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Consumers and Direct Investment - UK - December 2016

Published By :

Mintel

Published Date : Dec 2016

Category :

Banking

No. of Pages : N/A

Direct-to-consumer investing has grown steadily in the last five years and this growth will continue in the coming years. As well as positive market conditions for growth, there is also consumer demand for direct services. People are keen to take control of their finances and will look for the tools that allow them to do so. Crucially, few are willing or able to pay for more traditional advice, leaving direct services in a strong position.

Table of Contents

OVERVIEW
What you need to know
Definitions included in this Report

EXECUTIVE SUMMARY
The market
Direct sales account for more than a fifth of retail sales
Figure 1: Overall distribution split of gross retail sales, 2015
Direct platforms grow at the expense of direct fund manager sales
Growth in direct investing driven by range of factors
Regulator to tackle opaque pricing…
…and supports development of online advice models
Companies and brands
Hargreaves Lansdown leads the way in D2C market
Interactive Investor and TD Direct merge to create major player
Banks launch new D2C services
Asset managers take different positions towards D2C services
Life companies look to D2C and robo-advice channels following pension freedoms
The consumer
Using D2C investment services to reach Generation X
Direct services are rivalling more traditional advised channels
Figure 2: Preferred methods of arranging future investments, July 2016
Strong appetite for D2C investment services
Generational differences in demand for online advice services
Figure 3: Consumer agreement with statements regarding direct investment and financial advice, July 2016
Positive factors drive interest in direct investing
Figure 4: Consumer attitudes towards direct investing and advice, July 2016
Investors expect mobile access, but have limited interest in trading via mobile devices
Figure 5: Appetite for mobile investment services, July 2016
What we think

ISSUES AND INSIGHTS
Robo-advice will become a bigger feature of the D2C market
The facts
The implications
How much choice do people want from direct-to-consumer platforms?
The facts
The implications
Mobile investment services are growing, but demand is limited
The facts
The implications

THE MARKET – WHAT YOU NEED TO KNOW
Direct sales account for more than a fifth of retail sales
Growth in direct platforms, while direct business with fund managers falls
Growth in direct investing driven by range of factors
Regulator to tackle opaque pricing…
…and supports development of online advice models

MARKET SIZE
Direct sales account for more than a fifth of retail investment sales
Figure 6: Overall distribution split of gross retail sales, 2015
AUM on D2C platforms grows to more than £150 billion in 2016
Figure 7: Assets under management, direct-to-consumer platforms, 2012-16
Direct fund manager sales in decline
Figure 8: Direct-to-fund-manager gross retail sales, 2012-16

MARKET ENVIRONMENT
Low levels of investible assets limit participation in market
Figure 9: Value of consumer investible assets, July 2016
Low tolerance for products that carry risk
Figure 10: Consumers’ comfort with taking risks with savings, July 2016
Low rates drive interest in investing
Figure 11: Bank of England base rate, June 2007-October 2016
Brexit creates uncertainty in markets but as yet little has changed for consumers
Figure 12: Net retail sales, September 2015-September 2016
Pension freedoms provide opportunities and challenges for D2C providers
Advice gap drives growth in D2C services but also creates strategic difficulties for firms

REGULATORY AND LEGISLATIVE ENVIRONMENT
FCA proposes to tackle opaque charging and improve transparency
FAMR encourages development of automated advice and guidance…
…and looks to provide clearer definitions for advice and guidance
New Lifetime ISA product could boost engagement in long-term savings
FCA proposes tougher rules for CFDs
Further regulation on the horizon – PRIIPs and MiFID II
PRIIPs
MiFID II
Brexit adds further uncertainty to the mix

COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
Hargreaves Lansdown leads the way in D2C market
Banks refine their D2C services
Asset managers take different positions towards D2C services
Life companies look to D2C and robo-advice channels following pension freedoms

COMPETITIVE STRATEGIES
Hargreaves Lansdown shores up its position as market leader
Asset managers take different positions towards D2C services
Life companies look to D2C and robo-advice channels following pension freedoms
M&A activity in the platform market during 2016
Interactive Investor and TD Direct
Cofunds and Aegon
Standard Life and AXA Elevate/AXA Self Investor

LAUNCH ACTIVITY AND INNOVATION
Banks launch new D2C services
Barclays launches an integrated investment and banking platform
Santander launches Investment Hub
Other new entrants to the D2C sector
Brewin Dolphin moves up wealth scale but fills gap with D2C proposition
Saga joins investment market with Tilney Bestinvest tie-up
Select digital innovations
MoneyFarm launches first app-based digital wealth platform
AJ Bell Youinvest to partner with Amazon Echo/Facebook
Moneybox app aiming to nudge people into investing

THE CONSUMER – WHAT YOU NEED TO KNOW
Using D2C investment services to reach Generation X
Scope to grow the scale of direct sales
Two thirds of investors are happy to make investment decisions on their own
Generational differences in demand for online advice services
Positive factors drive interest in direct investing
Interest in mobile services is for information, not transactions

INVESTMENT PRODUCT OWNERSHIP AND FUTURE OWNERSHIP PLANS
Company shares are most widely held type of investment
Figure 13: Investment product ownership and plans to take out investments in next 12 months, July 2016
Scope to expand investment ownership among Generation X
Figure 14: Investment product ownership, by generation, July 2016
Nudge technology helps Millennials to access investments
Figure 15: Investment product ownership, by value of investible assets, July 2016

EXPECTED CHANNELS FOR FUTURE INVESTMENT
Consumers continue to look to banks to play a role in the investment market
Direct services can rival more traditional advised channels
Figure 16: Preferred methods of arranging future investments, July 2016
Balancing advised and direct services is a challenge
Few have high enough investible assets to access bespoke advice…
…but many of those who do are open to using direct investing channels
Banks play important role for mass-affluent investors
Figure 17: Expected channels for future investments, by value of investible assets, July 2016

CONSUMER INTEREST IN DIRECT INVESTMENT
Strong appetite for direct-to-consumer and robo-advice services
Figure 18: Consumer agreement with statements regarding direct investment and financial advice, July 2016
Generational differences in demand for online advice services
Figure 19: Consumer agreement with statements regarding direct investment and financial advice, by age, July 2016
Growth in direct channels reflects demand among the wealthy
Figure 20: Consumer agreement with statements regarding direct investment and financial advice, by value of investible assets, July 2016

CONSUMER ATTITUDES TOWARDS DIRECT INVESTING AND ADVICE
Positive factors drive interest in direct investing
Figure 21: Consumer attitudes towards direct investing and advice, July 2016
Only a fifth are looking for a wide range of investment options
Figure 22: Consumer agreement with statements regarding direct investment and financial advice – Cross-analysis of selected statements, July 2016
Investor confidence increases with wealth
Figure 23: Consumer agreement with statements regarding direct investment and financial advice, by value of investible assets, July 2016

ATTITUDES TOWARDS INVESTMENT FEES AND CHARGES
Confusion about fees and charges is a barrier to direct investing
Figure 24: Attitudes towards investment fees and charges, July 2016

APPETITE FOR MOBILE INVESTMENT SERVICES
Investors expect mobile access, but there’s limited interest in trading via mobile devices
Figure 25: Appetite for mobile investment services, July 2016
Few over-55s are interested in mobile investment services
Figure 26: Agreement with the statement ‘I would not be interested in using a smartphone to manage or take out investments’, by gender and age, July 2016
Most potential D2C investors still need convincing about mobile trading
Figure 27: Consumer appetite for mobile investment services, by selected expected channels for future investment, July 2016
The most affluent show the least interest in mobile investments
Figure 28: Consumer appetite for mobile investment services, by value of investible assets, July 2016

APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology

List of Table

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