1

The majority of financial advisors are cautiously optimistic

Advisors expect sales of most products to remain static over the next 6 months

There has been little definitive change from Q1

The outlook for life products is positive

Advisors are more optimistic over mutual funds than ISAs

Protection sales look to remain largely static, but some advisors predict a decrease

Advisors are most optimistic regarding pension sales over the next 6 months

Financial advisors are most positive towards Standard Life, Skandia, and Legal & General

Standard Life is a leading UK fund manager employing a ""focus on change"" investment philosophy

Skandia has been a prominent name in the UK savings & investments market in recent years

Legal & General has won a number of awards in 2007

Attitudes have remained similar to those in Q1 2007

Invesco Perpetual and Fidelity have the highest approval ratings from advisors in Q2

Invesco Perpetual is one of the largest independent asset management companies in the UK

Fidelity is the UK's largest mutual fund manager

HSBC is the least popular provider by a significant margin

Data

Distribution Dynamics

Confusing regulation is the biggest challenge for all ages of advisors

Younger advisors are more concerned about technological change

Over half the surveyed advisors believe providers are not helpful in quieting their fears

Paperwork is the key source of dissatisfaction for all ages of advisor

Most advisors feel comfortable with the pace of change

The younger age groups are most confident about keeping pace with change

Over half of advisors believe that better training is the answer

Most advisors remain reluctant to move away from upfront commissions

The 30-40 age group is most open to the idea of fee-based remuneration

Most advisors are concerned with loss of profitability when moving away from commissions

The predominant innovations have been in the area of delivery platforms

There is a close link between advisor age and enthusiasm for product delivery developments

Few advisors work in firms of more than 2 employees

Younger advisors are more likely to work in larger firms

Older advisors are ambiguous about retirement

The younger advisors work for firms with the best succession plans

Most advisors do not believe they have a problem with recruitment

Advisors are happy to handle recruitment without external help

Many advisors are ambivalent about forming a partnership with another firm

Most advisors would prefer to partner with accountants or other IFA firms

Reputation and a natural fit are the two most important criteria in financial advice partnerships

Data

APPENDIX

Definitions

Pension product definitions

Personal Pensions

Stakeholder Pensions

Group personal pensions

Employer Sponsored Stakeholder pension (ESS)

SIPPs (Self Invested Personal Pensions)

Definitions of distribution channels

Independent Financial Advisors (IFAs)

Direct sales forces

Tied agents

Multi-tied agents

Bancassurance

Direct marketing

Telesales

Other

Matrix Definitions

Methodology

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: What percentage of your business is conducted in each of the following areas?

Table 2: Over the next six months how do you expect sales in each of the following products to change?

Table 3: Over the next six months how do you expect sales in each of the following products to change?

Table 4: Which of the following statements best describes your attitude to these insurers? (Q2 2007)

Table 2: Which of the following statements best describes your attitude to these insurers? (Q1 2007)

Table 6: Which of the following best describes your company?

Table 7: What business model do you operate?

Table 8: What is the average case size of the business you deal with?

Table 9: Does more than 50% of your customer base have total liquid assets of over £200k? i.e would you describe more than half of your customer base as High Net Worth?

Table 10: Does more than 50% of your customer base have total liquid assets of below £30 000? i.e would you describe more than half of your customer base as Mass affluent?

Table 11: What percentage of your business is conducted in each of the following areas?

Table 12: I believe in the next 6 months the UK Financial Advice market will:

Table 13: Which of the following statements best describes your attitude to these insurers?

Table 14: Which of the following statements best describes your attitude to these mutual fund providers?

Table 15: Do you believe that providers will really work with IFAs to meet these needs and concerns?

Table 2: What do you find dissatisfying about your work?

Table 3: What could be done by providers to help you keep pace with change?

Table 18: What are the 3 biggest challenges facing your firm?

Table 19: What do you find dissatisfying about your work?

Table 20: Do you feel you are keeping pace with the changes occurring in the market?

Table 21: Do you feel you are keeping pace with the changes occurring in the market?

Table 22: What could be done by providers to help you keep pace with change?

Table 23: Do you feel your firm is open to the idea of removal of up-front commissions?

Table 24: What are the key challenges facing firms who wish to move away from upfront commissions?

Table 25: What have been the most interesting product developments over the last five years?

Table 26: How many advisors work in your firm?

Table 27: Are any members of your firm likely to retire in the next 5 years?

Table 28: Is there a succession plan in place?

Table 29: Are you facing issues surrounding recruitment of new advisors into your business?

Table 30: Do you feel that providers could do more to help recruit new advisors into the industry?

Table 31: Would your firm look to forming a partnership with another organisation?

Table 32: Which kind of partners do you think would be suitable for IFAs? (choose up to 3)

Table 33: What qualities would you be looking for in such a partnership? (choose up to 3)

List of Figures

Figure 1: Almost half the Q2 advisors surveyed are sole traders

Figure 2: The majority of advisors operate an independent business model

Figure 3: Most participants deal with an average case size of less than £5,000

Figure 4: Younger advisors deal with higher value average cases than their older colleagues

Figure 5: Less than half the sample have a majority of high net worth clients

Figure 6: Over half of respondents consider the majority of their customer base to be mass affluent

Figure 7: Almost a quarter more advisors claim a majority of HNW clients in Q2 compared to Q1

Figure 8: Pensions and life-based investments demonstrate the strongest business performance

Figure 9: The majority of advisors forecast limited growth when asked how the market will develop over the next 6 months

Figure 8: The majority expect life products sales to remain the same over the next 6 months

Figure 9: Non-life products may see a gradual increase in sales over the next 6 months

Figure 10: Some advisors predict a decrease in protection sales over the next 6 months

Figure 11: Personal pension sales look positive over the next 6 months

Figure 13: Skandia is the most popular insurer with advisors in Q2

Figure 13: Invesco Perpetual remains the most popular mutual fund provider

Figure 14: HSBC is the least popular mutual fund provide by some distance

Figure 15: Confusing regulation is one of the key challenge for almost two thirds of advisors

Figure 18: The Under 30s are worried about technological change

Figure 16: Over half of surveyed advisors had little faith in providers to help assuage their worries

Figure 17: Advisors are unconcerned about learning new products and technologies

Figure 18: Over half of advisors feel confident that they are keeping up-to-date with change

Figure 22: The 30-40 age group is most confident about the pace of change

Figure 19: The majority of advisors feel uncomfortable with the idea of removing up-front commissions

Figure 24: Only the 30-40 age group has a majority open to moving away from up-front commissions

Figure 20: Almost half of advisors are primarily concerned with profitability when considering moving away from up-front commissions

Figure 21: Delivery platforms are considered some of the most interesting product developments in recent years

Figure 27: Younger advisors are most excited about delivery platforms

Figure 22: How many advisors work in your firm?

Figure 23: Older advisors are far more likely to work alone than their younger colleagues

Figure 30: Retirement possibilities increase in firms with older advisors

Figure 31: Older advisors are less well-provided for in terms of succession plans

Figure 24: Recruitment of new advisors is most challenging in the 50-55 age group

Figure 25: Over two thirds of advisors feel they do not require recruitment assistance from providers

Figure 26: Advisors between 30 and 50 are least open to the idea of a partnership

Figure 27: Over half of advisors say accountants would be a potential partnership choice

Figure 36: A natural fit is the most important quality in an IFA partnership

Abstract

• Survey conducted among 102 financial advisors revealing their views on a variety of investment choices
• Analyses the position of various age groups within the industry, explores growth potential, and gauges advisor opinion toward various product areas
• Covers the prominent issues affecting the financial advice market, discusses key current issues and a range of advisor opinions across age groups

This report looks at the changing structure of the financial advisor market and how advisors of different ages are adjusting to changes in products, regulation and technology. It also examines the future for aging firms of advisors.

For all advisors, confusing regulation is regarded as the biggest current challenge within the financial advice market, with 66% of all survey participants selecting it as one of their top three biggest challenges.

Attitudes towards the challenges faced by financial advisors differ widely between age groups, despite being linked by a general consensus that confusing regulation is the largest challenge faced by the community. The younger age groups appear more concerned with issues directly affecting the future of the industry, such as technological change.

• Identify market opportunities by discovering which product areas IFAs see as having the greatest potential
• Identify the main client groups, as well as the most popular products and life providers in the eyes of financial advisors
• Gain direct insight into the fears, concerns, and attitudes of financial advisors and their predictions for the future of the industry

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