Financial Advisors' Views of the Post-RDR Landscape

Content

• 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 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