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Collective Investments - UK - July 2015

Collective Investments - UK - July 2015

The UK investment market performed strongly in 2014 and the first half of 2015. The gross value of retail sales of unit trusts and OEICs grew by 15% in 2014, while sales in Q1 2015 were 5% higher than the year before. This increase in value is expected to continue and Mintel forecasts the market to grow by 49% over the next five years, aided by a strong UK economy and the opportunities presented by the pension freedoms.Jessica Morley, Financial Services Analyst

This report looks at the following areas:


The growing preference for passive management
The rise of the online investor
Investing for retirement and the move towards outcomes-based investing


OVERVIEW
Product Definitions
Abbreviations
EXECUTIVE SUMMARY
The market
Figure 1: Forecast for gross retail sales of unit trusts and OEICs (UK-domiciled), 2010-20
The consumer
Figure 2: Ownership of investment products, April 2015
Figure 3: Type of investment management used for most recently arranged investment product, April 2015
Figure 4: Attitudes towards investment approach, April 2015
Figure 5: Agreement with the statement “I regularly check the performance of my investments”, April 2015
Figure 6: Agreement with the statements “I would only consider investing if I understood all the details of an investment strategy” and “I would
only consider investing if I knew which exact fund/markets my money would be invested in”, by ownership of investment products, April 2015
10
Figure 7: Consumer attitudes towards online-only investment channels, April 2015
Figure 8: Consumer comfort with taking risks with savings, April 2015
Figure 9: Agreement with the statement “I would only consider investing in a well-known brand”, by ownership of investment products, April
2015
Figure 10: Agreement with the statements “Friends/family/colleague recommendations are/would be important to me when making investment
decisions” and “Information or tips from the media (e.g. financial press, newspaper articles etc.) are/would be important to me when making
investment decisions”, by ownership of investment products, April 2015
ISSUES & INSIGHTS
The growing preference for passive management
The rise of the online investor
Investing for retirement and the move towards outcomes-based investing
THE MARKET
What you need to know
Continued market growth forecast
Strong market performance boosts retail investment sales
Prioritisation of capital preservation favours fixed income over equity assets
Popularity of fund platforms means that intermediated sales dominate
Pension freedoms spell opportunity for investment market
Market size and forecast
Open-ended funds
Figure 11: Value of retail sales of unit trusts and OEICs – UK-domiciled, 2010-14
Closed-ended funds
Figure 12: Volume of new regulated retail sales of investment trusts, unit trust/OEICs and stocks and shares ISAs, 2010-14
Figure 13: Number of closed-ended investment companies and value of assets, 2013-15
Market prospects as of June 2015
Market forecast
Figure 14: Forecast for gross retail sales of unit trusts and OEICs (UK-domiciled), 2010-20
Market segmentation
Sales of property unit trusts and OEICs boom
Figure 15: Net retail unit trust/OEIC sales (UK-domiciled), by asset class, 2010-14
Strong growth in funds under management across asset classes
Figure 16: Net retail unit trust/OEIC fund under management (UK-domiciled), by asset class, 2010-14 (year-end)
Market drivers
The economy, stockmarket performance and investor behaviour
Figure 17: Spending index, June 2012-March 2015
The cost of money
Differing prospects of higher earners and lower earners
Figure 18: Comfort with taking financial risks, by annual household income, April 2015
The retirement opportunity
Figure 19: Pension pot usage plans of non-retired adults, June 2015
Figure 20: Consumer plans for partial or complete pension pot drawdown, June 2015
Regulatory environment
Channels to market
Intermediaries dominate distribution sales
Figure 21: Gross retail sales of unit trusts and OEICs, by distribution channel, 2010-14
Fund platforms grow in popularity
Figure 22: Share of gross retail unit trust and OEIC sales, by distribution channel, 2014
Self-directed online platforms prove most popular channel amongst consumers
Figure 23: Channels used to arrange most recent investment product purchase, April 2015
Reliance on advisers increases with risk
Figure 24: Channels used to arrange investments, by ownership of investment products investments, April 2015
KEY PLAYERS
What you need to know
Invesco Perpetual is the UK’s largest fund management firm
Competitive strategies
ISA promotion boosts adspend
Market share
Aberdeen acquisition results in significant increase in managed funds
Figure 25: Top 20 fund managers, by retail and private client funds under management (minimum lump sum is £50,000 or less), March
2013-March 2015
Pension savers boost St. James’s Place ISA funds
Figure 26: Top 10 ISA fund managers, by ISA and PEP funds under management, March 2013-March 2015
Competitive strategies
Developing multichannel platforms
Building client-centric portfolios
Investing where it matters most
Deepening the relationship
Capturing the retirement market
Focusing on innovation
Advertising spend
Advertising expenditure on investment ISAs up 22% in year to April 2015
Figure 27: Above-the-line advertising expenditure on collective investments and investment ISAs, 2011-15
Pension freedoms drive up advertiser spend
Figure 28: Top 10 above-the-line advertisers of collective investments and investment ISAs, 2011-15
Press and direct mail prove to be favoured advertising channels
Figure 29: Above-the-line advertising expenditure on collective investments and investment ISAS, by media type, 2011-15
THE CONSUMER
What you need to know
Low overall ownership dominated by company shares
Lower costs and the popularity of online platforms encourage passive investing
Investors want collaboration not adviser dictation
Enable investor engagement with their investments to stand out in a crowded market
Investment location prioritised by experienced investors
Online-only channel remains niche
Low risk tolerance is a barrier to investment uptake
Brand building vital to competing effectively
Reward referrals to attract new business
Ownership of investment products
Company shares dominate investment product ownership
Figure 30: Current ownership levels of and consumer interest in investment products, April 2015
Pension freedoms look set to boost investment trust ownership
Company shares provide a door into the wider investment market…
Figure 31: Repertoire of current ownership of any investment, April 2015
…especially for under-represented groups
High-net-worth investors have a broader reach
Figure 32: Ownership of investment products, by value of savings and/or investments, April 2015
Encouraging non-traditional investors
Most recently arranged investment product
Big brand sales boost investment in company shares
Figure 33: Investment products most recently arranged, April 2015
Active vs. passive investment management
Growing preference for passive management
Figure 34: Type of investment management used for most recently arranged investment product, April 2015
Adding value to active management
Popularity of passive investing boosts ETF ownership
Figure 35: Investment products owned, by method used to manage most recently arranged investment product, April 2015
Consumer involvement in investment management
The ‘DIY’ Investor
Figure 36: Attitudes towards investment approach, April 2015
Current investors more likely to see value of advisers
Figure 37: Attitudes towards investment approach, by ownership of investment products, April 2015
Collaboration is key
Higher-net-worth investors continue to rely on advisers
Figure 38: Attitude towards investment approach, by value of savings and investments, April 2015
Investor oversight of investment performance
75% regularly check their investment performance…
Figure 39: Investor approach to overseeing investment performance, April 2015
…but 22% are disengaged
Engaged investors more likely to be managing their investments actively
Figure 40: Agreement with the statement “I regularly check the performance of my investments”, by investment management method used for
most recently arranged investment product, April 2015
Engagement with investment strategy
Strategic direction key to encouraging potential investments
Figure 41: Consumer attitudes towards investment strategy, April 2015
Importance of fund location increases with experience
Figure 42: Agreement with the statements “I would only consider investing if I understood all the details of an investment strategy” and “I
would only consider investing if I knew which exact fund/markets my money would be invested in”, by ownership of investment products, April
2015
The online investor
Interactive online platforms
Although self-directed online investment platforms are becoming increasing popular (see Channels to Market and
Active vs. Passive Investment Management), the majority of consumers remain reluctant to rely solely on computer
algorithms. Only 35% said they would use an online investment platform that involved no face-to-face contact and just
31% said they would be happy to use an online investment platform that involved no human contact.
Figure 43: Consumer attitudes towards online-only investment channels, April 2015
Traditional channels could benefit from targeting new investors
Figure 44: Agreement with the statements “I would consider using an online investment platform that involves no face-to-face contact with
an investment manager/financial adviser” and “I would consider using an online investment platform that doesn’t require the involve of an
investment manager/financial adviser (e.g. self-manageable investments)”, by ownership of investment products, April 2015
Figure 45: Consumer comfort with taking risks with savings, by agreement with the statements “I would consider using an online investment
platform that involves no face-to-face contact with an investment manager/financial adviser” and “I would consider using an online platform
that doesn’t require the involvement of an investment manager/financial adviser”, April 2015
The opportunity to expand the online market
Figure 46: Agreement with the statement “I would consider using an online investment platform that doesn’t require the involvement of an
investment manager/financial adviser”, by channels used to arrange an investment, April 2015
Identifying the niche
Figure 47: Agreement with the statement “I would consider using an online investment platform that doesn’t require the involvement of an
investment manager/financial adviser”, by demographics, April 2015
Consumer tolerance for risky investments
Industry transparency reduces risk tolerance
Figure 48: Consumer comfort with taking risks with savings, April 2015
Understanding and responding to variations in risk
The retirement risk
Figure 49: Consumer tolerance to taking risks with savings, by ownership of investment products, April 2015
Encouraging the next generation of investors
The influence of brand and fund manager reputation
The importance of investing in brand building
Figure 50: The influence of brand and fund manager reputation on consumer investment decisions, April 2015
Figure 51: Ownership of investment products, by agreement with the statements “I would only consider investing in a well-known brand” and
“I would only consider using a fund manager with a proven track record”, April 2015
Personal brand is equally important
Sources of investment advice
The benefits of rewarding loyalty
Figure 52: Sources of investment advice, April 2015
Figure 53: Agreement with the statements “Friends/family/colleague recommendations are/would be important to me when making investment
decisions” and “Information or tips from the media (e.g. financial press, newspaper articles etc.) are/would be important to me when making
investment decisions”, by ownership of investment products, April 2015
RESEARCH METHODOLOGY
UK Research Methodology
Sampling and weighting
Face to Face Surveys
Definitions
Brand & Social Media Research
Trade research
Desk research
Statistical Forecasting
The Mintel fan chart

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