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Impact and Unintended Consequences of RDR in the UK Financial Market

Explore the effects of the Retail Distribution Review (RDR) on UK financial advisory landscape, from advice gaps to shifting business models and the rise of D2C services. Stay informed on sales trends and changing dynamics in the industry.

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Impact and Unintended Consequences of RDR in the UK Financial Market

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  1. Impact and unintended consequences of RDR on the UK Bella Caridade-Ferreira, MD, FundscapeFinancial-Clarity Seminar, London, 31st October 2013

  2. Pre-RDR predictions  • Advice will become the preserve of the wealthy. A significant advice gap will open up. • Advisers will prune their businesses of unprofitable clients (or those unwilling to pay). • Even a proportion of mass-affluent /affluent are expected to be unwilling to pay for advice. • As a result of the three points above, direct-to-consumer (D2C) business will explode. • Charges will be driven down for fund managers and platforms. • Investment solutions will expand and passive business (trackers, ETFs) will grow exponentially. • Increased use of packaged solutions (DFMs, model portfolios, FoFs)      

  3. The jury is still out, but in Q1… • Q1 2013 gross sales marginally higher than Q1 2012: + +1% • Aggregation: platforms +12%,L&P: -5.2%,FMG: +7% • Direct-to-consumer business up by 32% • Bank business down by 19% • IFA business down by 5% • IFA numbers down from just over 30,000 in July 2012 to 26,563 in July 2013 Source: Matrix Solutions Financial-Clarity database

  4. …However, H1 is looking better • H1 2013 gross sales considerably higher than H1 2012: +28% • Aggregation: platforms +34%,L&P: +40%,FMG: +18% • Direct-to-consumer business up by 68% • Bank business up by 5% • IFA business up by 20% • Employee benefit consultants up 80% • Adviser numbers starting to creep up and are 27,607 in Sept 2013 Source: Matrix Solutions Financial-Clarity database

  5. …Context Source: Matrix Solutions Financial-Clarity database

  6. Q3 - hot of the press! Platforms account for 54% of gross flows in Q313 Gross new sales for Financial Advisers, WMs, and EBC Source: Matrix Solutions Financial-Clarity database

  7. Q3 - hot of the press! Another strong quarter for advised retail. Gross new sales for Financial Advisers, WMs, and EBC Source: Matrix Solutions Financial-Clarity database

  8. Q3 - hot of the press! YTD numbers for customer-facing channels are all up… but some are more up than others Gross new sales for FAs, WMs, EBCs comparing Jan-Sept 2012 to Jan-Sept 2013 Source: Matrix Solutions Financial-Clarity database

  9. …Context Source: Matrix Solutions Financial-Clarity database

  10. What’s changed? OR

  11. There may be trouble ahead…

  12. Advice in the UK Pre-RDR advice model Post-RDR advice model WMPrivate banks High-end IFAs WMPrivate banks High-end IFAs HNW HNW ~10-15% of UK population* ~5-10% of UK population* WMs IFAs Banks WMPrivate banks High-end IFAs Mass affluent Mass Affluent IFAs Banks IFAs Banks Retail Retail Retail Zilch Retail * Fundscape estimates

  13. Future of retail? OR

  14. Known and unknown unknowns • The clean and superclean share-class debate • Aggregation and/or distribution • Simplified and/or retail advice – the advice gap? •   Investment propositions and fund concentration • Passive v actives • Competing products

  15. Q3 – hot off the press! Passives are up 42% on like-for-like sales in 2012. Gross new sales for Financial Advisers, WMs, EBCs, D2C and Banks/BS Source: Matrix Solutions Financial-Clarity database

  16. Q3 – hot off the press! ETFs are starting to make a come back - flows are 17% higher than 2012 Gross new sales for Financial Advisers, WMs, EBCs, D2C and Banks/BS Source: Matrix Solutions Financial-Clarity database

  17. Q3 – hot off the press! But active funds are also kicking butt – sales are up 54% YOY. Gross new sales for Financial Advisers, WMs, EBCs, D2C and Banks/BS Source: Matrix Solutions Financial-Clarity database

  18. Q3 – hot off the press! Multi-manager funds are growing more slowly: up 27% YoY Gross new sales for Financial Advisers, WMs, EBCs, D2C and Banks/BS Source: Matrix Solutions Financial-Clarity database

  19. Q3 – hot off the press! ITs the largest gainers: up 93% YOY Gross new sales for Financial Advisers, WMs, EBCs, D2C and Banks/BS Source: Matrix Solutions Financial-Clarity database

  20. Thank youBella Caridade-Ferreira, MDbella@fundscape.co.uk+ 44 (0)20 7720 1183

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