Product Innovation And The Impact On Advisors 2007

Published by: Datamonitor

Published: Nov. 27, 2007 - 70 Pages

Table of Contents

Overview

Catalyst

Summary

Executive Summary

Market Context

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

Advisors are somewhat optimistic over sales growth for the coming 6 months

Distribution Dynamics

Offshore bonds are commonly offered to clients for investment and tax planning

The majority of financial advisors offer variable annuities to their clients for flexibility and the potential to earn higher income.

Two thirds of financial advisors offer SIPPs to their clients while the initial surge in popularity for these investments appear to have slowed

Table of Contents

Table of figures

Table of tables

Market context

The sample consists of predominatly sole traders

The financial advice market remains almost entirely independent or whole of market

The average business case dealt with in this survey is less than £5,000

The majority of business is conducted in pension and life based investments

There have been some notable changes since Q2

The majority expect that product sales will remain the same over the next six months

The majority of advisors expect life products sales to remain static

Individual savings accounts (ISAs) are the most likely products to increase their sales over the next six month

The majority of advisors expect protection product sales to remain static in the near future

The outlook for pension products is bright

Financial advisors have very positive attitudes towards Standard Life, Skandia and Legal and General

Attitutdes have remained similar to those in Q2 2007

Financial advisors are positive about Invesco Perpetual, Fidelity and Jupiter

The majority of financial advisors were somewhat optimistic about the future

Data

Distribution Dynamics

64% of advisors offer offshore bond products to their customers

A third of advisors have experienced a change in demand for offshore bonds over the last 18 months

Offshore bonds are prodominately used for investment and inheritance tax planning

Other products used for inheritance tax planning are onshore bonds, discounted gift schemes and whole of life policies

Advisors are torn over the attractiveness of a regular premium payments into offshore products

The key providers in the offshore product market are Skandia, Standard Life and Scottish Equitable

Skandia was the most popular provider of offshore bond investment according to the respondents

Standard Life offers offshore products to the high-end of the market

Scottish Equitable offers three main offshore investment products to clients

57% of advisors offer variable annuities to their clients

34% of advisors had seen an increase in popularity of variable annuities over the last 18 months

The key advantages of variable annuities are percieved to be flexibility and potentially higher income

For those who do not see an advantage to these products, the issues that variable annuity providers face are lack of income guarantees and increasing customer awareness

Variable annuities are seen to be preferable to traditional annuity products although less advantageous than income drawdown

Traditional pension providers or those with SIPP or income drawdown experience are seen as the most likely to suceed in the variable annuity market

The key providers in the variable annuity market are Prudential, Canada Life and Norwich Union

Prudential was the most commonly used provider of variable annuities

Canada Life offers its clients a flexible range of annuities

Norwich Union is one of the world's largest insurance groups

67% of advisors offer SIPPs to their clients

The initial surge in popularity of SIPPs appears to have slowed

Regulatory moves to simplify SIPPs are not yet having the desired effect

70% of advisors feel that the charging structure of SIPPs is getting simpler

Much of the product innovation is in fact seen to be in the delivery platforms rather than the SIPP product

The majority of business is put into full SIPP by the surveyed financial advisors

There is unlikely to be a significant change in this business mix over the next 2 years

The key providers in the SIPP market are Standard Life and Scottish Equitable

Standard Life is a leading provider of SIPPs in the UK

Scottish Equitable's SIPP products provide clients with control in the timing and size of income payments

Advisors have mixed views on the usefulness of Group SIPPs

The flexibility of investment choices is one of the key advantages of Group SIPPs

There were few respondents that perceived advantages of joining a Group SIPP for mass market clients

Data

APPENDIX

Definitions

Pension product definitions

Personal Pensions

Stakeholder Pensions

Group Self-Invested Personal Pensions (Group SIPPs)

Employer Sponsored Stakeholder pension (ESS)

SIPPs (Self Invested Personal Pensions)

Definitions of distribution channels

Independent Financial Advisors (IFAs)

Tied agents

Multi-tied agents

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: Which of these statements best describes your attitude to these insurers? (Q3 2007)

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

Table 5: Which of these best describes your company?

Table 6: What business model do you operate?

Table 7: What is the average case size of the business you deal with?

Table 8: What percentage of your business is conducted in each of the following areas?

Table 9: Over the next six months how do you expect sales in each of the following products to change?

Table 10: How do you feel about these insurers?

Table 11: How do you feel about these mutual fund providers?

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

Table 13: Have you seen a continued surge in popularity for SIPPs over the last three months?

Table 14: Do you offer offshore bond products to your customers?

Table 15: Have you seen an increase in popularity of offshore bonds over the last 18 months?

Table 16: What purposes do your customers use offshore bonds for?

Table 17: Is the option of a regular premium payment into an offshore product attractive to your customer base?

Table 18: Do you offer Variable Annuity products to your customers?

Table 19: Have you seen an increase in popularity of Variable Annuity over the last 18months?

Table 20: Do you see any advantages of variably annuities for your client base?

Table 21: Which of the following types of provider do you think is best placed to capitalize on the variable annuity opportunity?

Table 22: How would you rate Variable Annuities against Income Drawdown for generation of income?

Table 23: How would you rate Variable Annuities against conventional annuities for generation of income?

Table 24: Do you offer SIPPs to your customers?

Table 25: Are charging structures for SIPPs getting simpler?

Table 26: Have you seen a continued surge in popularity of these products over the last 3 months?

Table 27: Are the FSAs moves to improve transparency and simplicity in SIPPs having any impact?

Table 28: Are the key SIPP innovations actually in the delivery platforms rather than the products?

Table 29: What proportion of your SIPP business (in terms of value) do you place in each of the following?

Table 30: Do you expect these proportions to change over the next 2 years?

Table 31: Are Group SIPPs a key innovation in the SIPP market?

Table 32: What are the key advantages to Group SIPPs?

Table 33: Is there any advantage to mass market employees of joining a group SIPP program?

List of Figures

Figure 1: Sole Traders constitute 36% of the total survey sample

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

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

Figure 4: Young adviser deal with higher average case size than their older colleagues

Figure 5: Pensions and life-based investments demonstrate the largest business areas

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

Figure 7: Respondents believe mutual funds and ISAs are expected to increase their sales

Figure 8: Protection products are likely to have static sales in the coming six months

Figure 9: Personal pensions and SIPPs sales look to be positive over the next six months

Figure 10: Standard Life are the most popular insurer in Q3

Figure 11: Invesco Perpetual is the most popular mutual fund provider

Figure 12: HSBC stand out as the least popular mutual fund provider

Figure 13: Over half of the surveyed financial advisors expect some growth in the next six months

Figure 14: The majority of financial advisors offer offshore bond products to their customers

Figure 15: The majority of financial advisors have seen no change in demand for offshore bonds

Figure 16: Customers use offshore bonds mostly for inheritance tax planning and investment

Figure 17: Is the option of a regular premium payment into an offshore product attractive to your customer base?

Figure 18: The majority of advisors offer variable annuities to their clients

Figure 19: The majority of advisors have seen no change in the popularity of variable annuities over the past 18 months

Figure 20: The majority of advisors see some advantages for their clients in variable annuities

Figure 21: The majority of advisors prefer variable annuities over traditional annuities for generating income

Figure 22: Most advisors prefer income drawdown over a variable annuity for income generation

Figure 23: Traditional pension providers and SIPP or income drawdown specialists are most likely to capitalize on the variable annuity opportunity

Figure 24: Two-thirds of advisors offer SIPPs to their clients

Figure 25: The majority of advisors believe that the FSA's efforts to improve transparency and simplicity in SIPPs is having no impact

Figure 26: The majority of advisors agree that SIPPs charging structure is becoming simpler

Figure 27: Two thirds of respondents stated that SIPP innovation came from delivery platforms rather than the products themselves

Figure 28: Full SIPP represents the largest proportion of SIPP business for advisors

Figure 29: The majority of financial advisors expect SIPP business to stay the same over the next few years

Figure 30: Are Group SIPPs a key innovation in the SIPP market?

Figure 31: What are the key advantages of Group SIPPs?

Figure 32: Is there any advantages to mass market employees of joining a Group SIPP program?

Abstract

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