Abstract
Overview
Introduction
This report assesses the issues that are arising from the aging of the
financial advisor community. The industry is failing in its efforts to attract
new, young talent and without this the question for providers is what will
happen to advisors' businesses as they approach retirement. This survey aims
to reveal the future plans of advisors and how they are planning for the
future of their business
Scope
- Survey conducted among 102 financial advisors revealing their views on a
variety of investment choices
- Analyses the position of various age groups within the industry, explores
growth potential, and gauges advisor opinion toward various product areas
- Covers the prominent issues affecting the financial advice market,
discusses key current issues and a range of advisor opinions across age groups
Report Highlights
This report looks at the changing structure of the financial advisor market
and how advisors of different ages are adjusting to changes in products,
regulation and technology. It also examines the future for aging firms of
advisors.
For all advisors, confusing regulation is regarded as the biggest current
challenge within the financial advice market, with 66% of all survey
participants selecting it as one of their top three biggest challenges.
Attitudes towards the challenges faced by financial advisors differ widely
between age groups, despite being linked by a general consensus that confusing
regulation is the largest challenge faced by the community. The younger age
groups appear more concerned with issues directly affecting the future of the
industry, such as technological change.
Reasons to Purchase
- Identify market opportunities by discovering which product areas IFAs see
as having the greatest potential
- Identify the main client groups, as well as the most popular products and
life providers in the eyes of financial advisors
- Gain direct insight into the fears, concerns, and attitudes of financial
advisors and their predictions for the future of the industry
Table of Contents
- Overview
- Catalyst
- Summary
- Methodology
- Executive Summary
- Market Context:
- Advisors are predominantly sole independent traders, with a low
average case size
- Advisors are cautiously optimistic over sales growth in the next 6
months
- Distribution Dynamics:
- Regulation and administration are the two biggest concerns for
advisors in Q2
- Advisors seem happy with the pace of change but are still
uncomfortable with the idea of fee-based remuneration
- Most advisor firms are small, but recruitment is not considered a
problem
- Table of Contents
- Table of figures
- Table of tables
- MArket Context
- The sample consists predominantly of sole traders
- Advisors have retained an independent or whole of market model
- The average case size in this sample is below £5,000
- 42% of advisors in this sample have a majority of high net worth clients
- The majority of business is currently conducted in pensions and
life-based investment products
- Advisors are losing business to online sales for simpler products
- There have been few changes since Q1
- The majority of financial advisors are cautiously optimistic
- Advisors expect sales of most products to remain static over the next 6
months
- There has been little definitive change from Q1
- The outlook for life products is positive
- Advisors are more optimistic over mutual funds than ISAs
- Protection sales look to remain largely static, but some advisors
predict a decrease
- Advisors are most optimistic regarding pension sales over the next 6
months
- Financial advisors are most positive towards Standard Life, Skandia, and
Legal & General
- Standard Life is a leading UK fund manager employing a "focus on
change" investment philosophy
- Skandia has been a prominent name in the UK savings & investments
market in recent years
- Legal & General has won a number of awards in 2007
- Attitudes have remained similar to those in Q1 2007
- Invesco Perpetual and Fidelity have the highest approval ratings from
advisors in Q2
- Invesco Perpetual is one of the largest independent asset management
companies in the UK
- Fidelity is the UK' s largest mutual fund manager
- HSBC is the least popular provider by a significant margin
- Data
- Distribution Dynamics
- Confusing regulation is the biggest challenge for all ages of advisors
- Younger advisors are more concerned about technological change
- Over half the surveyed advisors believe providers are not helpful in
quieting their fears
- Paperwork is the key source of dissatisfaction for all ages of advisor
- Most advisors feel comfortable with the pace of change
- The younger age groups are most confident about keeping pace with
change
- Over half of advisors believe that better training is the answer
- Most advisors remain reluctant to move away from upfront commissions
- The 30-40 age group is most open to the idea of fee-based remuneration
- Most advisors are concerned with loss of profitability when moving
away from commissions
- The predominant innovations have been in the area of delivery platforms
- There is a close link between advisor age and enthusiasm for product
delivery developments
- Few advisors work in firms of more than 2 employees
- Younger advisors are more likely to work in larger firms
- Older advisors are ambiguous about retirement
- The younger advisors work for firms with the best succession plans
- Most advisors do not believe they have a problem with recruitment
- Advisors are happy to handle recruitment without external help
- Many advisors are ambivalent about forming a partnership with another
firm
- Most advisors would prefer to partner with accountants or other IFA firms
- Reputation and a natural fit are the two most important criteria in
financial advice partnerships
- Data
- APPENDIX
- Definitions
- Pension product definitions
- Personal Pensions
- Stakeholder Pensions
- Group personal pensions
- Employer Sponsored Stakeholder pension (ESS)
- SIPPs (Self Invested Personal Pensions)
- Definitions of distribution channels
- Independent Financial Advisors (IFAs)
- Direct sales forces
- Tied agents
- Multi-tied agents
- Bancassurance
- Direct marketing
- Telesales
- Other
- Matrix Definitions
- Methodology
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- List of Tables
- Table 1: What percentage of your business is conducted in each of the
following areas?
- Table 2: Over the next six months how do you expect sales in each of
the following products to change?
- Table 3: Over the next six months how do you expect sales in each of
the following products to change?
- Table 4: Which of the following statements best describes your
attitude to these insurers? (Q2 2007)
- Table 2: Which of the following statements best describes your
attitude to these insurers? (Q1 2007)
- Table 6: Which of the following best describes your company?
- Table 7: What business model do you operate?
- Table 8: What is the average case size of the business you deal with?
- Table 9: Does more than 50% of your customer base have total liquid
assets of over £200k? i.e would you describe more than half of your
customer base as High Net Worth?
- Table 10: Does more than 50% of your customer base have total liquid
assets of below £30 000? i.e would you describe more than half of your
customer base as Mass affluent?
- Table 11: What percentage of your business is conducted in each of the
following areas?
- Table 12: I believe in the next 6 months the UK Financial Advice
market will:
- Table 13: Which of the following statements best describes your
attitude to these insurers?
- Table 14: Which of the following statements best describes your
attitude to these mutual fund providers?
- Table 15: Do you believe that providers will really work with IFAs to
meet these needs and concerns?
- Table 2: What do you find dissatisfying about your work?
- Table 3: What could be done by providers to help you keep pace with
change?
- Table 18: What are the 3 biggest challenges facing your firm?
- Table 19: What do you find dissatisfying about your work?
- Table 20: Do you feel you are keeping pace with the changes occurring
in the market?
- Table 21: Do you feel you are keeping pace with the changes occurring
in the market?
- Table 22: What could be done by providers to help you keep pace with
change?
- Table 23: Do you feel your firm is open to the idea of removal of
up-front commissions?
- Table 24: What are the key challenges facing firms who wish to move
away from upfront commissions?
- Table 25: What have been the most interesting product developments
over the last five years?
- Table 26: How many advisors work in your firm?
- Table 27: Are any members of your firm likely to retire in the next 5
years?
- Table 28: Is there a succession plan in place?
- Table 29: Are you facing issues surrounding recruitment of new
advisors into your business?
- Table 30: Do you feel that providers could do more to help recruit new
advisors into the industry?
- Table 31: Would your firm look to forming a partnership with another
organisation?
- Table 32: Which kind of partners do you think would be suitable for
IFAs? (choose up to 3)
- Table 33: What qualities would you be looking for in such a
partnership? (choose up to 3)
- List of Figures
- Figure 1: Almost half the Q2 advisors surveyed are sole traders
- Figure 2: The majority of advisors operate an independent business
model
- Figure 3: Most participants deal with an average case size of less
than £5,000
- Figure 4: Younger advisors deal with higher value average cases than
their older colleagues
- Figure 5: Less than half the sample have a majority of high net worth
clients
- Figure 6: Over half of respondents consider the majority of their
customer base to be mass affluent
- Figure 7: Almost a quarter more advisors claim a majority of HNW
clients in Q2 compared to Q1
- Figure 8: Pensions and life-based investments demonstrate the
strongest business performance
- Figure 9: The majority of advisors forecast limited growth when asked
how the market will develop over the next 6 months
- Figure 8: The majority expect life products sales to remain the same
over the next 6 months
- Figure 9: Non-life products may see a gradual increase in sales over
the next 6 months
- Figure 10: Some advisors predict a decrease in protection sales over
the next 6 months
- Figure 11: Personal pension sales look positive over the next 6 months
- Figure 13: Skandia is the most popular insurer with advisors in Q2
- Figure 13: Invesco Perpetual remains the most popular mutual fund
provider
- Figure 14: HSBC is the least popular mutual fund provide by some
distance
- Figure 15: Confusing regulation is one of the key challenge for almost
two thirds of advisors
- Figure 18: The Under 30s are worried about technological change
- Figure 16: Over half of surveyed advisors had little faith in
providers to help assuage their worries
- Figure 17: Advisors are unconcerned about learning new products and
technologies
- Figure 18: Over half of advisors feel confident that they are keeping
up-to-date with change
- Figure 22: The 30-40 age group is most confident about the pace of
change
- Figure 19: The majority of advisors feel uncomfortable with the idea
of removing up-front commissions
- Figure 24: Only the 30-40 age group has a majority open to moving away
from up-front commissions
- Figure 20: Almost half of advisors are primarily concerned with
profitability when considering moving away from up-front commissions
- Figure 21: Delivery platforms are considered some of the most
interesting product developments in recent years
- Figure 27: Younger advisors are most excited about delivery platforms
- Figure 22: How many advisors work in your firm?
- Figure 23: Older advisors are far more likely to work alone than their
younger colleagues
- Figure 30: Retirement possibilities increase in firms with older
advisors
- Figure 31: Older advisors are less well-provided for in terms of
succession plans
- Figure 24: Recruitment of new advisors is most challenging in the
50-55 age group
- Figure 25: Over two thirds of advisors feel they do not require
recruitment assistance from providers
- Figure 26: Advisors between 30 and 50 are least open to the idea of a
partnership
- Figure 27: Over half of advisors say accountants would be a potential
partnership choice
- Figure 36: A natural fit is the most important quality in an IFA
partnership
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