Financial Advisors' Views of the Post-RDR Landscape

Published by: Datamonitor

Published: Aug. 27, 2009 - 12 Pages

Table of Contents

Overview

Catalyst

Summary

Methodology

EXECUTIVE SUMMARY

Advisors have predominantly maintained an independent business structure

Advisors view Skandia and Invesco Perpetual as offering the best level of service

Providers' ability to develop tailored solutions in the midst of channel competition and regulatory challenges will be important factors for IFAs

Table of Contents

Table of figures

Table of tables

ADVISORS IDENTIFY PROVIDER AND CUSTOMER PREFERENCES

Introduction to Datamonitor's Q2 2009 Financial Advisor Survey

The financial advisory market is predominantly occupied by small, single outlet firms

Abbey and HSBC continue to be less popular among advisors

Among life assurers, Abbey continues to attract a net negative response from IFAs

Skandia is rated positively by IFAs for its level of service and quality of products in contrast to Abbey

IFAs continue to have a strong opinion of Invesco Perpetual's levels of service and quality of products in Q2 2009

HSBC received the least positive votes from advisors

The most important trigger for visiting an advisor is to receive retirement planning advice

Personal recommendations are vital when choosing an IFA

PROVIDERS NEED TO DEVELOP TAILORED SOLUTIONs FOR ADVISORS DURING ECONOMIC AND REGULATORY CHALLENGES

Economic turmoil represents the biggest challenge for the IFA market

Providers' product innovations must focus on the risk profile of today's consumers

Individual savings accounts stand out as the product IFAs are most positive about

Income protection has the best outlook while whole-of-life is the least attractive option among protection products

Advisors are expecting consumers to re-evaluate their need for income protection during a global economic crisis

Future sales of mortgage-related term will be impacted by the pessimistic housing market but saving-related term will fare better as customers become cautious over their finances

Advisors are not confident of growth potential in CII over the next six months

Whole-of-life policies still have their place in the protection market as consumers take a cautious stance on household financial stability

Protection sales can be maintained if their importance is highlighted in the current economic climate

Advisors are uncertain about the future sales of investment bonds

Sales of mutual funds will gain growth potential once equity prices become more attractive

Individual SIPPs will prove to be a less difficult sale compared to other pension products

The increasing interest in SIPPs does not necessarily signal the end of personal and stakeholder pensions

IFAs expect the RDR to create a more competitive distribution environment

IFAs perceive high street banks as the biggest competitor for clients in their market

Banks are suited to offering simpler life and pensions products such as mortgage-related protection insurance

Banks will focus more on selling protection to offset mortgage-related protection sales

The protection industry has suffered from a lack of consumer engagement with its products

The solution to extending protection to the mass market may be through direct-to-consumer channels

However, advisors still have a prime opportunity to revisit clients, increase consumer awareness and change perceptions of protection

The recently tarnished brand reputation of banks will limit their entry into the life, pensions and investment market

Banks are perceived to be unable to offer the same level of service and advice as IFAs but this may change in the post-RDR landscape

Online price comparison sites are also a strong contender for IFAs' client base

Aggregator sites challenge the distribution landscape and more pertinently protection sales

Aggregator sites have become a trusted source of financial service in the current climate

Aggregator sites offer a wealth of opportunity

Concerns and criticisms have been leveled at non-advised sales

Problems are also arising between the direct sales and advisor channels

Those who are able to offer open architecture and unique solutions to clients' needs will harness the competitive advantage

IFAs have an advantage over wealth managers in being able to offer truly independent advice

IFAs rank their ability to provide unique solutions to clients as their greatest strength

However, IFAs and wealth managers both believe that their strength lies in having personal relationships with clients

An even closer client relationship can be fostered through regular and more frequent contact

Providers who can invest in technology today have an opportunity to gain a competitive advantage

Providers should bring in end-customer-focused propositions while uncertainty surrounds RDR impact on the IFA-centric model

Advisors do not believe that the RDR will hit the target of increasing consumers' access to financial advice

IFAs believe they will be forced out of the market as a result of the RDR

Whatever uncertainty surrounds the impact of RDR, changes to an IFA's business model are essential for success

The end-customer should receive clarity of communication if the RDR is to succeed

The final focus must be on meeting customers' needs and demands for financial advice

APPENDIX

Data

Definitions

Single premium policy

Regular premium

Wrap accounts

Product definitions

Life based savings products

Life Assurance

Single premium life

With-profit bond

Unit-linked bond

Income and growth bonds

Guaranteed equity bonds

Distribution bonds

Purchased life annuities

Other bonds

ISAs

Matrix-Data definitions

IFA firm types

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: How do you see business in each of the following areas changing over the next six months?

Table 2: How do most of your clients find you?

Table 3: What type of organization do you work for?

Table 4: Please rate the following providers in terms of the level of service they provide to you? (1-5, with 5 being highest level of service and 1 being lowest)

Table 5: Please rate the following providers in terms of the quality of products they offer? (1-5, with 5 being highest level of quality and 1 being lowest)

Table 6: Roughly, what proportion of your customer base falls into each of the following asset bands?

Table 7: How important are each of the following as triggers for clients coming to an IFA?

Table 8: On average, how often do you speak to your clients on the telephone?

Table 9: On average, how often do you speak to your clients face to face?

Table 10: To what extent do you see the following as a challenge for the IFA market?

Table 11: Who do you see as the main competition for clients in your market?

Table 12: Thinking about the changes the RDR will bring to the structure of the market, to what extent do you agree with the following statements?

Table 13: To what extent do you see each of the following as limiting factors in banks' attempts to enter this market?

Table 14: In what areas of your business and service do you see banks as most competition to you?

Table 15: Thinking about the potential threat that banks pose to the IFA industry, please indicate the extent to which you agree with each of the following statements.

Table 16: Thinking about your clients, to what extent do you agree with each of the following statements?

Table 17: Which of the following do you consider to be relative strengths of IFAs over wealth managers?

Table 18: Thinking about the changes the RDR will bring to the structure of the market, to what extent do you agree with the following statements?

Table 19: Thinking about the possible changes to the nature of the wealth management market in the UK, to what extent do you agree with the following statements?

Table 20: In what areas of your business and service do you see wealth managers as most competition to you?

List of Figures

Figure 1: The IFA industry is mostly made up of single outlet firms

Figure 2: The clients of the IFAs surveyed tend to be at the lower end of the asset band spectrum

Figure 3: Advisors rate Skandia highly for the level of service it provides

Figure 4: Advisors perceive Skandia to have high quality product ranges

Figure 5: Invesco Perpetual is perceived as offering best level of service in relation to other asset managers

Figure 6: Advisors rank Invesco Perpetual highly for the quality of its products

Figure 7: Advice on retirement planning is a very important trigger for a customer to visit an IFA

Figure 8: Most clients find IFAs through personal recommendations from others

Figure 9: IFAs perceive current economic conditions to be the most important challenge to their market

Figure 10: ISAs have the most growth potential over the next six months

Figure 11: High street banks pose the biggest threat to advisors

Figure 12: Banks pose a stronger threat to IFAs in terms of being able to offer advice for protection insurance

Figure 13: Banks' tarnished brands and reputations will be a hindrance against their entry into the life and pensions market

Figure 14: Banks do not pose a potentially strong threat to IFAs in terms of the service levels they provide

Figure 15: Advisors strongly agree that HNW clients are defecting to IFAs due to the truly independent service they offer

Figure 16: IFAs' weakest competitive factor is in technology

Figure 17: Advisors believe their clients prefer the greater level of personal contact IFAs can provide over wealth managers

Figure 18: Advisors speak to clients by phone approximately twice a year

Figure 19: IFAs speak to clients face-to-face approximately once a year

Figure 20: The RDR will leave a middle market of clients who have no access to advice

Figure 21: Advisors think IFA firms will be forced out of the market by RDR

Abstract

• Reveals IFAs' opinion of how the RDR will change the competitive structure of distribution in the UK
• In-depth analyses of the relative attractiveness of various products during the downturn and of the future competitive market structure.
• Benchmarks leading L&P and Asset Management firms in terms of their product offerings and elements of service.

• Understand where IFAs' fears for the post-RDR world are coming from.
• Assess the opportunies for other competitors to seize market share from IFAs.
• Access the results of Datamonitor's Q2 2009 IFA survey.

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