Alongside industry guru Ron Wheatcroft, Technical Manager at Swiss Re, Andy Glazier recently co-presented the thought leadership paper “Orphaned or Empowered”? at the Cello Financial Services Conference. Ron and Andy discuss the myriad of issues impacting pensions, protection and investments in 2012 and beyond, paying particular attention to how RDR is putting further pressure on the accelerator pedal.
2. The abandoned investor
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.
It’s not in our plan however,
to go back there.
MD, pre-eminent global money manager
Cello MoneyTalks Conference, September 2012 2
3. Why the interest in them now …. easy access ….
Approximate internet usage
2012 - 84%
Sources: ITU / ONS
Cello MoneyTalks Conference, September 2012 3
4. Why the interest in them now … familiarity …
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5. Why the interest in them now … responsibility …
Responsibility: A detachable burden easily shifted to the
shoulders of God, Fate, Fortune, Luck or one's neighbour. In the
days of astrology it was customary to unload it upon a star.
Ambrose Bierce, The Devil's Dictionary, 1911
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6. Why the interest in them now … the market …
BoE Base Rate………..
6%
5%
4%
3%
2%
1%
0%
2006 2009 2012
Source: http://www.bankofengland.co.uk/statistics/rates/baserate.xls
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7. 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
Cello MoneyTalks Conference, September 2012 7
8. Why the interest in them now … opportunity …
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9. The active investor market is substantial …
A little over 1 in 2 people in the
UK have savings or investments
Of these, around 1 in 2 have
risk-based investments
A little under 1 in 2 are actively
involved with those investments
This gives us approx 6 million
active investors in the UK
Cello MoneyTalks Conference, September 2012 9
10. … and for many, investing is not much fun …
Which one of the following most closely matches the way you think about investing?
All Active Investors
Interested in investing -
52%
happy to spend time on it
Get involved, but don't
36%
get much pleasure from it
Find investing confusing
13%
and complicated
Source: Consensus IFS Active Investors Monitor
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11. Whose responsibility is it today?
Government Employer Individual Don't know
Nursing care for the very old 80% 2% 10% 8%
Income during long-term illness 63% 12% 16% 9%
Rehabilitation 63% 4% 22% 11%
Income after redundancy 55% 16% 21% 9%
Income in retirement 47% 12% 32% 9%
Swiss Re UK Insurance Report 2011, ‘O Shaped Recession’
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12. Whose responsibility in 10 years’ time?
Government Employer Individual Don't know
Nursing care for the very old 35% 2% 45% 18%
Income during long-term illness 31% 7% 44% 17%
Rehabilitation 27% 3% 52% 19%
Income after redundancy 27% 8% 47% 17%
Income in retirement 23% 6% 55% 16%
Swiss Re UK Insurance Report 2011, ‘O Shaped Recession’
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13. In the event of long-term illness, disability or death, how
would your household be financially positioned?
2009 2011
44%
30% 28%
27%
24%
18%
9% 11%
8%
3%
Well positioned Reasonably Might struggle Would struggle & Don't know
financially positioned financially be in financial
financially difficulties
Swiss Re UK Insurance Report 2011, ‘O Shaped Recession’
Cello MoneyTalks Conference, September 2012 13
14. Which statement best describes why you might or would
struggle?
26% 28% 27%
13%
6%
Not enough State won't Not enough No one else to Other
savings provide enough insurance provide for me
Swiss Re UK Insurance Report 2011, ‘O Shaped Recession’
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15. Some challenges facing the pensions market
More downward pressure on pension costs, in face of media and
political comments, both informed and ill-informed
More government/regulatory meddling
Consultancy charging – how will it work in practice?
Will RDR lead to the growth of the financially excluded small business?
Will NEST emerge as a threatening competitor to other pension
providers?
Political pressures to remove some of the constraints on NEST
Should we ditch pensions as a term given the greater use of ISAs in
retirement planning?
Cello MoneyTalks Conference, September 2012 15
16. Pensions and risk benefits
AE could increase the take up of workplace protection sales
Death in service and, to a lesser extent, group income protection
entitlement often conditional on scheme membership
Will employers offer risk cover to all, including those they auto-enrol?
Research for Group Watch suggest positive for group life (average cost
per member across total market is £103, compared with £286 for group
income protection)
Product design for income protection increasingly towards limiting
benefit payment term to between two and five years
Increase of flex and voluntary risk cover business – transferring
responsibility back to the member
Should auto-enrolment remain a pensions issue – how do organisations
dependent on pensions business manage the lack of diversification?
Cello MoneyTalks Conference, September 2012 16
17. Insurance needs to be honest,
clear and jargon free.
Providers need to be seen
to be working with you,
providing a product where
both of you would get
some value out of it.
Cello MoneyTalks Conference, September 2012 17
18. How comfortable would you be buying life or protection
insurance through the following sources?
Very comfortable Fairly Not very Not at all Don't know
Independent adviser 20% 44% 11% 11% 13%
Financial adviser at bank or building society 19% 45% 13% 11% 12%
Internet / website 14% 41% 14% 18% 13%
Solicitor 11% 36% 18% 19% 15%
Employer 11% 35% 16% 19% 19%
Doctor 9% 28% 22% 26% 15%
Supermarket 18% 29% 37% 14%
High street department store 12% 30% 42% 14%
iPhone app 5% 17% 63% 13%
Youtube 15% 69% 12%
Facebook 14% 70% 11%
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19. The view from employers
I would be prepared to allow an insurance company to offer
protection products to employees at the workplace
Strongly agree Slightly agree
Neither agree nor disagree Slightly disagree
Strongly disagree Don't know/ refused
6% 19% 25% 17% 22% 11%
“It's quite different to say buy this critical illness plan and then it does not pay”
Senior industry figure
Cello MoneyTalks Conference, September 2012 19
20. So, what now??
The world is changing …………
More than ever before, our financial fate is in our own hands
And as much as we may not like it, we do know it’s happening .....
If only we could simplify our products and our terminology,
then surely many more of us would feel confident enough to
take matters into our own hands …..
But this is a big ‘if’ ……
So where does the opportunity lie?
Make the most of existing relationships
Surely the time is now for banks in particular, with their brand clout, high street
presence and deep-rooted relationships?
And what about affinity brands? We’ve seen it in insurance already, with the Tesco
Bank’s of this world prospering for the very same reasons – familiarity, relationship
As much as it seems we’ve been hell bent on making enemies over the last
few years, the day of the consumer-friendly financial services brand is here
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