Investor Metrics: Retail Customer and Private Client Behaviour in UK Security-Based Investments : Market Research Report

Investor Metrics: Retail Customer and Private Client Behaviour in UK Security-Based Investments

Published: Feb. 1, 2008 - 170 Pages

0.0 EXECUTIVE SUMMARY: Certain categories of consumer are especially likely to be classifiable as retail investors…; … including the retired, the self-employed and those living in London and Greater London; Almost a quarter of retail invs. are willing to take calculated risks but frequent traders are scarce; Individuals are most likely to be classifiable as retail investors by virtue of holding an equity ISA; Pen. rates for most products are at least double among retail clients with over £25,000 invested; Retail investors appear to be showing an increasing interest in funds investing outside of the UK…; … with a significant percentage also holding funds focusing on specific business sectors…; … or promising particular invest. styles, although few appear motivated by ethical considerations; Many retail customers still prefer making investment decisions in a face-to-face environment…; … with little evidence for a significant shift towards utilisation of the Internet as a dist. interface; Recognition and utilisation rates of on-line fund supermarkets and discount brokers remain low; Mainstream financial services providers inspire the highest ratings for awareness and trust…; … although specialist investment management firms score more highly among wealthier investors.6 Six fund managers sit in the ‘golden quadrant’ of numerous and wealthy retail investors
1.0 INTRODUCTION: Research rationale; The study discloses a variety of hitherto unpublished metrics about the market; Research sample and mechanics; Finaccord; Other UK consumer research publications; IPT / Tpoll
2.0 MARKET ANALYSIS: Introduction; Consumers classifiable as retail investors; Market overview; A significant proportion of consumers have at least some exposure to security-based invs; What is the value of their funds committed to security-based investments?; The segmentation of the latest sample is very similar to that recorded by the original investigation; What is their age profile?; The percentage of all consumers classifiable as retail investors rises in line with increasing age…; What is their household income profile?; … with a similar finding visible if respondents are split by annual household income; What is their geographic profile?; What is the impact of having children?; Number of children aged under 25 has little influence on holdings of security-based investments...32; What is the impact of employment status?; Wealthier invs. are particularly prevalent among the retired and self-employed constituencies; Analysis by type of security-based investment; Current penetration; Consumers are most likely to be defined as retail investors through holding equity ISAs…; … although holdings of both Child Trust Funds and SIPPs appear to be increasing; For most products, pen. rates are far higher among those with more than £25,000 invested; Intention to purchase; Interest in OEICs, unit trusts and investment trusts appears to be declining among retail investors.37; Analysis by primary underlying instrument of investment; Current penetration; Holdings among retail invs. exceed 10% only in the case of equity funds and balanced funds…; … with more exotic options appealing mainly to those with a portfolio worth more than £25,000; Intention to purchase; Equity-based funds and balanced funds also dominate likely retail investment in 2008; Analysis by specific geography of investment; Current penetration; Retail investors may be increasingly inclined to consider funds investing in overseas securities…; … with the popularity of funds investing solely in UK equities having fallen over the last two years; Intention to purchase; With the exception of the UK, no specific geography will attract more than 5% of retail investors; Analysis by specific business sector of investment; Current penetration; Over 10% of retail investors claim to have allocated capital to specialist financial sector funds; Intention to purchase; Funds investing in the shares of ‘green’ energy firms seem likely to attract investment in 2008; Analysis by style of investment; Current penetration; Products oriented towards producing capital growth are the most popular option…; … with guaranteed or protected funds also achieving a penetration rate in excess of 10%; Intention to purchase; It remains the case that few retail investors seem to be motivated by ethical considerations; Risk appetite and trading frequency of retail investors; Risk appetite; Almost one third of wealthier investors state that they are willing to take calculated risks…; Buying and selling frequency; … although a majority even of this group buy or sell investments once a year or less on average; Distribution interface / channel behaviour of retail investors; Self-direction and financial advice - current behaviour; The proportion of retail investors claiming to be totally self-directed has risen slightly; Distribution interfaces - current behaviour; A majority of retail investors still prefer to make new investments in a face-to-face environment; Distribution channels - current behaviour; High street banks and building societies continue to outgun other distribution channels; Distribution interfaces - future behaviour; A rise in use of the Internet will occur only at the expense of other remote distribution interfaces…66 Distribution channels - future behaviour; … and it remains doubtful whether fund supermarkets can turn forecast into actual progress; Key factors determining choice of investment manager; Historic performance of the investment manager remains the most important factor…; … with retail investors least likely to choose a fund manager on the basis of its brand…; … although numerous other factors also have a bearing on the behaviour of retail investors; Awareness and usage of fund supermarkets and discount brokers; Barclays Funds Market and Hargreaves Lansdown record the highest utilisation rates…; … with Saga scoring most highly in terms of overall awareness among retail investors
3.0 COMPETITOR ANALYSIS: Introduction; Awareness; Awareness rates are highest for companies providing a broad range of financial services…; … with specialist investment managers excluded from the top ten for overall recognition; A majority of customers have a limited knowledge only of the wider market for investments; Allianz Global Investors has probably been most successful in improving its recognition rating; More affluent investors tend to have higher awareness levels of investment management firms…; … with only two providers scoring more highly among investors with holdings below £25,000; Trust; Specialist investment managers tend to achieve a higher ranking for trust than for awareness; Schroders has achieved a significant improvement in its ranking for trust since the original survey; Wealthier retail investors are more inclined to trust specialist investment management firms…; … with the difference particularly marked in the case of many of the larger investment managers; The correlation between scores for awareness and for trust among retail invs. is almost perfect; Usage; Only one investment management firm is used by more than three in ten retail investors; Specialist fund managers achieve significantly higher utilisation rates among wealthier investors; The data also facilitates computation of approx. funds under management per retail investor; Six companies possess a high number of retail investors with relatively high average holdings
4.0 COMPETITOR SNAPSHOTS: 4.1 Abbey; 4.2 Aberdeen Asset Management; 4.3 AEGON Asset Management; 4.4 Alliance Trust; 4.5 Allianz Global Investors; 4.6 Artemis Fund Managers; 4.7 AXA Framlington; 4.8 Baillie Gifford; 4.9 Baring Fund Managers; 4.10 BlackRock Investment Management; 4.11 Cazenove Capital Management; 4.12 Credit Suisse Asset Management; 4.13 F&C Asset Management; 4.14 Fidelity Investments; 4.15 First State Investments; 4.16 Franklin Templeton; 4.17 Gartmore; 4.18 Halifax; 4.19 Hargreaves Lansdown; 4.20 Henderson Global Investors; 4.21 HSBC; 4.22 Insight Investment; 4.23 Invesco Perpetual; 4.24 Investec Asset Management; 4.25 iShares; 4.26 JP Morgan Asset Management; 4.27 Jupiter; 4.28 Legal & General; 4.29 Legg Mason; 4.30 Lincoln Unit Trust Managers; 4.31 Liontrust Asset Management; 4.32 M&G; 4.33 Marks & Spencer Financial Services; 4.34 Marlborough Fund Managers; 4.35 Martin Currie; 4.36 MLC; 4.37 Nationwide; 4.38 Neptune Investment Management; 4.39 New Star Asset Management; 4.40 Newton Investment Management; 4.41 Norwich Union; 4.42 Old Mutual; 4.43 Premier Asset Management; 4.44 Prudential; 4.45 Rathbone Unit Trust Management; 4.46 Rensburg Fund Management; 4.47 Resolution Asset Management; 4.48 Royal London; 4.49 Schroders; 4.50 Scottish Widows; 4.51 Skandia Investment Management; 4.52 Smith & Williamson; 4.53 Société Générale Asset Management; 4.54 St James’s Place; 4.55 Standard Life; 4.56 The Co-operative Investments; 4.57 Threadneedle; 4.58 UBS Global Asset Management; 4.59 Virgin Money; 4.60 Witan Wealthbuilder

Abstract

Finaccord’s report titled Investor Metrics: Retail Customer and Private Client Behaviour in UK Security-Based Investments is about the dynamics in the retail market for security-based investments in the UK. The definition of security-based investments includes equity ISAs (individual savings accounts), PEPs (personal equity plans), SIPPs (self-invested personal pensions), OEICs (open-ended investment companies) and unit trusts, investment trusts, ETFs (exchange traded funds), investment bonds, Child Trust Funds, ‘wrap’ accounts, investment funds located offshore (eg. Bermuda, Dublin, Guernsey, Jersey, Isle of Man, Luxemburg), VCTs (venture capital trusts) and direct holdings of equities. On the other hand, it specifically excludes life insurance and mainstream occupational and personal pensions. Investor Metrics is not the first study of the UK market for security-based investments.

However, it has been conceived in such a way that it provides insight into the behaviour, holdings and perception of retail investors that has not hitherto appeared in a published format. For example, the publication is unique in that it systematically discloses customer penetration data not only by type of security-based investment product but also by primary underlying instrument, business sector, geographical orientation and investment style of funds invested. Moreover, it also offers insights into the perception among and usage by private clients of 60 leading firms involved in investment management, and analyses how these metrics have changed since the original Investor Metrics report published in the first quarter of 2006.

Key questions answered by the Investor Metrics research are as follows: how does propensity to acquire security-based investments vary by age, annual household income, geographical location, number of children aged under 25 and employment status of consumers? how do private clients in the UK segment according to their risk appetite, the frequency with which they buy or sell security-based investments and the degree of self-direction that they exercise when making investment decisions? to what extent do retail investors plan to commit savings to 50 different classes of security-based investment product in 2008 such as funds investing primarily in property, multi-manager funds, funds investing solely in the shares of companies in China, funds investing solely in the shares of healthcare or biotech companies, or funds that describe their primary purpose as being to invest in 'special situations'? what proportion of retail customers can fund managers expect to acquire directly and how do the remainder split between competing distribution channels including high street banks and building societies, Internet-based fund supermarkets and discount brokers, independent financial advisers, private banks and discretionary advisers, and stockbrokers? which firms involved in investment management record the highest recognition and trust ratings among private clients and how do these vary between more affluent customers with over £25,000 invested in security-based products and those with investments worth less than this threshold?

The research for the study was carried out in an eight week period during November and December 2007 using the Internet consumer panel of Tpoll. In total, completed surveys were filled in and submitted on-line by 2,765 respondents among which 1,545 were found to be classifiable as retail investors by virtue of their currently holding one or more of the security-based investment products listed or having a stated intention to purchase one or more of the same products in 2008.

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Investor Metrics: Retail Customer and Private Client Behaviour in UK Security-Based Investments

Table of Contents

Abstract