[Report] UK Unit linked Investment Bonds Market Research, Trends, Analysis TOC

CHAPTER 1 EXECUTIVE SUMMARY
- Market Focus
- Sector Issues
- Competitor Issues
- Distribution Dynamics
CHAPTER 2 INTRODUCTION
- What is this report about?
- Who is the target reader?
- How to use this report
CHAPTER 3 MARKET FOCUS
- Introduction
- Key findings
- Growth in the unit-linked market has historically driven the single premium bond market
  - Unit-linked bond new business dwarfs that of With-Profits
- The unit-linked market is forecast to contine growing at a rapid pace
- Growth has been driven by the favourable structure of unit-linked offerings
  - The unit-linked product explained
  - The unit-linked bond market is growing on the back of its status as the leading life investment bond, as well as the freefall in with-profits sales
    - With-profits are currently underweight in equities, leading to low return compared to unit-linked bonds
  - Clients appreciate the flexibility, choice and transparency of a unit-linked offering
  - Unit-linked investors can react to market changes rapidly in order to maximise potential returns
  - Product flexibility has caused some industry experts to believe that commission-based advisors have an incentive to oversell bonds
    - But other experts believe the commission structure to be the most efficient and cost-effective method of advisor remuneration
- Regulation in the investment bond market has not been specific to unit-linked products
  - The substitution effect of A-Day regulation has caused some investors to consider unit-linked product offerings
  - Treating Customers Fairly has been a key regulatory issue, helping to increase investor understanding of unit-linked products and preventing the possibility of mis-selling
    - Online platforms keep clients informed and offer another means of client-advisor communication
    - Wrap platforms should be part of the development process to address TCF
  - Some experts believe that TCF will filter out the poorly-structured and poorly-performing providers, while others believe FSA intervention may be necessary
- Unit-linked products have several appealing structural features
- Distribution bonds are unit-linked bonds' most viable alternative
  - Unit-linked is the dominant investment bond product, with distribution bonds leading the rest of the pack
  - Unit-linked investors may also be interested in non-life related investment products such as unit trusts, investment trusts or OEICs, which have lower charges but are less tax-efficient
  - UK clients should also look at offshore alternatives
- Data
CHAPTER 4 SECTOR ISSUES
- Introduction
- Key findings
- Product structure has been a key issue in the unit-linked market, as well as certain regulatory developments
  - Clients appreciate the flexibility, choice and transparency of a unit-linked offering
  - A-Day pensions regulation has increased the amount of money channelled into unit-linked products
  - Despite certain strengths, Treating Customers Fairly has forced providers to adapt their strategy and some have been more prepared than others
    - Some providers have been slow in addressing the TCF initiative
    - Some providers have been more meticulous, though this has come at a price
  - Unit-linked providers need to be fully aware of TCF and its implications, especially because of the upcoming initiative deadlines and the threat of FSA action
- Non-life related investment products are not seen as a direct alternative to unit-linked products
  - The decision between unit-linked and non-life related investments depends on investor attitude to taxation
- Innovation is a key strategic issue in the unit-linked space
  - Innovation is an important area for providers, given an increasing move towards product commoditization
    - Innovation has centred on the fringes of the product offering, rather than any major changes to the product structure itself
    - But innovation costs money and advisors can sometimes be reluctant to recommend new products
    - But equally increasing the fund range can spread risk
  - Wraps are likely to have a positive effect on the sales of unit-linked bonds
- Providers are having to be proactive in addressing market issues
  - In general, TCF is forcing providers to make sure clients understand the unit-linked product, through revision of product literature, highlighting charges and alteration to the product marketing approach
    - Market research should also give providers good quality information to use as a basis for future product strategy
    - Providers need to focus on IFA service and changes to the stream of commission
- Open architecture and online functionality are vital areas of best practice for unit-linked providers
  - Sesame has taken TCF one step further by launching an online TCF tool
CHAPTER 5 COMPETITOR ISSUES
- Introduction
- Key findings
- The top ten providers dominate the unit-linked market
  - HBOS is the biggest provider of unit-linked products in the UK market
  - The top five unit-linked providers have maintained their stronghold on the market over the last five years
- Product development has focused on offshore opportunities
  - Cofunds & Fundsnetwork have both moved to incorporate offshore Luxembourg-based funds in their offerings
- Skandia & Hartford are two examples of key unit-linked providers
  - Skandia is one of the UK' s leading providers of savings, investments, pensions & protection products
  - Hartford is a new entrant in the UK unit-linked space
- Scottish Life have devised an innovative unit-linked offering
  - Scottish Life - Life of Riley Fund combines fund performance with protection
- Fund supermarkets are key participants in the unit-linked market
  - Cofunds claims it is the UK' s largest independent investment platform
  - Fundsnetwork is Fidelity' s fund supermarket offering
  - Fundsdirect claims to have been the UK' s first fund supermarket
- Data
CHAPTER 6 DISTRIBUTION DYNAMICS
- Introduction
- Key findings
- IFAs are the most popular means of distributing unit-linked products
  - IFAs will continue to dominate the distribution landscape in 2005 and beyond
- Unit-linked bonds are often used for strategic purposes
  - Unit-linked bonds are looked upon favourably by IFAs, who value the versatility of the product
    - Another important feature is the ability to switch funds
  - Many investors specifically value the use of unit-linked bonds for Inheritance-tax planning purposes
  - The market' s move towards fee-based advice will place increasing importance on the peripheral features of a product offering
- Data
CHAPTER 7 APPENDIX
- Definitions
  - Annual Management Charge
  - SynThesys Life Business Line Definitions
  - Single premium policy
  - Regular premium
  - New business
  - Life based investment products
  - Life Product Definitions
  - Single Premium Life
  - Annual Premium Life
  - ABI definitions of distribution channels
- Future readings
  - Life and Pensions SPP
    - Interactive Databases
    - Reports and Briefs
  - Financial Advice Market SPP
- SPP writing team
- List of Tables
  - Table 1: Single premium life market new business, segmented by type of investment, £m APE, 2002-2006
  - Table 2: Single premium life market new business, segmented by type of investment, £m APE, 2007-2011
  - Table 3: New business levels of the top ten unit-linked providers, £m APE, 2001-2005
  - Table 4: Market share of top ten unit-linked providers, 2000 & 2005
  - Table 5: Unit-Linked new business, segmented by distribution channel, £m APE, 2002 - 2006
  - Table 6: Unit-Linked new business, segmented by distribution channel, £m APE, 2007 - 2011
  - Table 7: Percentage share of unit-linked new business, segmented by distribution channel, 2007-2011
- List of Figures
  - Figure 1: Unit-linked bonds continue to dominate the life investment market
  - Figure 2: Unit-linked bonds are no longer merely a with-profits replacement
  - Figure 3: Unit-Linked bonds dominate percentage of new business in 2006
  - Figure 4: Forecast: Unit-linked bonds will continue to dominate the UK life investment market
  - Figure 5: HBOS head the list of the top ten unit-linked providers in the UK in 2005
  - Figure 6: The top ten unit-linked providers dominated the market in 2005
  - Figure 7: The market share of the top five unit-linked providers has remained relatively unchanged in 2005
  - Figure 8: IFAs have historically been the primary channel for distribution of unit-linked products
  - Figure 9: IFAs are the dominant channel for distribution of unit-linked products in 2006
  - Figure 10: IFAs are likely to continue to dominate the distribution of unit-linked products over the next five years

UK Unit linked Investment Bonds 2007

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