Report: Consumers and Financial Advice - UK

Issues in the Market
Key issues explored
Abbreviations
Market in Brief
Key findings of Mintel' s consumer research
- Figure 1: Sources of financial advice used, January 2009
Strong demand for professional advice
Adapting to a harsh business climate
Yet more regulation
A contracting market
General insurance is the largest sector, by number of DA firms
Top performers achieved healthy turnover in 2007/08
Industry adspend cut back
Advice Landscape
Key points
Historical context: from a polarised to a depolarised marketplace
- Figure 2: The advice landscape pre- and post, June 2005
Only a handful of banks switched to a multi-tie approach...
...most kept existing arrangements
The Impact of the Retail Distribution Review
Key points
There' s more change on the way with RDR implementation
Redefining ' sales' versus ' advice' ...
- Figure 3: Proposed regulatory landscape, 2012
...but does it muddy the water?
Moving away from commission-based remuneration
Separating advice from products
An increase in capital requirements
Wider implications
Mixed industry reaction
Going forward
Market Environment
Key points
Economic downturn: Implications for the advice market
The crunch effect on investor behaviour
Products in and out of favour
- Figure 4: General trends in consumer demand for financial products, 2009
Market turmoil...
- Figure 5: FTSE 100 and FTSE All Share -- daily index movements, January 2000-January 2009
...could increase demand for advice among some
Income and spending growth slows
Housing slump hits mortgage advice market
- Figure 6: Number of loans for house purchase, by type of borrower, 2002-08
Protection advisers shift focus away from mortgage-linked business
- Figure 7: Number of new regular-premium protection product sales, by type, 2004-08
Competitive Context
Key points
A variety of consumer advice sources
- Figure 8: Sources of financial information and advice
Price-comparison sites have altered the general insurance landscape...
...and moved into the advice arena
Cost, Access and Trust
Key points
Time to take stock
CAT barriers
Confidence had been hit
- Figure 9: Agreement with statements about financial advisers, by gender, December 2008
Consumers perceive commission bias, whether true or not
Strengths and Weaknesses
- Figure 10: Financial advice market -- summary of strengths, weaknesses, opportunities and threats, 2009
Size and Structure of the Intermediary Market
Key points
Current regulatory structure of the advice market
- Figure 11: Overview of the UK advice market, 2009
Contraction in the number of DA intermediary firms set to continue
- Figure 12: Total number of directly authoritised retail intermediary firms, 2006-08
Mortgage sector hit hard by the property slump
- Figure 13: Number of directly authoritised retail intermediary firms, by sector (primary category), 2006-08
Strong growth in the number of general insurance ARs
- Figure 14: Number of general insurance ARs and DA intermediary firms, by type, 2006-08
More IFAs make the switch to AR status too
- Figure 15: Number of financial advice ARs and DA intermediary firms, by type, 2006-08
The number of primary-category mortgage firms fell by 14% in 2008
- Figure 16: Number of mortgage ARs and DA intermediary firms, by type, 2006-08
Main Advice Sectors
Key points
Intermediaries work across the full range of financial sectors
- Figure 17: Summary of the sectors written by retail intermediaries, 2009
The top reason people seek advice is mortgage-related
- Figure 18: Intermediaries' share of new mortgage business, by type of loan, 2006-08
Intermediaries generate the lion' s share of protection business
- Figure 19: New individual protection business, by distribution channel, 2005-08
Sub-sector performance
IFAs dominate the sale of individual pensions...
- Figure 20: New individual pensions business, by distribution channel, 2005-08
...but in the retirement income market, IFAs' share continues to erode
- Figure 21: Distribution of new retirement income products business, by channel, 2005-08
Intermediaries sell the majority of new insurance-linked investments...
- Figure 22: New insurance-related investment business, by distribution channel, 2005-08
...and collective investments
- Figure 23: Gross retail sales of UK-domiciled unit trusts and OEICs, by distribution channel, 2005-08
Implication and opportunity
General insurance intermediaries fight back
- Figure 24: General insurance business (personal lines only), by distribution channel, 2003-07
Sector outlook
Adviser Firm Rankings
Key points
Sesame and Openwork are the largest IFA firms by turnover
- Figure 25: Top 15 financial advisers in the UK, based on relevant turnover, 2007/08
About the top three
Brand Communication and Promotion
Key points
Mortgage intermediary adspend dramatically cut in 2008
- Figure 26: Advertising expenditure by financial intermediaries, by sector, 2006-08
Press advertising accounts for three quarters of industry expenditure
- Figure 27: Proportional distribution of intermediary advertising expenditure, by media type, 2008
Top IFA firms are conspicuous by their absence
- Figure 28: Advertising expenditure by financial intermediaries, by top 25 advisers, 2006-08
The Consumer -- Wealth Distribution
Key points
About Mintel' s consumer research
Online focus group
Over a third of UK adults have little or no savings
- Figure 29: Value of savings and other investible assets, January 2009
Wealth increases with age
- Figure 30: Value of savings and other investible assets, by gender, age and socio-economic group, January 2009
The Consumer -- Advice Sources Used
Key points
People are most likely to consult family and friends on financial matters
- Figure 31: Sources of financial advice used, January 2009
Credit crisis has undermined trust in the banks
Most people have only used one advice source
- Figure 32: Number of financial advice sources used, January 2009
- Figure 33: Sources of financial advice used, by number of sources used, January 2009
ABs make the greatest use of IFAs
- Figure 34: Sources of financial advice used, by gender and socio-economic group, January 2009
Lifestage events increase the need for expert advice
- Figure 35: Sources of financial advice used, by age, January 2009
The more people earn, the more advice sources they have used
- Figure 36: Sources of financial advice used, by gross annual household income, January 2009
Summary analysis
- Figure 37: Key demographic groups and typical advice needs, by source category, January 2009
The affluent prefer to put their faith in an IFA
- Figure 38: Sources of financial advice used, by value of investible assets, January 2009
The Consumer -- Advice Needs
Key points
Getting a mortgage is a key driver for seeking expert advice
- Figure 39: Financial matters previously sought advice on and interested in seeking advice on in the future, January 2009
Many pension holders fail to take professional advice
Significant latent demand for advice
Advice needs change with age
- Figure 40: Financial matters previously sought advice on, by gender and age, January 2009
Wealth also dictates advice needs
- Figure 41: Financial matters previously sought advice on, by value of investible assets, January 2009
IFAs generally cater for more complex advice needs
- Figure 42: Financial matters previously sought advice on, by source of advice used, January 2009
Around one in ten people aged 35-44 are interested in seeking advice on property investment
- Figure 43: Financial matters interested in seeking advice on in the future, by gender and age group, January 2009
Appendix -- Advice Sources by Demographics
- Figure 52: Sources of financial advice used, by demographic sub-group -- part 1, January 2009
- Figure 53: Sources of financial advice used, by demographic sub-group -- part 2, January 2009
Appendix -- Advice Clusters by Demographics
- Figure 54: Demographic profile of advice clusters -- part 1, January 2009
- Figure 55: Demographic profile of advice clusters, by demographic sub-group -- part 2, January 2009

Consumers and Financial Advice - UK - April 2009

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