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Independent Financial Advisers

Product Type: Market Research Report
Published by: Key Note Publications Ltd
Published: April 2008
Product Code: R310-1569
Description
Between 2003 and 2007 the profession of independent financial advisers (IFAs) has been targeted by a barrage of regulatory reform and industry restructuring.

Economic conditions appeared stable for the majority of the review period, but present and future conditions remain very uncertain. The credit crunch could lead to significant changes in the type of services demanded by consumers, as mortgages become more difficult to obtain and the value of equities stagnates or falls.

Regulations under the Financial Services Authority (FSA) have come to impact on all advisers, whether offering insurance, mortgages or investments. The depolarisation of financial advice in the mid-2000s led to the purchase of many agents by large institutions, as well as to the expansion of multi-tie agent networks. The number of IFAs has fallen, as the costs of complying with the new principles and taking appropriate qualifications and continuing professional development have risen. New IFAs are now being recruited and trained to a higher level than in the past.

However, regulatory reforms under the Retail Distribution Review Discussion Paper (RDR DP) propose further changes to improve the customer experience by segmenting advice according to customer levels. This Market Assessment report includes criticism of this approach. The report also considers the fortunes of IFAs working in the general insurance industry, where tied agents have a significant presence, in long-term insurance, where IFAs predominate, in mortgage advice, and in investment and savings.

The market conditions of 2008 mean that financial advice has never been more necessary, but only in the area of pension provision is there likely to be a significant increase in activity. Reforms to tax and pension law mean that innovations in persuading consumers to save are politically apposite, if possibly ineffectual, when their interest remains in their property as a hedge against inflation.

Key Note's exclusive consumer research found that, although IFAs are widely respected, only a third of respondents agreed that they would consider using their services, while a larger number said that they would consult a financial adviser linked to their bank. In addition, the research shows that a high proportion of respondents find most financial information difficult to understand.

Overall, IFAs have survived the regulatory shake-up in robust form and are likely to perform a significant role in financial services distribution over the next 5 years (2008 to 2012).
Table of Contents
Executive Summary

1. Introduction

OVERVIEW

BACKGROUND

DEFINITION

2. Strategic Overview

ECONOMIC INDICATORS

Population

Table 1: UK Resident Population Estimates by Sex (000), Mid-Years 2003-2007

Gross Domestic Product

Table 2: UK Gross Domestic Product at Current and Annual Chain-Linked Prices (£m), 2003-2007

Inflation

Table 3: UK Rate of Inflation (%), 2003-2007

Unemployment

Table 4: Actual Number of Unemployed Persons in the UK (million), 2003-2007

Household Disposable Income

Table 5: UK Household Disposable Income Per Capita (£), 2003-2007

Consumer Confidence

MARKET DYNAMICS

Market Sectors

Market Size

PROBLEM ADVISERS

GENERIC ADVICE

REGULATORY BODIES

Financial Services Authority

Association of British Insurers

The Chartered Insurance Institute

Investment Management Association

REGULATORY DEVELOPMENTS

The Retail Distribution Review

The Implications of Specific Proposals

General Financial Advisers

Primary Advice

Response From the Association of Independent Financial Advisers

Commission and Fees

Consumer Credit Directive

TRAINING AND QUALIFICATIONS

Table 6: Financial Adviser Qualifications, 2007

DEFAULTS

Table 7: The Number of Firms Declared in Default (number and index 2002/2003=100), 2002/2003-2006/2007

DISTRIBUTION

Leading Independent Financial Advisers

Table 8: The Top 12 Independent Financial Advisers by Turnover and Size of Salesforce (£000 and number), 2007

Regional Variations

Table 9: Top Ten Concentrations of Employees in Financial Intermediation by Region (%), 2006

Consolidation of the Industry

Product Distribution

Table 10: Independent Financial Adviser Product Specialisms (number of independent financial advisers), September 2005-2007

COMPETITIVE STRUCTURE

Number of Independent Financial Advisers

Table 11: Independent Financial Advisers by Number of Adviser Firms by Type, 2007

Advertising

Table 12: Main Media Advertising Expenditure on Independent Financial Advice (£000), Years Ending December 2006 and 2007

THE CONSUMER

3. Insurance

STRUCTURE OF THE UK INSURANCE MARKET

Household Expenditure on Insurance

INVESTMENT HOLDINGS

Premiums and Claims

General Insurance

Table 13: General Insurance Claims by Type of Insurance (£bn), 2006

Long-Term Insurance

DISTRIBUTION

General Insurance

Table 14: Total UK General Insurance Business — UK Risks — by Gross Written Premiums and Source of Business (% and £m), 2003-2007

Personal-Lines Insurance

Table 15: Total UK Personal-Lines Insurance Business — UK Risks — by Gross Written Premiums and Source of Business (% and £m), 2003-2007

Motor Insurance

Table 16: Total UK Personal Motor Insurance Business — UK Risks — by Gross Written Premiums and Source of Business (% and £m), 2003-2007

Household Insurance

Table 17: Total UK Personal Household Insurance Business — UK Risks — by Gross Written Premiums and Source of Business (% and £m), 2003-2007

Other Personal-Lines Insurance

Table 18: Total UK Other Personal-Lines Insurance Business — UK Risks — by Gross Written Premiums and Source of Business (% and £m), 2003-2007

Commercial-Lines Insurance

Table 19: Total UK Commercial-Lines Insurance Business — UK Risks — by Gross Written Premiums and Source of Business (% and £m), 2003-2007

Long-Term (Life) Insurance

Individual Protection

Table 20: Individual Protection — New Regular Premiums by Distribution Channel (% and £m), 2003-2007

Group Protection

Table 21: Group Protection — New Regular Premiums by Distribution Channel (% and £m), 2003-2007

Investments and Savings

Table 22: Investments and Savings — New Single Premiums by Distribution Channel (% and £m), 2003-2007

Table 23: Protection Business — New Single Premiums by Distribution Channel (% and £m), 2003-2007

Table 24: Offshore Business — New Single Premiums by Distribution Channel (% and £m), 2005-2007

THE CONSUMER

General Insurance

Life Insurance

4. Mortgages

BACKGROUND

Buy to Let

Sub-Prime Mortgages

THE HOUSING MARKET

Regulation

White Paper on EU Mortgage Credit Markets

Supply and Funding

Product Diversity

Consumer Confidence

Customer Mobility

Issues in the Market

Early Repayment

Responsible Lending

Pre-Contractual Information

APR

Payment Protection Insurance

MARKET SHARE

Table 25: Market Share of Mortgages in Gross Advances Taken by Independent Financial Advisers (%), 2003-2007

THE CONSUMER

5. Investments

BACKGROUND

Unit Trusts and Open-Ended Investment Companies

ISAs and PEPs

Funds of Funds

Tracker and Ethical Funds

With-Profits Funds

DISTRIBUTION

Table 26: Gross Retail Sales of Unit Trusts and OEICs by Distribution Channel (%), 2003-2007

ISAs

Table 27: Gross Individual Savings Account Sales by Distribution Channel (£m, index 2002/2003=100 and %), 2002/2003-2006/2007

THE CONSUMER

6. Pensions

BACKGROUND

Stakeholder Pensions

Stakeholder Products

THE SAVINGS GAP

Personal Accounts

PENSIONS ACTS

IMPLICATIONS FOR INDEPENDENT FINANCIAL ADVISERS

DISTRIBUTION

Individual Pensions

Table 28: Individual Pensions — New Regular Premiums by Distribution Channel (% and £m), 2003-2007

Table 29: Individual Pensions — New Single Premiums by Distribution Channel (% and £m), 2003-2007

Occupational Pensions

Table 30: Occupational Pensions — New Regular Premiums by Distribution Channel (% and £m), 2003-2007

Table 31: Occupational Pensions — New Single Premiums by Distribution Channel (% and £m), 2003-2007

Retirement Income Products

Table 32: Retirement Income Products — New Regular Premiums by Distribution Channel (% and £m), 2003-2007

THE CONSUMER

7. An International Perspective

EU REGULATION

Introduction

The Financial Services Action Plan, 1999

EU Directives

Market Abuse Directive

Markets in Financial Instruments Directive

Best Execution

Client Categorisation within MiFID

Investment Research

Conflicts of Interest

Outsourcing

Insurance Intermediation Directive

Mortgages

MACROECONOMIC INFLUENCES

8. PEST Analysis

POLITICAL FACTORS

ECONOMIC FACTORS

SOCIAL FACTORS

TECHNOLOGICAL FACTORS

9. Consumer Dynamics

INTRODUCTION

Summary of Results

Table 33: Summary of Results (% of respondents), 2007

SOURCES OF FINANCIAL ADVICE

Banks, Building Societies and Insurance Companies

I Have Consulted a Financial Adviser Linked to My Bank for Advice

I Have Consulted a Financial Adviser Linked to My Building Society for Advice

I Have Consulted a Financial Adviser Linked to My Insurance Company for Advice

Table 34: Those Who Have Consulted a Financial Adviser Linked to a Bank, Building Society or Insurance Company for Advice (% of respondents), 2007

Independent Financial Advisers, and Friends, Colleagues and Family Members

I Have Consulted an Independent Financial Adviser for Advice

I Have Consulted a Friend, Colleague or Family Member for Advice

Table 35: Those Who Have Consulted an Independent Financial Adviser, or a Friend, Colleague or Family Member for Advice (% of respondents), 2007

FUTURE SOURCES OF FINANCIAL ADVICE

Banks, Building Societies and Insurance Companies

In the Future, I Would Consult a Financial Adviser Linked to My Bank for Advice

In the Future, I Would Consult a Financial Adviser Linked to My Building Society for Advice

In the Future, I Would Consult a Financial Adviser Linked to My Insurer for Advice

Table 36: Those Who Would Consult a Financial Adviser Linked to a Bank, Building Society or Insurer for Advice in the Future (% of respondents), 2007

Independent Financial Advisers and Financial Websites

In the Future, I Would Consult a Financial Adviser Linked to an Independent Financial Adviser for Advice

In the Future, I Intend to Base My Financial Decisions on Information from Financial Websites

Table 37: Those Who Would Consult a Financial Adviser Linked to an Independent Financial Adviser for Advice and Those Who Intend on Basing Financial Decisions on Information from Financial Websites in the Future (% of respondents), 2007

CONSULTING INDEPENDENT FINANCIAL ADVISERS

General Insurance, Life Insurance and Mortgages

I Would Consult an Independent Financial Adviser About General Insurance

I Would Consult an Independent Financial Adviser About Life Insurance

I Would Consult an Independent Financial Adviser About a Mortgage

Table 38: Those Who Would Consult an Independent Financial Adviser About General Insurance, Life Insurance or a Mortgage (% of respondents), 2007

Investments and Pensions

I Would Consult an Independent Financial Adviser About Investments

I Would Consult an Independent Financial Adviser About My Pension

Table 39: Those Who Would Consult an Independent Financial Adviser About Investments or Their Pension (% of respondents), 2007

FEES VERSUS COMMISSION

I Prefer to Pay a Fee for Financial Advice

I Prefer to Pay for Financial Advice Through Commission on the Products I Choose

Table 40: Those Who Prefer to Pay a Fee for Financial Advice and Those Who Prefer to Pay for Financial Advice Through Commission on the Products They Choose (% of respondents), 2007

ATTITUDE TOWARDS FINANCIAL ADVICE AND INDEPENDENT FINANCIAL ADVISORS

I Do Not Understand Much of the Financial Advice I Receive

I Think Independent Financial Advisors Are Generally Competent and Trustworthy

Table 41: Attitudes Towards Financial Advice and Independent Financial Advisers (% of respondents), 2007

10. Company Profiles

AWD GROUP PLC

Company Strategy

Strengths and Weaknesses

New Product and Brand Development

Distribution

Profitability

Table 42: Financial Results for AWD Group PLC (£000, number, % and £), Years Ending 31st December 2004-2006

Future Company Developments

BARCLAYS PLC

Corporate Strategy

Strengths and Weaknesses

New Product Development and Brand Innovations

Advertising

Distribution

Profitability

Table 43: Financial Results for Barclays PLC (£000, number, % and £), Years Ending 31st December 2004-2006

Future Company Developments

HARGREAVES LANSDOWN PLC

Company Strategy

Strengths and Weaknesses

New Product and Brand Development

Advertising

Distribution

Profitability

Table 44: Financial Results for Hargreaves Lansdown PLC (£000, number, % and £), Years Ending 30th June 2005-2007

Future Company Developments

THE MONEY PORTAL LTD

Company Strategy

Strengths and Weaknesses

New Product and Brand Development

Distribution

Profitability

Table 45: Financial Results for The Money Portal Ltd (£000, number, % and £),Years Ending 31st December 2004-2006

Future Company Developments

OPENWORK LtD

Company Strategy

Strengths and Weaknesses

New Product and Brand Development

Advertising

Distribution

Profitability

Table 46: Financial Results for Openwork Ltd (£000, number, % and £),Years Ending 31st December 2005 and 2006

Future Company Developments

POSITIVE SOLUTIONS (FINANCIAL SERVICES) LTD

Company Strategy

Strengths and Weaknesses

New Product and Brand Development

Distribution

Profitability

Table 47: Financial Results for Positive Solutions (Financial Services) Ltd (£000, number, % and £), Years Ending 31st December 2004-2006

Future Company Developments

TENET GROUP LTD

Company Strategy

Strengths and Weaknesses

New Product and Brand Development

Advertising

Distribution

Profitability

Table 48: Financial Results for Tenet Group Ltd (£000, number, % and £),Years Ending 30th September 2005-2007

Future Company Developments

11. The Future

THE ECONOMY

Unemployment

Table 49: Forecast Actual Number of Unemployed Persons in the UK (million), 2008-2012

Inflation

Table 50: Forecast UK Rate of Inflation (%), 2008-2012

Population

Table 51: Forecast UK Resident Population by Sex (000), Mid-Years 2008-2012

Gross Domestic Product

Table 52: Forecast UK Growth in Gross Domestic Product in Real Terms (%), 2008-2012

THE FINANCIAL SERVICES INDUSTRY

Forces for Change

Technology

Consumers and the Internet

FORECASTS

Table 53: Forecast Share of Advisers Offering Financial Advice by Type (%), 2008-2012

Figure 1: Forecast Share of Advisers Offering Financial Advice by Type (%), 2008-2012

CONCLUSION

12. Further Sources

Associations

Publications

General Sources

Government Sources

Other Sources

Bisnode Sources

Ordering and More Information
Price and Delivery Options


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