1. Good afternoon.
Thanks for staying with us, right through to the bitter end. I do hope Lucian
and I make it worth your while.
We’re going to talk to you for probably no longer than 15 minutes or so
about the world of investing, specifically collective investments, risk-based
investments.
We’re looking at how we see the world to be slowly waking up to the fact -
or perhaps not as slowly as we might think actually – that there is a very
real and growing opportunity out there to go straight to the investor,
straight to the money.

2. Let’s be totally clear right up front about what we actually mean here, and
why we think it’s worth 15 or so minutes of everyone’s time.
Lucian will tell you a little more later on about how we get to this number,
but we estimate there’s approximately 6 million consumers who we might
describe as active, direct investors. I mean they get their hands dirty, even
if just a bit grubby. They might not all like to – and more of that later as
well – but they invest off their own bat to some extent.
Thinking just about direct to consumer investment platforms, we size
assets under administration through the platforms at some £65 billion
already. It’s hardly chicken-feed.
And remember these are risk-based investments. So we have stocks and
shares ISAs, by far the most commonly held form of collective, but also
OEICs, unit trusts, investment trusts and so on.

3. I actually sometimes wonder how this market has grown to the size that it
has, given the almost complete lack of attention paid to the consumer over
the years by the providers.
This quote is taken from an interview I conducted with the UK MD of a top
three global asset management company, one that is entirely typical of the
industry. The presence and potential offered by going straight to the
investor is plain to see and well recognised, but even then, almost nothing
is done about it!
The focus of attention has been purely and simply the intermediary. (REFER
BACK TO PREVIOUS CHART) I mean, just look at these product names –
particularly impressive FLAs on display here! (That’s Four and Five Letter
Acronyms, by the way …).
And no I’m not going to explain the ins and outs of SICAVs – my French is
not good enough for that.

4. Why then, are we interested in the consumer NOW? What’s changing?
Well, there’s so much changing, so many convergent macro-factors, it’s
almost impossible to know where to start.
There’s the relentless march of the internet and broadband, giving
investors high-speed access to countless information sources. There’s a
mountain of stats we could throw at you here …
- according to Ofcom, in 2009 UK consumers spent an average of 25
minutes surfing the net, compared to 9 in 2004
- according to the British Banking Association, every 10 minutes, 35,000
people use the internet to check their bank balance or statement online.
In fact, in our Investment Funds Survey earlier this year, the proportion of
active investors turning first to the internet for information on collectives,
overtook those turning first to an intermediary. This is the first time in the
27 years of the study – a real tipping-point in our view.

5. And that ease of access has bought with it a raft of brands that have
become household names …… from the beloved meerkats (NO FS
Conference is complete without a mention of the meerkats) to the deity
that is Martin Lewis.
Now I’m not saying all these guys offer advice – sorry, I mean information –
on SICAVs or any form of collective investment, but they are key in creating
a feeling of familiarity and ease with hunting around ones self for the best
offers on the market …..

6. And of course that growing feeling of familiarity sits very nicely with the
initiatives outlined by Elaine earlier in the day, the devolution of
responsibility to the individual from the state.
From Mr Cameron’s Big Society, to PFEG, the All Party Parliamentary
Committee on financial education for young people, to the sterling work of
the Money Advice Service, the mantra is very clear and is seeping more
and more into the public psyche.
Apologies to the MRS and to Elaine for nicking the agenda entry, it just
saved us searching for another new graphic …

7. And another convergent factor that we’ve been hearing about earlier in
the day, the impact of regulation, in particular the RDR.
Just how the RDR is set to shake up the investment market is something on
which pretty much every stakeholder has a view, but we certainly seem to
be agreed that it is going to shake things up.
One commonly held view is touched on here, another interview I
conducted as part of our Investment Funds Survey. The suggestion is that
the fee-driven model could potentially ‘orphan’ sizeable numbers of
smaller portfolio investors.
In fact in an online survey of 16,000 IFAs conducted earlier this year by
Dunstan Thomas, almost 70% of IFAs consider independent financial advice
to the mass market to be unaffordable following the new qualification and
training requirements demanded by RDR …

8. And I don’t really need to delve deep into the economic backdrop against
which all of this is set.
For those of us repaying mortgages, there’s a clear upside. For those of us
looking for good returns on our capital however, it’s not so bright. We’re all
looking around for something that can beat the unprecedented low
interest rates on offer on the high street.
And when you’re paying for poor performance, we of course throw another
factor into the pot. Perceived high charges, in tandem with poor returns,
are doubtless two of the factors behind the drop in people using wealth
managers and private banks.

9. And all of this creates real opportunity ….
Up to this point, Hargreaves Lansdown has not had a totally open road in
the consumer platform market, but in truth it hasn’t had a great deal of
competition.
This is starting to change however, and very quickly. Stronger competition
is starting to emerge all the time, and the opportunity in the market is
starting to be realised.
Now over to the entire workforce of Lucian Camp Consulting to have a
closer look at this market, what these investors actually look like and our
vision for the future …

10. One thing firmly on our side is that we are all perfectly familiar with active,
direct investors …. aren’t we?
I’m not sure about the bow-tie image here – this is more James Bond than
any type of investor I know – but do we not all mentally picture the active
investor as some studious boffin, immersed in the financial pages of the FT
and various specialist magazines, or hunched over a laptop managing
online variously structured portfolios.
Even if they’re not doing this, they can easily be found on a Sunday at the
Golf Club whilst the good lady prepares the Sunday roast.
Well if we do believe this, we really should think again.

11. Point one to note is that this market is already substantial.
We added some questions to a well-known consumer research omnibus
that feeds us through a funnel of reasonably robust estimations:
- around 55% of consumers today have some form of savings or
investments
- half of these, give or take, have what we might call a form of risk-based
investment
- half of these again, so around 13% of UK consumers all in all, are
‘involved’ to some extent in these investments i.e. do not absolve all
responsibility to a third party, an intermediary.
That presents us with 6m people and an awful lot of invested or investable
wealth.

12. So straightaway we can surmise that all 6 million are unlikely to be golf-
playing, financial hobbyists, hanging on the every word of Motley Fool et
al.
In fact the active, direct investors paint a broad demographic canvas:
- around 3 in 10 are under 45 years of age
- a good proportion, 1 in 5, are social grades C2 DE, a further 3 in 10
classified C1
- so as you might expect, active investment is not the domain of the uber-
wealthy: some 3 in 10 have a household income of £25,000 or less.
What is true to some extent, though by no means exclusively, is that it
remains a primarily male domain, to the tune of approximately 2:1.

13. But if we are to really understand active, direct investors, we need to look
beyond the demographics, and for this we look to Consensus’ Investment
Funds Survey.
As much as these people do not devolve all responsibility for their risk-
based investments to a third party, a good 3 in 5 continue to look to an
adviser to one degree or another.
This may be just for ratification that what they’re thinking of doing is not
complete madness, or for advice that takes them further down the
decision route – whatever the extent, there is a whole spectrum of shades
of grey in terms of self-direction …

14. And, curiouser and curiouser, 1 in 2 direct investors do not get much
pleasure from it or actually find it confusing and complicated.
Even of those who take care of their own investments entirely, 1 in 4 claim
to not get much pleasure from it.
So we have a mind-set for an awful lot of investors that is not a million
miles from how countless people probably think about their garden: they
don’t much enjoy the digging or weeding, or even the more pleasurable
aspects of gardening, but get their hands grubby all the same, when they
could feasibly pay someone else to do something they simply do not enjoy
doing.

15. This means we have a substantial market on our hands, one that is
demographically diverse and that views its own ability or desire to make
decisions in many different ways. They are not the ‘Wall St wannabe’
hobbyists, desperately trying to beat the market at all costs.
In terms of who is looking after them nowadays, stockbroker-led platforms
lead the way, holding some 3 in 5 customer accounts. IFA-led platforms, a
la the Fidelity Funds Networks of this world, have 1 in 4 customer accounts.
The behemoth in this arena however, is Hargreaves Lansdown, with a
whopping 400,000+ customer accounts on the Vantage platform. On
Consensus’ Investment Funds Survey, Hargreaves boasts an impressive 45%
awareness across the entire active investor universe.

16. But what of the future?
Well, it would be churlish to not point out first of all that there remains a
huge opportunity for Hargreaves to just get bigger and bigger.
Likewise the Selftrades and stocktrades of this world. They have a strong
foothold now and surely this will only become stronger over time.
But who else, who ‘new’? The banks, and how seriously they decide to take
up the challenge, will surely be instrumental in defining how well active,
direct investors are serviced in future years.
And then there’s the affinity groups. The Sagas and Asdas of this world can
only continue to make strides into the world of financial services, taking
advantage of their already extensive and diverse customer bases, and their
well developed distribution channels.

17. If anyone is to take advantage of the opportunity however, the vagaries of
the investor market need to be fully appreciated.
In our view the answer is not the launching of any more Hargeaves
Lansdown clones; as much as there is doubtless some opportunity here, it
is not where the greatest potential lies.
The gauntlet we would like to see picked up belongs to those millions of
investors who are patently not hobbyists, who don’t particularly enjoy
being hands-on with their investments but who collectively have a lot of
money in their pockets.
So, be bold, research these people, segment them meaningfully and look
to recruit a new customer base. Take advantage of the environmental
macro-factors we’ve been discussing before someone else does.

18. If you require any information or assistance with any of your market
research needs please get in touch.
Thank you and goodbye …