The Future of European Investment Distribution

Table of Contents

• DATAMONITOR VIEW
  • CATALYST
  • SUMMARY
• EXECUTIVE SUMMARY
• MARKET SIZE
  • The European market for private investments is robust and growing
    • Market growth is having an important effect on the distribution landscape
    • Liquid assets in Germany and the UK are particularly high
    • Liquid assets across the key European markets are projected to grow strongly in value
    • The growth in the value of long term investment assets is more variable across Europe
    • The UK is home to a proportionally large number of high net worth individuals
    • The number of mass affluent and high net worth individuals is projected to grow steadily
    • Overall growth in the high net worth sector is predicted to be even stronger
  • The sophistication of the financial advisory sector varies widely across Europe
    • The financial intermediary population is often swelled by largely unqualified advisors
    • The regulatory purity of investment markets in Europe varies widely
      • Limited regulation in Germany may open up opportunities for quality investment advice
      • The UK and Switzerland are subject to detailed regulatory guidelines
      • The IFA sector in the UK is particularly well developed
    • Single tied advisors dominate the advisory markets in a majority of European countries
  • Bancassurance is currently the dominant distribution channel in Europe
    • A significant proportion of long term investment assets are distributed via the bancassurance channel
    • France is the largest bancassurance market in Europe
    • The distribution landscape in Germany is slowly diversifying
    • The UK and Switzerland represent exceptions to the rule
    • Data
• MARKET DRIVERS
  • The bancassurance channel is very strong across most of Europe
    • In continental Europe, the bancassurance channel dominates the distribution of retail investment products
    • Consumers in much of Europe are unused to paying for financial advice
    • The strength of the banking channel is driving the development of bancassurance partnerships
  • Demographic change is stretching state pension schemes to breaking point
    • The support ratio is decreasing in almost all European countries
  • The closure of defined benefit schemes is polarizing the market
    • Mass market consumers are driving demand for long term investments via the bancassurance channel
    • However, as defined benefit schemes close, more affluent consumers are seeking independent advice
      • In turn, this has driven the development of partnerships with firms of financial advisors
  • In the UK, foreign and domestic banks are responding to consumer demand for long term investments
    • Foreign banks have identified an opportunity to compete with the IFA sector in the UK for top end clients
    • Domestic banks are considering developing their own distribution channels
• REGULATION
  • Regulatory change has had a key impact on the investment and savings landscape in Europe
    • The Financial Services Action Plan was intended to create a unified financial services market in Europe
      • Insurance Mediation Directive
      • Markets in Financial Instruments Directive (MiFID)
  • Other pieces of national legislation are also having an impact on the investment distribution landscape
    • A new financial advice certificate is being developed in Spain
    • The new status of Conseiller en Investissement Financier has been established in France
    • The effects of depolarization in the UK are slowly effecting a shift in the distribution landscape
    • The Treating Customers Fairly initiative in the UK was intended to ensure the quality of financial advice
• ACTION POINTS
  • European markets offer strong potential for distributing investment products
    • Demand for investment products is growing across Europe
    • Increasing demand combined with the impact of regulation is opening up the distribution landscape
  • Distribution strategies must be tailored to different markets and market segments
    • Each market and consumer segment requires a clearly differentiated strategy
    • In order to develop effective distribution networks, partnerships can be highly effective
  • As the pensions market evolves, opportunities emerge to sell new investment products
    • Variable annuities may become a more prominent feature in the European investment landscape
• APPENDIX
  • Definitions
  • Further reading
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
  • List of Tables
    • Table 1: Value of liquid assets in Europe in 2006e, EURbn
    • Table 2: Projected value of European liquid assets, 2005 - 2010f, EURbn
    • Table 3: European life and pensions assets, 2006e - 2010f EURbn
    • Table 4: European mutual funds assets, 2006e - 2010f EURbn
    • Table 5: Number of wealthy individuals in Europe, 2006e (000s)
    • Table 6: Number of mass affluent individuals in Europe, 2006e - 2010f
    • Table 7: Number of high net worth individuals in Europe, 2006e - 2010f
    • Table 8: Financial intermediaries in Europe segmented by type, 2005
    • Table 9: Financial intermediaries in Europe segmented by channel (%), 2005
  • List of Figures
    • Figure 1: Value of liquid assets in Europe in 2006, EURbn
    • Figure 2: Projected value of European liquid assets, 2005 - 2010f, EURbn
    • Figure 3: European life and pensions assets, 2006e - 2010e EURbn
    • Figure 4: European mutual funds assets, 2006e - 2010e EURbn
    • Figure 5: Number of wealthy individuals in Europe, 2006
    • Figure 6: Number of mass affluent individuals in Europe, 2006e - 2010f
    • Figure 7: Number of high net worth individuals in Europe, 2006e - 2010f
    • Figure 8: Individual financial intermediaries in Europe segmented by country, 2005
    • Figure 9: Modified number of Individual financial intermediaries in Europe segmented by country, 2005
    • Figure 10: Comparative size and sophistication of European investment markets
    • Figure 11: Financial intermediaries in Europe segmented by channel (%), 2005