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Consumers and Direct Platforms - UK - August 2013

Published By :

Mintel

Published Date : Sep 2013

Category :

Banking

No. of Pages : 131 Pages


Direct DIY platforms are popular amongst consumers who have an interest in finance and confidence in making financial decisions. For less confident consumers direct discretionary platforms could solve their investment needs.
TABLE OF CONTENT

Introduction
Abbreviations

Executive Summary
Consumers and the appetite for direct platforms
Figure 1: Attitudes towards financial advice, June 2013
Market factors
Consumers still feeling the effects of the financial crisis
Strong performance of financial markets has made equities attractive to consumers
The internet is driving direct platforms into the mainstream
Companies, brands and innovation
Adspend lower in 2012/13 as the industry waited for the RDR
Figure 2: Advertising expenditure by selected platform providers, 2008/09 – 2012/13
The consumer
Some 65% of consumers have savings and investments under £30,000
Figure 3: Value of savings and investments, June 2013
Preferred approach to investment decisions
Figure 4: Attitudes towards financial advice, June 2013
Attitudes towards the concept of discretionary fund management
Figure 5: Attitudes towards the concept of discretionary fund management, June 2013
Amount that consumers expect to pay in charges when investing
Figure 6: Amount that consumers expect to pay in charges, June 2013
Considerations when choosing a company to invest with
Figure 7: Considerations when choosing a company to invest with, June 2013
How much choice consumers want in picking their investments
Figure 8: Appeal of selected online investment options, June 2013
What we think

Issues in the Market
Can direct DIY platforms help less affluent consumers to invest their money?
Can the RDR gap be filled by direct discretionary platforms?
How important is brand in choosing an investment provider?
Will large financial institutions want to join the direct platform market?

Trend Application
Simplifying choice
Take control of your finances
Mintel’s Futures: Generation Next

Market Drivers
Key points
Household incomes remain under pressure
Figure 9: Trends in average earnings (excluding bonuses) versus retail price inflation, 2007-13
Global markets have performed well over the past year
Figure 10: Nikkei 225, FTSE 100, S&P 100, Eurofirst 300 – adjusted closing values index, January 2003-June 2013
Consumers have little interest in the performance of the stock market
Figure 11: Consumer engagement in saving and investing, November 2012
Savings accounts are underperforming
Figure 12: Average annual changes in the Bank of England base rate, CPI and RPI – UK, January 2010 – April 2013
Consumers are becoming dependent on online sources of information
Figure 13: Main sources of information about financial products, June 2013
Online is the most popular channel to buy and sell shares
Figure 14: Ways in which consumers most like to buy or sell shares, June 2013

Regulation and Legislation
Key points
The RDR has changed the way advisers and providers charge clients
Summary of the RDRs changes
Figure 15: Summary of the key requirements for the retail investment market, pre- and post- RDR, 2013
RDR’s effect on the direct platform market
The growth of white labelling
FCA policy paper adds clarity for the direct platform market
Banks withdrawing from the advice space, leaving an opportunity for direct platforms
Figure 16: Overview of selected retail banking providers investment advice services post-RDR, February 2013
Auto-enrolment will encourage mass market consumers to own investments

SWOT Analysis
Figure 17: Direct Platforms Market – SWOT Analysis, 2013

Who’s Innovating?
Key points
Nutmeg brings discretionary asset management to the mass market
rplan focuses on usability and transparency to win over consumers
Compare fund platforms
Money on toast - the online financial adviser

Consumers and the Appetite for Direct Platforms
Consumers want to do things for themselves, but also have guidance
Figure 18: Attitudes towards financial advice, June 2013

Companies and Products
Barclays Stockbrokers
Figure 19: Key financial data for Barclays Stockbrokers, 2011-12
Fidelity
Figure 20: Key financial data for Fidelity Investment Services (UK), 2011-12
Hargreaves Lansdown
Figure 21: Key financial data for Hargreaves Lansdown, 2011-12
Selftrade
Figure 22: Key financial data for Talos Securities (Self Trade), 2010-11
TD Direct Investing
Figure 23: Key financial data for TD Direct Investing (Europe) Ltd, 2010-11

Brand Communication and Promotion
Key points
Adspend decreased in 2012/13 as the industry waited for RDR
Figure 24: Advertising expenditure by selected platform providers, 2008/09-2012/13
Top five players account for over 90% of adspend
Figure 25: Advertising expenditure by selected platform providers, by advertiser, 2009/10-2012/13
Providers cut back on internet spending
Figure 26: Advertising expenditure by selected platform providers, by media type, 2009/10-2012/13

Value of Savings and Investments and Product Ownership
Key points
Consumers have low levels of savings and investments
Figure 27: Value of savings and investments, June 2013
Appealing to younger consumers will help to develop future loyal customers
Figure 28: Amount of savings and investments, by age, June 2013
Most consumers struggle to save
Low-risk cash-based products remain popular despite losing value in real terms
Figure 29: Ownership of financial products, June 2013
Consumers are risk-averse

Preferred Approach to Investment Decisions
Key points
Consumers want to have input in choosing their investments
Figure 30: Attitudes towards financial advice, June 2013
DIY investing is gaining popularity
Wealthier consumers are more self-sufficient in choosing investments
Figure 31: Attitudes towards financial advice, by amount of savings and investments, June 2013
Consumers with low levels of savings and investments are in an advice gap

Attitudes Towards Discretionary Fund Management
Key points
How Mintel have defined discretionary fund management in this report
The evolution of discretionary fund manangement
Appetite for discretionary fund managers is divided
Figure 32: Attitudes towards the concept of discretionary fund management, June 2013
Discretionary fund management is dominated by a few wealthy investors
Younger consumers are more open to the concept of using a DFM
Figure 33: Attitudes towards the concept of discretionary fund management, by demographics, June 2013
DIY investing is incompatible with the discretionary model
Figure 34: Attitudes towards the concept of discretionary fund management, by attitudes towards financial advice, June 2013
DFMs could gain from marketing to consumers with lower levels of savings
Figure 35: Attitudes towards the concept of discretionary fund management, by amount of savings and investments, June 2013

Consumer Expectations of Investment Charges
Key points
Almost half of respondents expect to pay between 1%-2.9% charges
Figure 36: Amount consumers expect to pay in charges, June 2013
Consumers expect to pay less in charges as they get older
Figure 37: Amount consumers expect to pay in charges, June 2013
Consumers who want expert advice expect to pay more for the privilege
Figure 38: Amount consumers expect to pay in charges, by Attitudes towards financial advice, June 2013

Considerations When Choosing an Investment Provider
Key points
Six out of ten look for low fees when choosing an investment company
Figure 39: Considerations when choosing a company to invest with, June 2013
Four out of ten consumers want a clear charging structure
Younger consumers are less brand focused than over-55s
Figure 40: Considerations when choosing a company to invest with, by Age, June 2013
Recommendations are more important for young consumers than over 55s
Clear charging structures are the main consideration for over-55s

Preferred Level of Online Investment Choice
Key points
Investors show a preference for more limited investment options
Figure 41: Appeal of online investment options, June 2013
DIY investors want the lowest possible costs
Figure 42: Considerations when choosing a company to invest with, by appeal of investment options, June 2013
Consumers who want a small handful of investment options want companies to use clear language
DIY consumers expect to pay lower charges
Figure 43: Amount consumers expect to pay in charges, by Appeal of investment options, June 2013
Consumers that want simple choices are more open to the idea of DFM
Figure 44: Attitudes towards the concept of discretionary fund management, by appeal of investment options, June 2013
Consumers with lower levels of savings prefer fewer investment options
Figure 45: Appeal of investment options, by amount of savings and investments, June 2013

Appetite for Features Offered by Online Investment Providers
Key points
Time poor consumers are unlikely to be interested in financial tutorials
Figure 46: Appetite for features offered by online investment providers, June 2013
Investment researchers are more likely to want the largest choice of investments
Figure 47: Cross analysis of appeal of different investment options, June 2013
Consumers that want to research the market are likely to want low fees
Figure 48: Considerations when choosing a company to invest with, by Appeal of investment options, June 2013
Consumers with an interest in learning want to find out more about DFM
Figure 49: Attitudes towards discretionary fund managers, by Appeal of investment options, June 2013

Appendix – Platform Overview
Figure 50: Platform overview

Appendix – Types of Discretionary Fund Manager
Figure 51: Types of DFM, 2013

Appendix – Value of Savings and Investments and Product Ownership
Figure 52: Level of savings and investments, by demographics, June 2013
Figure 53: Level of savings and investments, by demographics, June 2013 (continued)
Figure 54: Financial products consumers own or plan on owning – Savings account/Cash ISA, by demographics, June 2013
Figure 55: Financial products consumers own or plan on owning – Company pension, by demographics, June 2013
Figure 56: Financial products consumers own or plan on owning – NS&I product, by demographics, June 2013
Figure 57: Financial products consumers own or plan on owning – Personal pension, by demographics, June 2013
Figure 58: Financial products consumers own or plan on owning – Individual company shares, by demographics, June 2013
Figure 59: Financial products consumers own or plan on owning – With-profits, unit-linked, money market, distribution or guaranteed investment bond, by demographics, June 2013
Figure 60: Financial products consumers own or plan on owning – Investment property, by demographics, June 2013
Figure 61: Financial products consumers own or plan on owning – Unit trust/OEIC, by demographics, June 2013
Figure 62: Financial products consumers own or plan on owning – Investment trust, by demographics, June 2013
Figure 63: Financial products consumers own or plan on owning – SIPP, by demographics, June 2013
Figure 64: Financial products consumers own or plan on owning – Financial spread-betting account, by demographics, June 2013
Figure 65: Financial products consumers own or plan on owning – ETF, by demographics, June 2013
Figure 66: Financial products consumers own or plan on owning – Other savings or investments, by demographics, June 2013

Appendix – Preferred Approach to Investment Decisions
Figure 67: Attitudes towards financial advice, by demographics, June 2013

Appendix – Attitudes Towards Discretionary Fund Management
Figure 68: Attitudes towards discretionary fund managers, by demographics, June 2013

Appendix – Consumer Expectations of Investment Charges
Figure 69: Amount consumers expect to pay in charges, by demographics, June 2013
Figure 70: Amount consumers expect to pay in charges, by demographics, June 2013 (continued)

Appendix – Considerations When Choosing an Investment Provider
Figure 71: Most popular considerations when choosing a company to invest with, by demographics, June 2013
Figure 72: Next most popular considerations when choosing a company to invest with, by demographics, June 2013

Appendix – Preferred Level of Online Investment Choice
Figure 73: Appeal of various online investment options, June 2013

Appendix – Appetite for Features Offered by Online Investment Providers
Figure 74: Appetite for features offered by online investment providers, June 2013

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