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The Spanish Financial Advice Market 2005
Datamonitor, March 2005, Pages: 54
EXECUTIVE SUMMARY
Market context
Financial advisers and their attitudes
The Spanish Financial Advice Market
INTRODUCTION
What is this report about?
Definition of an independent financial adviser
The independent financial advice market is growing rapidly
Who is the target reader?
How to use this report
MARKET OVERVIEW
Introduction
Key findings
Banks continue to be the most important channel for the distribution of financial services products in Europe
Banks hold more than 50% investment and protection distribution
Tied and multi-tied agents are an important force in European financial services distribution
Insurance company employees are declining in importance in the European market
Brokers and independent financial advisers have had a limited role in European financial services distribution
The European financial advice market is highly fragmented
Europe remains some distance from developing a pan-European financial advice market
Lack of consumer demand and lack of legislation have deterred the development of pan European competitors.
Technological and regulatory change will encourage the development of some pan-European competitors going forward
Product providers will push the market for financial advice in Europe in the next five years
Several providers have looked to buy distribution across boarders
Many product providers have set up offshore arms
Despite these developments product providers have found the financial advice channel difficult to approach successfully across Europe
Pan-European Financial Advice Associations and Standards bodies are attempting to unify the European financial advice market
Financial advisers are somewhat more important in the mutual fund than in the life and pensions markets
Independent advisers hold around 8% of mutual fund distribution in Europe
Independent advisers currently hold a small part of life and pensions distribution market
Private pensions are the products with the potential to have the biggest impact on the European financial advice industry
The private pensions market is yet to deliver results for financial advisers
The life-based investment market has become less attractive
Hedge funds and fund-of-hedge funds are starting to figure for financial advisers
Structured and derivative-based products are growing rapidly in popularity in Germany
European regulation presents a major threat to the fledgling financial advice market in Europe
Financial advisers are in danger of regulation overload
Professional indemnity and capital adequacy 'double whammy' will put up to 30% of financial advisers out of business
Capital Adequacy Directive to increase the required capital buffer by 50%
Financial advisers face two professional indemnity hikes
European advisers may find cover hard to find
The Financial Services Action Plan (FSAP) will radically change the regulatory environment in Europe
Insurance Mediation Directive (IMD) will allow financial advisers to operate abroad
Market in Investment Services Directive (ISD2) will drive up professional indemnity costs
The Distance Marketing Directive sets mandatory cooling-off periods
The European Savings Tax Directive will provide opportunities for financial advisers
Independent advisers' core customers group - the wealthy and financially aware - continue to grow in number across Europe
The affluent market in Europe continues to grow
European consumers are becoming more financially aware
The technology equity bust has reduced the self-directed market
Data
EUROPEAN FINANCIAL ADVISERS AND THEIR OPINIONS
Introduction
Key findings
Financial advice firms in Europe are typically small and independently owned
A minority of financial advisers surveyed are owned by product providers
Most financial advice firms have less than 20 staff
The majority of financial advice companies have less than 500 customers
Financial advisers in Europe focus on developing a close relationship with a focused customer base
The French and Spanish financial advice markets are particularly highly focused on affluent customers
The pre-retirement market is key for financial advisers in Europe
Many financial advisers have expatriate customer bases
Close relationships are crucial to financial advisers' success
The key to financial advice in Europe is direct contact between the adviser and the client
Customers with whom advisers are in frequent contact dominate revenues
Customers breed customers: the majority of new business in the financial advice channel comes through customer referals
Equity-based investments are the most important products for financial advisers in Europe
The dominance of commission is an issue for the European financial advice market
86% of financial advisers' business is commission-based
European consumers don't want to pay for financial advice
The preference for commission-based selling increases the danger of mis-selling
European advisers are technologically aware, but providers are yet to take advantage
European financial advisers are not technophobes
Most financial adviser-to-provider communication continues to be directed through traditional channels
There is little demand from financial advisers for changes in the way they communicate with providers
Providers need to focus on service in order to appeal to financial advisers
Data
THE SPANISH FINANCIAL ADVICE MARKET
Introduction
Key findings
Two banks dominate the financial services distribution market in Spain
Independent intermediaries account for a small part of the Spanish market
Independent brokers hold 8% of the mutual fund distribution market
Independent life and pensions distribution is limited by regulation
Providers own a large proportion of the fledgling financial advice market in Spain
Regulatory restrictions means that there are few pure independent financial advisers in the Spanish market
Renta 4 is the largest player in the limited market in Spain
Spanish advisers tend to be focused on either equity investment or general insurance
Non-investment products play an important role in Spanish financial advisers' sales
New personal pension funds signal a major opportunity for Spanish financial advisers
The attraction of life-based investments in Spain has declined
Regulatory change in the Spanish market has increased trade in mutual funds
Spanish providers offer a large range of life providers, but sales are limited
Pressure is mounting for regulation of the Spanish financial advice market
Despite many positive developments the Spanish financial advice market is held back by lack of public awareness
Customer wealth is growing in Spain
Financial advisers believe that the public is positive towards them
The reputation of banks with the Spanish public is declining
Spanish consumers remain unaware of the independent advice channel
The future for Spanish independent advice looks promising
THE FUTURE DECODED
Introduction
European financial advisers show muted optimism
We believes that the next five years will see independent financial advice start to gain a foot-hold in the major continental European countries
APPENDIX
Supplementary data
Definitions of investment and protection distribution channels
Insurance company employee
Tied agent
Multi-tied agent
Independent financial adviser
Independent broker
Bank/ bancassurer
Other
Other definitions
Research methodology
European Financial Advice Survey, Oct 2004
New Consumers Insights European Consumer Survey October 2004
Future readings
SPP writing team
List of Tables
Table 1: Financial intermediaries in Europe (individuals), 2004
Table 2: Financial intermediaries in Europe (firms) 2004
Table 3: Share of the mutual fund market held by financial advisers, 2003
Table 4: Share of the life and pensions market held by independent financial advisers, 2004e
Table 5: Professional financial advice associations by country France, Germany, Italy and Spain 2004
Table 6: Ownership of European financial advisers
Table 7: Average number of client-facing staff per firm in European financial advice firms
Table 8: Average number of customers per financial advice firm (percentage of financial advisers)
Table 9: Proportion of financial advisers' client base in different asset bands
Table 10: The financial advice market in my country is focused on high net worth individuals?
Table 11: Proportion of financial advice customers in different age groups
Table 12: Proportion of financial advisers whose client base includes expatriates
Table 13: Proportion of communication between client and financial adviser by channel
Table 14: Proportion of financial advisers' business by customer type
Table 15: Channels used by financial advisers to gain new customers
Table 16: Proportion of financial adviser business by charging structure
Table 17: Technological hardware used by financial advisers
Table 18: Factors in financial advisers' choice of product provider
Table 19: Spanish Consumers: To what extent do you agree with the statements?
Table 20: Spanish consumers: To what extent do you agree with the following statements?
Table 21: Who owns your company?
Table 22: What percentage of your current customer base has assets of?
Table 23: What proportion of your sales comes from the following products?
Table 24: How many providers' products do you offer in the following areas?
Table 25: Financial advisers view of the future of their market
Table 26: Percentage of life and pensions new business sold by independent financial advisers
Table 27: Total individuals offering intermediary financial services by country, additional countries, 2004
Table 28: Professional financial advice associations by country, additional countries, 2004
Table 29: Financial advisers' perceptions of their reputation, 2004
Table 30: To what extent do you agree that financial advice is a growing element of the financial services distribution market in your country
Table 31: Which statement is most true about financial advisers in your country?
Table 32: Proportion of different products sold by European financial advisers, 2004
List of Figures
Figure 1: The European Financial Advice Market, report process
Figure 2: Germany has by far the largest number of financial intermediaries in continental Europe, 2004
Figure 3: Germany has more financial intermediary firms than any other European market, 2004
Figure 4: German financial advisers hold the largest proportion of the mutual fund distribution market, 2003
Figure 5: Independent advisers hold 10% or less of life and pensions distribution in the major European countries, 2004e
Figure 6: Most financial advice firms in Europe are independently owned, 2004
Figure 7: Only a small number of financial advice companies have more than 20 employees, 2004
Figure 8: Germany has the largest proportion of large financial advice companies, 2004
Figure 9: More than 30% of financial advisers' clients are High Net Worth
Figure 10: The Spanish and French financial advice markets are concentrated on the pre-retirement age group
Figure 11: A large proportion of financial advisers in France service expatriate customers
Figure 12: Face-to-face and telephone communication remain the dominant forms of communication in the financial advice market
Figure 13: Financial advisers gain most of their revenues from customers with whom they have frequent contact
Figure 14: How do you go about finding new customers?
Figure 15: Mutual funds and stock broking are leading activities for European financial advisers
Figure 16: What proportion of your business is on average?
Figure 17: On average financial advisers' computers are 2-3 years old
Figure 18: Telephone remains the most common means of communicating with providers
Figure 19: Service is more important than performance or commissions to European financial advisers
Figure 20: The banks dominate the market for mutual funds in Spain to the point of excluding financial advisers
Figure 21: More than 50% of Spanish financial advice firms are owned by banks or insurers
Figure 22: Insurance is a key product for advisers in Spain
Figure 23: Around half of financial advisers in Spain offer a variety of mutual fund providers
Figure 24: Spanish customers have close relationships with providers
Figure 25: Confidence in the future of the financial advice channel is muted among financial advisers
Figure 26: Most European countries can expect strong growth in the financial advice market over the next five years
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