Overview:

Introduction

UK IFAs 2010 provides valuable analysis of the IFA industry. It provides strategies that IFAs have to confront the challenges posed by regulatory demands, changing consumer behaviors towards financial advice and technological developments within the life and pensions market to evolve their business models and make it relevant to the customer.
The UK IFAs 2010 assesses the strategies IFAs have to confront challenges posed by regulatory demands and changing consumer behaviors towards financial advice to evolve their business models and make it relevant to the customer.

Scope of this research
• Comprehensive analyses of key product, pricing, regulation and competitor trends affecting the UK IFA industry.
• Identifies key network competitors in the UK IFA market and their business efficiency.
• Presents the challenges and opportunity that the RDR presents for IFAs and wealth managers.

Research and analysis highlights
The RDR presents an opportunity for IFAs to regain trust from consumers who have become wary of seeking professional financial advice in the fallout from the recent recession.

The cost of doing nothing will hurt IFAs’ businesses and advisors will need to ensure they can position themselves as pivotal to the customer’s needs in order to succeed.

Key reasons to purchase this research
• Gain valuable insight into market leaders' views of how the UK IFA market can capitalize on opportunities under the RDR.
• Understand the current and future issues the IFA market face and the key market drivers for new business.
• Identify key competitors and how efficiently their business operates.

Overview 1
Catalyst 1
Summary 1
Executive Summary 2
The RDR produces three key challenges on the market structure and competition for IFAs 2
IFAs face other challenges from challenging consumer behaviors and changing technological developments 3
The IFA model in a post-RDR landscape 9
Introduction 9
The RDR demonstrates clarity of offering and value to IFAs’ customers 9
Upfront fees will result in punitive cost burden to IFAs' clients 12
Higher professional standards will help to increase consumer confidence in the market 14
Independence requirements for IFAs will improve the reputation of financial advice 17
The RDR will influence the uptake of wrap platforms by advisors 17
Significant commercial opportunities exist for entrepreneurial IFAs who can demonstrate their value to the consumer 19
The RDR will also create challenges and offer opportunities for wealth managers 19
Challenges to the IFA model 21
Introduction 21
Traditional advice channels are becoming an outdated model for consumers 21
Consumers' lack of trust in financial advisors presents a strong challenge to the market 24
Wrap technology will continue to be demanded by financial advisors 27
Aggregator sites challenge IFAs especially in the protection market 39
Market Focus 41
Introduction 41
IFAs have maintained their dominant market share of distributing life and pensions products 41
Financial advisors continue to dominate the distribution of single premium life products in the UK 43
The distribution of regular premium life products remain focused through IFAs 48
Personal pension products continue to generate the most new business for IFAs 51
Forecasts demonstrate the continuing dominance of IFAs for the distribution of life and pension products 54
The number of IFAs have seen their decline reversed in 2010 64
Investment business contributes the most to IFAs' grossed aggregate turnovers 67
Competitor Focus 70
Consolidation continues to be the theme for IFAs as firms seek better capitalization 70
Sesame dominates over its peers as the largest IFA network by turnover and sales staff 70
APPENDIX 75
Definitions 75
Product definitions 75
ABI definitions of distribution channels 79
Matrix-Data definitions 80
Methodology 81
Further reading 82
Ask the analyst 82
Datamonitor consulting 82
Disclaimer 82


TABLE OF FIGURES
Figure 1: The RDR outlines advice categories into three main sections 10
Figure 2: There are a series of steps that need to be taken before the RDR can be implemented 11
Figure 3: Financial advisors/brokers and insurers are the least trusted financial service companies in 2009 16
Figure 4: Most pensions are opened through employers 22
Figure 5: The use of online channels is more pertinent in the purchase of life products than pensions 23
Figure 6: Consumers trust insurers and financial advisors or brokers the least 25
Figure 7: More than a third of advisors use only one wrap platform 29
Figure 8: Stocks and shares ISAs and unit trusts and OEICs are understandably popular on wraps 30
Figure 9: Advisors are likely to conduct more life and pensions business through wraps in the next 12 months 34
Figure 10: Advisors perceive wrap platforms to be subjected to the ‘whole of market’ test 36
Figure 11: Financial advisors lead in the sale of life and pensions products 42
Figure 12: IFAs have seen new business from single premium life products fall drastically in 2009 44
Figure 13: IFAs dominate the sale of protection products in the regular premium life market 48
Figure 14: New business in personal pensions commanded the single premium pensions market for IFAs 52
Figure 15: Group personal pensions continue to generate the most new business for IFAs in 2009 53
Figure 16: Independent advisors will continue dominating in the distribution of life and pensions products 55
Figure 17: Unit-linked bonds will command single premium life sales by IFAs over the next five years 56
Figure 18: Term assurance will continue to dominate new business for IFAs in the regular premium life market 58
Figure 19: Single premium pensions new business by IFAs will be muted over the next 5 years 61
Figure 20: Group personal pensions are forecasted to dominate the regular premium pensions market 62
Figure 21: The total number of IFA firms observed an increase in 2010 64
Figure 22: Appointed representatives and network members are bolstering their presence in the UK IFA market 65
Figure 23: Small firms with less than five sales staff dominate the UK IFA market 66
Figure 24: IFAs generate most of their revenue from investment products over pensions or protection 68
Figure 25: Gross turnover of IFA firms declined significantly in 2010 from the previous year 69
Figure 26: Sesame is the largest IFA network by turnover in 2010 71
Figure 27: St James's Place employs the largest number of sales staff in relation to its peers 73
Figure 28: “Quasi-Delphi” forecasting technique 81


TABLE OF TABLES
Table 1: Question: to what extent do you trust the following types of FS company? 16
Table 2: Life insurance by channel of opening 24
Table 3: Level of trust in financial services providers 27
Table 4: How many platforms do you use? 29
Table 5: Currently, how much roughly of new business for these products do you conduct through wrap platforms? 32
Table 6: To what extent do you agree that you will be actively moving the products below onto wrap platforms in the next 12 months? 35
Table 7: To what extent do you agree with the following statements? 37
Table 8: Total life and pensions new business through IFAs, £m APE, 2005 -2009 42
Table 9: Single premium life new business premiums through IFAs, £m 2005 - 2009 45
Table 10: Regular premium life new business premiums through IFAs, £m APE, 2005 -2009 50
Table 11: Total (regular and single pension premiums) new business premiums (£m APE), by channel, 2005–09 51
Table 12: Single premium pensions new business through IFAs, £m, 2005-2009 52
Table 13: Regular premium pensions new business through IFAs, £m APE, 2005-2009 54
Table 14: Forecast total life and pensions new business by distribution channel 2010f-2014f, £m APE 55
Table 15: Forecast single premium life new business through IFAs 2010-2014, £m 57
Table 16: Forecast regular premium life new business through IFAs 2010-2014, £m APE 59
Table 17: Forecast single premium pensions new business through IFAs 2010-2013, £m 61
Table 18: Forecast regular premium pensions new business through IFAs 2010-2013, £m APE 63
Table 19: Number of sales staff in IFA firms, 2005-2010 67
Table 20: Turnover of the UK IFA networks by competitor in 2010 72