- ISSUES IN THE MARKET
- Key issues covered in the report
- Abbreviations
- INSIGHTS AND OPPORTUNITIES
- There are clear opportunities for the banking sector to exploit
- Mortgages and pensions represent particularly attractive markets
- Inheritance tax planning and ISAs also provide distinct opportunities
- Advisers need to do more to promote the value of their services
- They also need to allay consumer fears over cost and rebuild trust
- MARKET IN BRIEF
- A variety of factors are driving demand for financial advice
- Advisers’ key markets have seen strong growth in recent years
- Trade perspective: Consumers remain resistant to fee-based advice
- Mintel’s research findings: Sources of advice
- Mintel’s research findings: Demand for advice
- Mintel’s research findings: Drivers and deterrents
- MARKET FACTORS - DRIVING THE MARKET ONWARDS
- Key points
- A variety of factors will influence demand for financial advice
- Figure 1: Factors influencing the demand for financial advice
- Rising life-expectancy has heightened the need for advice…
- Figure 2: Expectation of life at birth, by gender, 1900-2050
- …particularly when it comes to pensions
- Erosion of state support is raising the need for self-provision…
- …and not only in the pension market
- Workplace benefit provision is also being eroded
- An end to the job for life
- Self-employment presents new problems
- Changing lifestyles are boosting demand for advice…
- …as well as pushing finance down the list of priorities
- Rising debt levels have also created a need for advice
- Figure 3: Total household debt, balances outstanding, 1992-2006
- Increased product complexity…
- …and a lack of clarity
- MARKET CONSTRAINTS
- Key points
- A lack of trust is constraining demand for financial advice
- The industry needs to improve its tarnished image
- High street banks are no exception
- Consumer apathy is also felt to be constraining the market
- This problem is exacerbated by low levels of financial literacy…
- …although the FSA is working to combat this issue
- The Internet has allowed some consumers to take personal control
- Online tools risk marginalising advice
- MAIN MARKETS FOR FINANCIAL ADVICE
- Key points
- Financial advice covers a broad spectrum of needs
- PENSIONS
- A key market for financial advisers
- Figure 4: Individual pension sales, 2001-06
- Growth overstated by transfer business
- A-day changes are having a significant impact on the market
- INVESTMENTS
- The investments market is also important to the advice industry
- Figure 5: Net retail unit trust/OEIC sales, 2001-06
- TAX PLANNING
- Inheritance tax receipts soar…
- Figure 6: Inheritance tax, receipts and number of estates liable, 2000/01-2005/06
- …ensuring that tax planning will provide increasing opportunities
- MORTGAGES
- Mass-market advice opportunities
- Figure 7: Gross mortgage advances, by type of loan, 2001-06
- FINANCIAL ADVICE - THE MARKET STRUCTURE
- Key points
- More than 5,000 financial advice firms are registered with the FSA
- Figure 8: Number of directly authorised financial advice firms and mortgage intermediaries, 2006 and 2007
- Depolarisation has altered the structure of the industry
- FINANCIAL ADVICE - MARKET SIZE
- Key points
- Is there any money in advice?
- Profitability varies widely
- Mortgage and pensions markets offer the most potential
- Figure 9: Potential market size versus need for advice, May 2007
- The IFA sector still dominates the main markets for financial advice
- Figure 10: Single-premium individual investment business income, 2006
- Bancassurers hold a significant share of regular-premium life sales
- Figure 11: Regular-premium individual life business income, 2006
- IFAs enjoy a large share of individual pension product sales
- Figure 12: Regular-premium individual pension business income, 2006
- Figure 13: Single-premium individual pension business income, 2006
- THE HIGH STREET BANK IN A DEPOLARISED WORLD
- Key points
- Banks enjoy potential advantages in offering financial advice
- There are now a range of business models that can be adopted
- HSBC was the first bank to announce a shift to multi-tied status
- Barclays has also adopted a multi-tied approach
- Other banks have retained emphasis on their bancassurance arms
- IFAS - FEES OR COMMISSION?
- Key points
- Remuneration has traditionally been via commission payments…
- …but this system has led to accusations of adviser bias
- Depolarisation signalled a shift from commission to a menu of fees
- There still appears to be resistance to fee-based advice…
- …but the proportion of consumers opting to pay fees is rising
- Further FSA reforms could speed up the trend to fee-based advice
- The new system would incorporate a wider definition of ‘fees’
- BROKERS - A ROLE FOR THE SPECIALISTS?
- Key points
- The need for mortgage advice has heightened in recent years
- Brokers have benefited from this increase in choice and complexity
- Mortgage brokers are now a common source of advice
- Figure 14: Where consumers would go for advice regarding a mortgage or a remortgage, December 2006
- The intermediary sector looks set to retain a position of prominence
- Home Inspection Plans will provide a boost for estate agents
- TRADE PERSPECTIVE
- Opinion is evenly divided over the current state of the market
- A broad range of factors appear to be hindering market growth
- Regulatory requirements have added to the cost base
- Investments and pensions are seen as particularly profitable
- Most consumers are still resistant to fee-based advice
- The drive for higher-level qualifications could boost the industry
- THE CONSUMER - SOURCES OF ADVICE
- Key points
- Survey background
- Branch staff are the most common source of financial advice
- Figure 15: Sources used for advice on financial matters, May 2007
- Implications and opportunities
- Sources of advice vary by age and socio-economic status
- Figure 16: Sources used for advice on financial matters, by age/socio-economic group, May 2007
- Half of all adults have sought advice from a professional adviser
- Figure 17: Sources used for advice on financial matters, by gender, age, socio-economic group, lifestage
- and Mintel’s Special Groups, May 2007
- Implications and opportunities
- Scottish consumers typically turn to branch staff for advice
- Figure 18: Sources used for advice on financial matters, by working status, income, TV region and ACORN
- group, May 2007
- Broadsheet readers tend to prefer professional advisers
- Figure 19: Sources used for advice on financial matters, by technology users, newspaper readership,
- commercial TV viewing and supermarket usage, May 2007
- ABC1s account for two thirds of the IFA customer base
- Figure 20: Professional adviser customer profiles, by gender, age, socio-economic group and lifestage, May
- 2007
- Almost a quarter of consumers have used four or more sources
- Figure 21: Number of sources used for advice on financial matters, May 2007
- Implications and opportunities
- More than a quarter of ABs have used five or more sources
- Figure 22: Number of sources used for advice on financial matters, by gender, age and socio-economic
- group, May 2007
- Branch staff and family or friends dominate the single-source group
- Figure 23: Repertoire analysis on number of sources used for advice on financial matters, May 2007
- Dissecting the sample according to sources of advice used
- Figure 24: Typologies based upon sources of advice used for financial matters, by gender, age, socioeconomic
- group and TV region, May 2007
- THE CONSUMER - DEMAND FOR ADVICE
- Key points
- Pensions and mortgages present opportunities for financial advisers
- Figure 25: Proportion of adults who think selected financial products are relevant to them, by gender, May
- 2007
- Implications and opportunities
- Four in ten 45-54-year-olds expressed an interest in pensions
- Figure 26: Proportion of adults who think selected financial products are relevant to them, by age group,
- May 2007
- Tax key for older consumers
- Inheritance tax planning is relevant to almost a quarter of ABs
- Figure 27: Proportion of adults who think selected financial products are relevant to them, by socioeconomic
- group, May 2007
- A mortgage is the product most consumers would seek advice on
- Figure 28: Proportion of adults who would consider using a financial adviser to arrange various products, by
- gender, May 2007
- Implications and opportunities
- The 25-44s are most likely to want advice on mortgages
- Figure 29: Proportion of adults who would consider using a financial adviser to arrange various products, by
- age group, May 2007
- C2s are likely to be a key target audience for certain products
- Figure 30: Proportion of adults who would consider using a financial adviser to arrange various products, by
- socio-economic group, May 2007
- Prospective mortgage customers are most likely to approach an adviser
- Figure 31: Adults who would approach a financial adviser as a proportion of those who think products are
- relevant to them, May 2007
- 10 million consumers would use an adviser to arrange a mortgage
- Figure 32: Estimated ‘potential market size’ for selected financial products, May 2007
- Mortgage and pensions markets are particularly attractive
- Figure 33: Potential market size versus need for advice, May 2007
- Around one in ten consumers hold savings of more than £50,000
- Figure 34: Amounts consumers hold in savings and investments, May 2007
- Implications and opportunities
- ABs tend to have comparatively large amounts of savings
- Figure 35: Amounts consumers hold in savings and investments, by gender, age, socio-economic group
- and age/socio-economic group, May 2007
- Third age consumers tend to hold relatively large sums in savings
- Figure 36: Amounts consumers hold in savings and investments, by lifestage, income, TV region and
- newspaper readership, May 2007
- People with large sums in savings are more likely to use an adviser
- Figure 37: Proportion of adults who would consider using a financial adviser to arrange various products, by
- amounts consumers hold in savings and investments, May 2007
- THE CONSUMER - DRIVERS AND DETERRENTS
- Key points
- Lack of product knowledge is a key reason for seeking advice
- Figure 38: Reasons for seeking professional financial advice, by gender, May 2007
- Implications and opportunities
- Three in ten 25-44s are driven by the fear of making a mistake
- Figure 39: Reasons for seeking professional financial advice, by age group, May 2007
- Almost a third of ABs want to receive non-biased information
- Figure 40: Reasons for seeking professional financial advice, by socio-economic group, May 2007
- People with high savings balances value non-biased advice
- Figure 41: Reasons for seeking professional financial advice, by amounts consumers hold in savings and
- investments, May 2007
- Some consumers feel they can cope without a financial adviser
- Figure 42: Concerns about using a professional adviser, by gender, May 2007
- Implications and opportunities
- The cost of advice is more of a concern to younger consumers
- Figure 43: Concerns about using a professional adviser, by age group, May 2007
- ABs often prefer to conduct their own research
- Figure 44: Concerns about using a professional adviser, by socio-economic group, May 2007
- Savers with high balances fear advice will be driven by commission
- Figure 45: Concerns about using a professional adviser, by amounts consumers hold in savings and
- investments, May 2007
- THE FUTURE
- What does Mintel’s research tell us?
- Advisers need to do more to promote the value of their services
- The slow drift from commission- to fee-based advice will continue
- PRODUCT OWNERSHIP - DETAILED DEMOGRAPHICS
- Figure 46: Most commonly held financial services products, by gender, age, socio-economic group, marital
- status, lifestage, Mintel’s Special Groups, working status, household income, tenure, region, ACORN
- category, media usage and supermarket usage, May 2007
- Figure 47: Next-most commonly held financial services products, by gender, age, socio-economic group,
- marital status, lifestage, Mintel’s Special Groups, working status, household income, tenure, region, ACORN
- category, media usage and supermarket usage, May 2007
- ADVICE USED - DETAILED DEMOGRAPHICS
- Figure 48: Sources of advice used, by gender, age, socio-economic group, marital status, lifestage, Mintel’s
- Special Groups, working status, household income, tenure, region, ACORN category, media usage and
- supermarket usage, May 2007
- RELEVANT FINANCIAL SERVICES PRODUCTS - DETAILED DEMOGRAPHICS
- Figure 49: Most relevant financial services products, by gender, age, socio-economic group, marital status,
- lifestage, Mintel’s Special Groups, working status, household income, tenure, region, ACORN category,
- media usage and supermarket usage, May 2007
- Figure 50: Next most relevant financial services products, by gender, age, socio-economic group, marital
- status, lifestage, Mintel’s Special Groups, working status, household income, tenure, region, ACORN
- category, media usage and supermarket usage, May 2007
- APPENDIX: RESEARCH METHODOLOGY
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