More and more British shoppers are choosing to buy their groceries either at discounters or at premium supermarkets, with the middle market players like Tesco taking a good hit as a result. It doesn’t necessarily mean the end of the middle class as some predict, but it does show a big change in shopping behaviour, which has been called the polarisation of the grocery market.
We have also observed a polarisation in the extent to which investors take professional advice or a self-directed approach. While half of the people continue to mix and match – meaning that some of their investments are under advice but they self-manage others – our most recent consumer research shows that the proportion who are either entirely advised, or entirely self-directed, are on the rise.
This confirms what we saw a year ago and could mean that the post-RDR shift is a permanent change in behaviour for some investors. What has driven this change?
- Pension freedoms. The polarisation of investors into the entirely advised camp and the entirely DIY camp is more pronounced for investors reaching retirement age. For some people the buzz around the new freedoms encouraged them to go down the DIY route while for others it was all very confusing and drove them away from making their own decisions and into the offices of financial advisers.
- RDR and the new fee-based world. Why should investors deal with part of their investments themselves if paying a fee to an adviser to manage their other investments anyway? It probably makes more sense to hand everything over to the adviser, especially when partially advised investors say they’d rather not spend time looking after their investments.
- Financial planning and consolidation of assets. Advisers are no longer in the business of picking funds. They are offering a more holistic approach to financial planning and this is coming through in the data. Advisers are increasingly advising clients across all investments and this has led to investors consolidating the management of those assets with the financial adviser. On the opposite side, the DIYers are consolidating their investments onto direct platforms which have been actively targeting people seeking to bring all their pots, including old pensions, together in order to get a better handle on their full investment portfolio.
There are a number of situation where people would find access to a financial adviser particularly helpful including ‘inheritance’, for ‘tax efficiency’, ‘at retirement’ and ‘when looking to draw income from investments’. This suggests that some people will continue to mix and match advice for specific situations with ongoing self-directed arrangements, but on the other hand, for some investors these moments will act as a catalyst to transition towards an ongoing relationship with their financial adviser across all their financial affairs.
We’ll be keeping an eye on the polarisation trend and the impact that FAMR might have on investor behavior… watch out for how things develop in our next consumer research update this summer…