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Orphaned or empowered - pensions, protection and investments in 2012 and beyond
 

Orphaned or empowered - pensions, protection and investments in 2012 and beyond

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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 ...

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.

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    Orphaned or empowered - pensions, protection and investments in 2012 and beyond Orphaned or empowered - pensions, protection and investments in 2012 and beyond Presentation Transcript

    • Orphaned orEmpowered?Disruption: a Cello Group Financial Services Conference Andy Glazier Ron Wheatcroft Head of Consensus Technical Manager
    • 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 managerCello MoneyTalks Conference, September 2012 2
    • Why the interest in them now …. easy access ….Approximate internet usage 2012 - 84% Sources: ITU / ONSCello MoneyTalks Conference, September 2012 3
    • Why the interest in them now … familiarity …Cello MoneyTalks Conference, September 2012 4
    • Why the interest in them now … responsibility …Responsibility: A detachable burden easily shifted to theshoulders of God, Fate, Fortune, Luck or ones neighbour. In thedays of astrology it was customary to unload it upon a star.Ambrose Bierce, The Devils Dictionary, 1911Cello MoneyTalks Conference, September 2012 5
    • 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.xlsCello MoneyTalks Conference, September 2012 6
    • 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 industryCello MoneyTalks Conference, September 2012 7
    • Why the interest in them now … opportunity …Cello MoneyTalks Conference, September 2012 8
    • 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 UKCello MoneyTalks Conference, September 2012 9
    • … 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 dont 36% get much pleasure from it Find investing confusing 13% and complicated Source: Consensus IFS Active Investors MonitorCello MoneyTalks Conference, September 2012 10
    • Whose responsibility is it today? Government Employer Individual Dont 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’Cello MoneyTalks Conference, September 2012 11
    • Whose responsibility in 10 years’ time? Government Employer Individual Dont 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’Cello MoneyTalks Conference, September 2012 12
    • 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 & Dont know financially positioned financially be in financial financially difficulties Swiss Re UK Insurance Report 2011, ‘O Shaped Recession’Cello MoneyTalks Conference, September 2012 13
    • Which statement best describes why you might or would struggle? 26% 28% 27% 13% 6% Not enough State wont Not enough No one else to Other savings provide enough insurance provide for me Swiss Re UK Insurance Report 2011, ‘O Shaped Recession’Cello MoneyTalks Conference, September 2012 14
    • 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
    • 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
    • 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
    • How comfortable would you be buying life or protection insurance through the following sources? Very comfortable Fairly Not very Not at all Dont 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%Cello MoneyTalks Conference, September 2012 18
    • 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 Dont know/ refused 6% 19% 25% 17% 22% 11% “Its quite different to say buy this critical illness plan and then it does not pay” Senior industry figureCello MoneyTalks Conference, September 2012 19
    • 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 hereCello MoneyTalks Conference, September 2012 20
    • Orphaned orEmpowered?Disruption: a Cello Group Financial Services Conference Andy Glazier Ron Wheatcroft Head of Consensus Technical Manager