The Fall and Rise of the Direct Investor

Andy Glazier

Head of Consensus

Presented to the MRS Financial Services Conference 2011

Lucian Camp

Entire workforce

2 MRS FS Conference October 2011 – The Fall and Rise of the Direct Investor

Who exactly, and direct to what?

OEICs

SICAVs Unit trusts

Approx. 6m active direct investors in the UK today

A D2C platform market of

£64.9b

3 MRS FS Conference October 2011 – The Fall and Rise of the Direct Investor

The abandoned customer

From a funds industry perspective, when I joined the company to

run the retail division, 20% of business was direct to consumers.

We had a hotline and crystal mark literature; none of this happens now however.

We’ve shifted our platform totally to business to business. We still love our direct

customers and give them great service … (BUT)…they have been left alone too

much. The flag that we very much put up is the B2B flag.

I think that there is a big direct to consumer marketplace. I think there is a

perfectly profitable sector which is under-broked at the moment.

MD, pre-eminent global money manager

It’s not in our plan however, to go back there.

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YEAR Users Population % Pop.

2000 15,400,000 58,789,194 26.2 %

2010 51,442,100 62,348,477 82.5 % Source: ITU

Why the interest in them now …. easy access ….

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Why the interest in them now … familiarity …

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Why the interest in them now … responsibility …

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Why the interest in them now … regulatory pressure …

There will be a need for trusted advisers without a question in the future but RDR has shown that the IFA model is corrupt & what will spring up in its place is a new fee driven model for the mid-market.

Director of a market intelligence/ consultancy for the asset management industry

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0%

1%

2%

3%

4%

5%

6%

2006 2011 2009

Why the interest in them now … the market …

BoE Base Rate………..

Source: http://www.bankofengland.co.uk/statistics/rates/baserate.xls

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Why the interest in them now … opportunity …

10 MRS FS Conference October 2011 – The Fall and Rise of the Direct Investor

Late middle-aged Confident hobbyist

Affluent, upper middle class

Avid disciple of FT, Times, maybe even Mail on Sunday money sections

At least we know who we’re dealing with … don’t we?

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Number of people with some savings or investments in the UK

People with savings/

investments 55%

People with no savings or

investments 45%

Number of people with risk-based investments in the UK

Deposit-based savings only

27%

Some risk-based investments

28%

No savings or investments

45%

The active investor market is substantial …

Source: IPSOS MORI Omnibus, November 2010. Unweighted base: 1965 adults. Weighted base: 1960 adults (all findings expressed from weighted base, and excluding don’t know/refused, which was never more than 5%)

Deposit-based savings only

27%

No savings or investments

45%

Involved with risk-based

investments 13%

Not involved with risk-based investments

15%

Number of people actively involved with risk-based investments in the UK

By our reckoning, this leaves us with c6 million people we can describe as active investors ….

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Age Social grade Earnings Sex

Women 36%

Men 64%

£11,500-25,000

19%

<£11,500 - 10%

Over £25,000

71%

AB 50%

C1 30%

C2 12%

DE - 8%

65+ 22%

55-64 23%

45-54 26%

35-44 15%

Under 35 14%

… and represents a broad demographic canvas …

People actively involved with risk-based investments

Source: IPSOS MORI Omnibus, November 2010. Unweighted base: 1965 adults. Weighted base: 1960 adults (all findings expressed from weighted base, and excluding don’t know/refused, which was never more than 5%)

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Rely on adviser but make final decision myself

34%

Consult an adviser but make final decision myself

26%

Take care of my own investments

40%

Which one of the following matches your approach to investing most closely?

Source: Consensus IFS Active Investors Report, April 2011

Active investors still need a helping hand …

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52%

36%

13%

65%

25%

9%

Interested in investing -happy to spend time on it

Get involved, but don'tget much pleasure from it

Find investing confusingand complicated

All Active Investors Take care of own investments

25% who take care of their own investments don’t really enjoy doing so

… and for many, investing is not much fun …

Source: Consensus IFS Active Investors Report, April 2011

Which one of the following most closely matches the way you think about investing?

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Hargreaves Lansdown has c400,000 customers on the Vantage platform

As of Sept 2010, Hargreaves Lansdown had an impressive 45% awareness across the entire AI universe

So who’s looking after active investors now …?

IFA led platform 25%

Fund manager owned platform

15%

Stockbroker led platform

60%

D2C platform market by provider type and number of customer accounts

Source: IPSOS MORI Omnibus, November 2010. Unweighted base: 1965 adults. Weighted base: 1960 adults (all findings expressed from weighted base, and excluding don’t know/refused, which was never more than 5%)

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… and who in the future?

Stockbrokers Banks

Affinity groups And, of course ….

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Recruit a new customer base from scratch

The challenges:

… if the gauntlet is taken up …

Target a platform-based investment service to the many investors who are not hobbyists

Key to future is understanding the market, segmenting it and targeting accordingly

The Fall and Rise of the Direct Investor

Andy Glazier

Head of Consensus

+44 (0)20 7627 7830

www.consensus-research.com

Lucian Camp

Entire workforce

Presented to the MRS Financial Services Conference 2011