Financial Advisors View of Investment Choices

Table of Contents

• Overview
  • Catalyst
  • Summary
  • Methodology
• Executive Summary
  • Market Context
  • Sector Issues
• Table of Contents
• Table of figures
• Table of tables
• MArket Context
  • The Survey sample consists mostly of sole traders
    • Sole Traders account for just over 40% of the total survey sample
    • Financial advisors' clients cover a range of wealth levels
  • Financial advisors believe sales of many savings products will remain unchanged in the future
  • In terms of providers, financial advisors have a particularly positive attitude towards Skandia, Friends Provident & Standard Life
    • Skandia has been a prominent name in the UK savings & investments market in recent years
    • Friends Provident is one of the UK' s largest financial services groups and houses one of the oldest asset management groups in Europe
      • Friends Provident' s F&C asset management subsidiary is one of the top five UK fund managers
    • Standard Life is a leading UK fund manager employing a "focus on change" investment philosophy
  • In terms of mutual fund providers, advisors are most positive about Invesco Perpetual & Fidelity
    • Invesco Perpetual is one of the largest independent asset management companies in the UK
    • The Jupiter Group has received more than 120 awards over the past four years
  • Data
• Sector Issues
  • Advisors' choice of provider is most affected by provider service and financial strength
    • Product features and historic investment performance area also factors that feature heavily in an advisor' s decision process
      • However, other factors such as broker consultant relationship and commission, though less of an influence are still important
  • Life companies' asset management arms have improved somewhat over the last 5 yrs
    • However, there are still a variety of improvements that could be made in areas such as service, product performance, product features & fund manager recruitment
    • Skandia, Standard Life and Legal & General are perceived as having particularly strong AM arms
      • Jupiter, Invesco Perpetual & New Star are mutual fund providers highly rated as asset managers
  • The area of specialization varies between different fund managers
    • Norwich Union, New Star and Standard Life are rated as the top property fund managers
    • Fidelity, Invesco Perpetual & Jupiter are rated as the top UK equity fund managers
    • Fidelity, Jupiter & Invesco Perpetual are also rated as the top 3 International equity fund managers
    • Artemis, Midas & Gartmore are rated as the top boutique fund managers
    • Artemis & Gartmore have product offerings of particular interest
      • Artemis is a dedicated active investment management house
    • Gartmore has been managing long-only investments for over 30 years
  • The key opportunities in the market lie with products such as wraps and REITs, as well as areas such as the Far East
    • Fund supermarkets and major life companies have been the main wrap market participants of late
    • Fund supermarkets and wraps are growing at a considerable rate in the UK market
    • There has been significant hype surrounding the introduction of REITs in January 2007
  • Size of fees have a most significant impact in the choice of life company
    • Fees need to be transparent, as well as reasonable
    • The range of funds is also important for all investments
  • Advisors find complex funds fairly simple to communicate to clients
    • Advisors have also found the same level of ease with manager of manager propositions
    • But despite the ease of explanation, higher charges are not always indicative of worthwhile return
    • There is a similar disparity of opinion regarding charges applied to manager of manager funds
  • REIT funds are seen as a particular area of growth
    • Equity-based REIT products are seen as having the most market potential
  • Data
• APPENDIX
  • Definitions
    • Fund of Fund Investments
    • Manager of Manager Investments
    • ICVCs
    • Real estate investment trust (REIT)
  • Methodology
  • Further reading
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
  • List of Tables
    • Table 1: Funds under management levels, 2006, split by asset class
    • Table 2: Composition of survey sample, segmented by type of company
    • Table 3: Percentage of respondents who classify more than half their customer base as high net worth
    • Table 4: Percentage of respondents who classify more than half their customer base as mass affluent
    • Table 5: Advisor opinion as to how sales of certain investment products will change over the next six months, % of respondents
    • Table 6: Advisor attitude towards a selection of life companies, % of respondents
    • Table 7: Advisor attitude towards a selection of mutual fund companies, % of respondents
    • Table 8: Percentage of respondents who believe a selection of factors have an influence on their choice of life company
    • Table 9: Financial advisor opinion as to the development of life company asset management arms over recent years
    • Table 10: Providers perceived to have the best asset management arms
    • Table 11: Mutual fund providers rated highly as asset managers
    • Table 12: The top property fund managers
    • Table 13: The top equity fund managers
    • Table 14: The top international equity fund managers
    • Table 15: Financial advisor opinion towards the effect of management fees on their choice of life company
    • Table 16: Financial advisor opinion towards the effect of management fees on their choice of mutual fund provider
    • Table 17: Financial advisor opinion as the effect of fee transparency on their choice of investment product
    • Table 18: Financial advisor opinion as to the importance of a wide range of underlying investment funds for a selection of products
    • Table 19: Financial advisor opinion as to whether they find fund of fund investments straightforward to explain to their clients
    • Table 20: Financial advisor opinion as to whether they find manager of manager investments straightforward to explain to their clients
    • Table 21: Financial advisor opinion as to whether they believe returns achieved through fund of fund investments are worth the higher charging structures
    • Table 22: Financial advisor opinion as to whether they believe returns achieved through manager of manager investments are worth the higher charging structures
    • Table 23: Financial advisor opinion as to the growth potential for REITs over the next 5 years
    • Table 24: Financial advisor opinion as to which type of REIT holds the biggest growth potential
  • List of Figures
    • Figure 1: Sole Traders constitute just over 40% of the total survey sample
    • Figure 2: Just over a quarter of respondents have more than 50% of their client base classified as high net worth
    • Figure 3: Approximately half of respondents have more than 50% of their customer base classified as mass affluent
    • Figure 4: The majority of financial advisors believe sales of many savings products will remain unchanged over the next 6 months
    • Figure 5: Financial advisors are most optimistic as to the growth potential of ISA, SIPP & personal pensions products over the next 6 months
    • Figure 6: Very few advisors had an overtly negative view of providers
    • Figure 7: A large proportion of respondents were indifferent towards providers, citing the belief that their products were not matched to their business model
    • Figure 8: In terms of product providers, financial advisors have a particularly favorable attitude towards Skandia & Friends Provident
    • Figure 9: Financial advisors are most impressed by Invesco Perpetual and Fidelity in terms of mutual fund providers
    • Figure 10: Financial strength and provider service are the greatest influences on an advisor' s choice of provider
    • Figure 11: Over half of financial advisors believe that the asset management arms of life companies have improved over recent years
    • Figure 12: Standard Life, Skandia and Legal & General are perceived to have the best asset management arms
    • Figure 13: Jupiter, Invesco & New Star are mutual fund providers who are also highly rated as asset managers
    • Figure 14: Norwich Union, New Star & Standard Life are perceived to be the top three property fund managers
    • Figure 15: Invesco, Jupiter & Fidelity are the top rated equity fund managers
    • Figure 16: Fidelity, Jupiter & Invesco Perpetual are the three most highly rated international equity fund managers
    • Figure 17: Over three quarters of financial advisors believe that the size of management fees have some impact on their choice of life company
    • Figure 18: Over 70% of financial advisors believe that management fees have an affect on their choice of mutual fund provider
    • Figure 19: Half of those surveyed believed that the level of fee transparency is a particularly important consideration when choosing an investment product
    • Figure 20: Having a wide range of underlying investment funds is important in all product areas
    • Figure 21: Nearly two thirds of financial advisors find fund of fund investments relatively easy to explain to clients
    • Figure 22: More than half of financial advisors find manager of manager funds straightforward to explain to clients
    • Figure 23: Nearly half of financial advisors believe that higher charging structures on fund of fund investments are only occasionally justified
    • Figure 24: Just under a quarter of financial advisors believe that returns achieved through manager of manager investments are not worth the higher charging structures
    • Figure 25: More than 80% of financial advisors believe REITs funds have growth potential over the next 5 years
    • Figure 26: Nearly half of financial advisors believe that equity REITs hold the most potential out of all REIT products