What’s the difference between a DIY and an advised investor?
No, not another Christmas cracker joke but one of the areas that our latest Consumer Insights report examines. Why DIY investors are much less inclined to invest in ready-made portfolios than those with an adviser is interesting for those thinking about launching a robo-adviser in 2016. The insight that DIY investors are more likely to switch services based on cost than those with an adviser is especially pertinent for those looking to retain or poach either of these types of client.
With so many players thinking about their next D2C steps, whether they are platforms, fund managers, pension providers, banks or even advice companies, we’re picking up a few challenges for the investing industry as a whole to address:
Firstly, investing in funds is a minority sport. DIY investors are much more likely to hold shares or invest in a workplace pension. The fact that premium bonds are far more popular than funds suggests that funds are widely misunderstood.
Secondly, while many newer propositions help people to save towards clear objectives, most of the top investment goals are much more vague and include simply feeling financially secure, maintaining quality of life and saving for a rainy day.
And thirdly, investors are a promiscuous bunch… those with an adviser have between one and two relationships with advisers, platform users have more than one platform, and it’s the same story with investors who have direct relationships with fund managers or pension providers.
However, while we see challenges we also see opportunities, like people wanting to buy directly from providers even if they don’t see them as ‘financial partners’ today. There is plenty of demand for advice and guidance at retirement, particularly around creating income and competitive pricing is the key rather than being cheap. Finally, understanding the risk profile for a portfolio is more important to a large number of investors than outperforming markets.
This suggests that people are happy to receive normal returns based on the risks that they choose to take, which is a fair challenge to anyone looking to manage other people’s assets and puts the emphasis on designing journeys that get people painlessly to a point where they fully understand what they’re being offered.
Congratulations to Aberdeen and Parmenion for completing their deal. Aberdeen say it puts them “at the forefront of the digital revolution within asset management”… it is certainly a big digital tick to kick off the year and enables them to think about how to pursue those investors who want to go directly to the provider.
We too have passed a digital milestone by moving towards downloadable research updates that are available to subscribers from our website. Congratulations also to Elaine Robson of Baillie Gifford who is the first person to download a report… we’ll send you something nice!