Fund Supermarkets in the UK 2007

Fund Supermarkets in the UK 2007 examines developments in the UK fund supermarket sector and assesses the distribution channels that are in operation. The report analyzes both the current and possible future trends of the industry.
Report Highlights

The UK fund supermarket sector has benefited from investments into tax efficient wrappers; though ISA, investment bond and pension investments. The increased liberation of the pensions market further boosted flows into tax efficient investments through a fund supermarket. The main advantage of fund supermarket products is the access to a large number of funds. Increased investment choice will allow more advisers to fine-tune their customers' pension funds in respect of asset allocation. It also allows financial advisers to engage their customers in deciding upon an investment strategy A key advantage of the fund supermarket industry in the UK is that, it has evolved rather than being set up as an established proposition .This has significantly contributed to its success, allowing features to develop, tailored to the needs of advisors.
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Overview 1
Catalyst 1
Summary 1
Executive Summary 2
Assets under management in the UK savings and investment market reached £1.7bn in 2006 2
The UK fund supermarket industry has developed to meet distribution needs 2
Pan-European legislation has a lesser effect on UK supermarkets than in mainland European markets 2
The main driver of demand for fund supermarkets will continue to be the preferences of advisors 2
Advisors will use platforms as a means of engaging with customers 2
The features of fund supermarkets will evolve to meet advisor needs 3
Fund ranges through supermarkets will become more complex and diverse 3
Volatility in the markets will result in an increased customer demand for structured and alternative investments 3
The future of the fund supermarket is bright 3
The evolution of fund supermarkets into Wraps 3

Market Background 7
Assets under management in the UK savings and investment market reached £1.7bn in 2006 7
Flows of investments into tax efficient wrappers are crucial to the UK investment market and fund supermarkets have benefited from this 8
Distribution Dynamics 11
The UK fund supermarket industry has developed to meet distribution needs 11
Regulatory Climate 14
The regulatory pressures on UK distributors come from domestic rather than pan-European legislation 14
Pan-European legislation has a lesser effect on UK supermarkets than in mainland European markets 14
The overall pressure of regulation in the UK market is encouraging advisors to adjust their business models 14
Regulatory pressures in the UK market will continue to increase, benefiting fund supermarkets 14
Distributor Profiles 16
Cofunds is the leading fund supermarket in the UK 16
Cofunds' primary service offering is for advisors 17
Cofunds' core bond product is the Legal & General Portfolio bond 17
Cofunds' collectives service gives access to over 1000 funds 18
The Cofunds pensions service draws upon the experience of its primary shareholder Legal & General 18
SIPPCentre provides an additional level of pension flexibility for Cofunds customers 18
The Cofunds platforms does not sell directly to consumers 18
FundChoice is the largest customer facing fund supermarket in the UK 19
Cofunds provides administration to other fund supermarkets 20
Fidelity FundsNetwork has successfully translated its US model to the UK market 20
FundsNework launched a new International bond product in 2007 21
FundsNetwork's Unit Trust OEIC account enables flexible investment in over 1000 funds 21
FundsNetwork SIPP is provided by Standard Life and incorporates all investment options 21
The Fundsnetwork platform supports some of the leading players in the financial advice industry 21
Smile Fund Supermarket offers basic savings product through a supermarket platform 22
Skandia and Selestia launch Selestia Investment Solutions 22
FundsDirect has grown since its launch in 1999 to offer over 1500 funds 23
Transact offers fee-based advantages 24
Distribution Strategies 25
The main driver of demand for fund supermarkets will continue to be the preferences of advisors 25
Advisors will continue to grow less fearful of technology 25
Advisors will use platforms as a means of engaging with customers 26
The transition process from commission led to an asset based business model will drive demand for supermarkets 26
Consumers confidence in fund supermarkets will grow leading to increased business for customer facing platforms 26
The features of the fund supermarkets will evolve to meet advisor needs 26
Advisors will increasingly demand solutions that help them deliver a cost efficient service 27
Fund ranges through supermarkets will become more complex and diverse 27
The increased popularity of multi-manager funds allows the limitations of a fund supermarket to be overcome 27
Strategies for choosing funds will continue to grow in sophistication 28
In the UK the fund selection appears to be based on quantity rather than quality 28
The enlarged fund ranges will reach a critical mass 29
Product ranges will grow to include more structured and alternative investments 29
Volatility in the markets will result in an increased customer demand for structured and alternative investments 29
Consumers are increasingly demanding choice, particularly in the pensions space. 29
The move from Defined Benefit (DB) to Defined Contribution (DC) pension provision encourages innovation in pension delivery 30
Platforms must take steps to address the potential disadvantages of fund supermarkets 30
The future of the fund supermarket is bright 30
The evolution of fund supermarkets into Wraps 30
Approaches to entering the Wrap market vary 31
APPENDix 32
Definitions 35
UCITS 35
MiFID 35
Definitions 35
Asset manager / Asset management company 35
Bank 35
Collective Investment Scheme 36
Exchange-Traded Fund 36
Fund of funds 36
Fund supermarket 36
Hedge fund 36
Non-retail market 36
Retail market 36
Structured products 36
UCITS 37
Methodology 37
Further reading 37
Ask the analyst 37
Datamonitor consulting 37
Disclaimer 37
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Table 1: UK retail investment assets 2002-2006 £m 8
Table 2: UK tax efficient investment inflows 2002-2006 £m 10
Table 3: Comparative overview of selected UK fund supermarkets 16
Table 4: UK investment assets 2002-2006 £m 32
Table 5: UK tax efficient investment inflows 2002-2006 £m 32
Table 6: UK Unit Trust and OEIC distribution 2002-2006, % 33
Table 7: Gross retail unit trust ISA sales by distribution channel 2002-2006 % 33
Table 8: Distribution of SIPP new business premiums 2002-2006, % 34
Table 9: Responses to the question "How would you summarise your company website?" 34
Table 10: Ownership structure of Cofunds 35


Figure 1: The UK retail investment market is one of the largest in the world, with assets of £1.7bn in 2006 7
Figure 2: Between 2002 and 2006 there has been a significant growth in tax efficient investments, particularly individual pensions 9
Figure 3: Over 80% of Unit Trust and OEIC sales came through intermediaries in 2006 11
Figure 4: Fund supermarket sales accounted for 38% of the ISA market in 2006 12
Figure 5: The complex choices available in the SIPP market mean that advice is crucial to purchases 13
Figure 6: Ownership Structure of Cofunds 17
Figure 7: Responses to the question "How would you summarize your company website?" 25
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