The Generational Shift of Financial Advisors

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