The history of financial markets is littered with the bodies of providers in the adviser market that failed to adapt to new trends and advances in technology. Some went out of business, or were acquired and absorbed into new entities. ‘You probably didn’t notice it at the time’, says David Tiller, Head of Platform Solutions at Standard Life, ‘but you lived through a mass-extinction event’.
58 high profile UK financial brands no longer existSource: DataMonitor, FCA and Money Marketing
Since then, a fair few new providers have entered the UK adviser market, and quite a number of them have prospered. At the end of 2003, the top three market positions were held by HBOS Financial Services, Norwich Union and Legal & General. But it’s telling that today, those positions are held by Standard Life’s Wrap and Elevate platforms, Quilter and Transact; the industry’s landscape has altered significantly.
‘It is not the strongest or the most intelligent who will survive, but those who can best manage change’
– Charles Darwin
There’s been a fundamental change to how financial services are provided and consumed, which is evident in the number of direct sales forces and advisers in the market – there are now around 30,000 firms in operation, down from 200,000 in 1992. This reflects a more connected, digital world, and the diminishing of face-to-face meetings and the direct-selling model.
UK - impact on market leaders
As well as a number of exits, market change has created opportunity for new entrants
UK Advised Market Share end 2003
|HBOS Finl Serv||18.20%|
|Legal and General||7.00%|
|AXA Sun Life||7.00%|
Bonds offering guaranteed returns, workplace pensions, personal pensions, protection and annuities mainly invested in embedded insured funds
UK Advised Market Share Q1 2019
|Standard Life Wrap and Elevate||12.30%|
Investment services accessed through a platform service (primarily mutual funds) wrapped in tax products such as self-invested personal pensions and individual savings accounts (ISAs)
UK - impact on advice propositionSource: DataMonitor, FCA and Money Marketing
Fundamental change to how financial services are consumed
- Product focused direct salesforce numbers have declined steeply
- Client centric advisory models have proven much more robust
Clients must come first
‘Consumer protection is a huge driving force’, says David. ‘The market is now more client-centric, which is a huge improvement.’ Distribution businesses today, now predominantly advisory firms, are focusing on what the client needs, and not what their firms have to sell. This has led to increased customisation and less commoditisation, and with it, a focus on the value added for the client.
There’s been an evident shift from mass production to mass personalisation, observes David. This has led to less duplication in models and platforms, which has been of benefit to both the service providers and their clients in terms of lower related costs.
‘If the customer cannot tell the difference between your service and something else, then the difference becomes the price – and they’ll pick the cheaper option’
- David Tiller
The creation of value is all-important. Clients are prepared to pay more when there’s a tangible, value-added benefit. They’re not prepared to pay up for commoditised, ‘me-too’ services. ‘Individualisation is going to be a huge theme’, says David – 'individualisation driven by better technology’.
The future is here
The recent development of individually managed accounts (IMAs), on our Wrap platform, recognises that value can be created in the customisation and optimisation of investment choices for the individual. As with all investments, the value can go down as well as up, and could be worth less than originally invested.
In the UK, around 40% of advisers now use separately managed accounts within their client investment solutions. This reflects an industry move towards open, flexible investment solutions; we’re breaking the historic mould of offering just commoditised platform products.
The new technology allows financial planners and investment managers to work together and deliver individual client outcomes in a centralised, scalable and efficient way. The product marks the shift from platform model portfolios to individually tailored accounts. ‘If you lose the individualisation, you lose the USP,’ David warns.
Our IMAs aim to provide all clients with a bespoke, consistent and value-enhancing result. The technology can easily and efficiently execute agreed client investment strategy. Auto-adjustments can be made to make sure plan targets are met. We believe these features, and an all-round client-centric service, represent the future of client-led investment solutions.
‘The world will be different’, David prophesies, ‘and if you keep doing the same old thing, your business might not actually be here to see the future’.