ComPeer has undertaken research with 1,000 affluent and high net worth investors to determine the effect of changing regulation, principally RDR, on the relationships with their wealth managers and advisers. This research answers some important questions - do clients understand the changes, are they aware of changes to fee structures and advice, is advice still accessible, have their investment preferences changed?

1. Regulatory and
Investment Change:
The Client’s View
26th November 2013
Research Partner

2. Background to the wealth
management industry
• 150 firms
• £600bn of assets under management and
administration as at 30th September 2013
• £5.15bn of revenues in 2012 – Record Year
• £1.18bn of pre- tax profits in 2012 – Record Year
• Rising hidden and direct costs of compliance
creating record cost levels in 2012 (£3.97bn)
Research Partner

3. The interviewees
Investable Assets Individuals Surveyed
MASS AFFLUENT
£50k - £249,999
401
AFFLUENT
£250k - £999,999
406
£1m+
200
HIGH NET WORTH (HNW)
Research Partner

4. Persuading clients to invest more
What would persuade you to invest cash currently held on deposit in
other investment products or asset classes?
• A guaranteed return on capital
– 58% said YES
• A guarantee that my capital is protected
– 57% said YES
Research Partner

5. The necessity to take risks
HNW
“I took a big hit in
the downturn and
it won't ever
recover to predownturn levels”
77%
Affluent
70%
Mass Affluent
63%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
% of respondents that AGREE or STRONGLY AGREE with the statement: "Risk is
necessary to make money"
HNW
58%
Affluent
49% are worried
about volatility in
the stock market
47%
Mass Affluent
38%
Research Partner
0%
10%
20%
30%
40%
50%
60%
% of respondents that AGREE or STRONGLY AGREE with the statement: "I
would be happy to risk losses to get potentially greater long-term gains"
70%

6. The importance of investment performance
Choosing a wealth manager / adviser
Proportion ranking it as main
reason for choosing a wealth
manager / adviser
1. Investment Performance
2. Brand / Reputation
3. Range of products
4. Relationship with firm
5. Level of fees
Mass
Affluent
Affluent
HNW
45%
27%
9%
8%
7%
40%
30%
10%
12%
7%
37%
30%
11%
13%
5%
Performance was the
top scoring element
when considering
value for money
All
41%
29%
10%
10%
7%
Staying with a wealth manager / adviser
Proportion ranking it as main
reason for staying with a
wealth manager / adviser
1. Investment Performance
2. Brand / Reputation
3. Relationship with firm
4. Range of products
5. Other*
Mass
Affluent
Affluent
HNW
All
41%
21%
13%
10%
10%
40%
16%
18%
11%
7%
40%
15%
21%
9%
9%
40%
18%
17%
10%
9%
Research Partner
*Specified ‘others’
include trust, lack
of other options
and cost and
hassle of
changing

7. The role of the regulator
“They should be much more interested in fraudulent behaviour,
and be prepared to prosecute accordingly. They should be less
involved in creating costs in legitimate businesses”
“Avoid mis-selling. Put pressure on the high risk sales advisers
and reduce unnecessary paperwork on reliable players”
“Protect against unfair practices, make things
transparent, but ensure good advice gets rewarded.”
“Ensure that investors are fully and honestly informed
about the nature of financial products and forbid the
sale of certain types of product.”
Research Partner

8. Few have heard of RDR
Have you heard of the FCA’s RDR?
Discretionary Investors
24%
76%
Advisory Investors
26%
Yes
No
74%
Research Partner
Of those who had heard of RDR, 70%
claimed to know of its objectives

9. A lack of communication
Have you been approached by your wealth manager/adviser to discuss
your old portfolio post January 1st 2013?
46%
Advisory
54%
Yes
45%
Discretionary
0%
10%
20%
No
55%
30%
40%
50%
60%
70%
47% of investors believe they should meet with
their wealth manager either twice, four times or
more than four times per year - whereas, in reality
only 29% meet this standard
80%
90%
100%
Research Partner

10. The impact of regulation
How do you believe changes in regulations over the last 5
years have impacted the services you receive from your
wealth manager/adviser?
Positively
17%
Negatively
11%
No impact
40%
Unsure
87% of
those who
cited a
positive
impact of
regulation
agreed that
costs are
now more
transparent
32%
Research Partner

11. The movement away from advice
Likelihood to invest
without advice
Mass Affluent
Affluent
HNW
All
Very Unlikely Unsure
unlikely
15%
26%
17%
10%
22%
15%
13%
21%
14%
12%
23%
15%
Likely
27%
32%
28%
29%
Very
likely
15%
22%
26%
20%
Research Partner
Half of investors are now likely to invest without advice

12. Clients picking up the bill
Do you believe the costs associated with wealth managers/advisers
complying with new regulations will mainly be...
70%
66%
60%
50%
40%
30%
20%
7%
10%
12%
15%
0%
Research Partner
Passed on to you
Absorbed by the wealth
manager/adviser
Shared approximately
equally
Don't Know

13. Fees increasing as a result
Has the level of fees for your investment services in the last year...
75%
All
7%
HNW
7%
18%
67%
stayed the same
27%
decreased
74%
Affluent
7%
Mass Affluent
7%
increased
18%
80%
13%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Research Partner
Only 13% believe their wealth manager / adviser
is hiding the true level of fees

14. Setting the right charging structure
What investors
currently pay
What investors
want
Fees only, based on a percentage of assets
held
33%
27%
Fees only, based on an hourly charge or fixed
amount
11%
21%
Commission only
27%
27%
A combination of fees and commissions
30%
25%
Research Partner

15. Understanding client reports
Overall understanding of the information in the reports you
receive from your wealth manager(s)/adviser(s)
1%
19%
5%
19%
I understand almost
nothing at all
I understand a little
90% of
investors are
satisfied with
the reports
they
currently
receive
I understand some
55%
I understand most
Understand all
Research Partner

16. Areas for improvement
at least some
improvement
significant
improvement
Client portal
62%
17%
Client communications / education
55%
16%
Formal surveys of clients' opinions
47%
14%
Advice on Pensions, inheritance and tax issues
44%
15%
Client events/networking opportunities
39%
11%
Mobile apps
38%
17%
Offer more time with my relationship manager
38%
10%
More bespoke service
36%
10%
More knowledgeable staff
35%
9%
Quality of staff
33%
10%
Research Partner
40% of those seeking significant improvement are likely to
switch wealth managers if problems are not resolved

17. Future expectations
Proportion of investors AGREEING with the following statements:
I want my financial adviser to be independent of the products and solutions they
recommend to me
I want my main relationship to be with the person who makes the decisions for
my investments, rather than a Relationship Manager
87%
63%
I will place more emphasis on understanding risk and my risk tolerance
52%
I will take more control of investment decisions
46%
I will be willing to pay more for a service that meets my needs exactly
39%
I would stay with the wealth management firm if my current adviser left
36%
I will expect to pay lower fees for wealth management services
34%
I will consider splitting my wealth between a greater number of institutions
34%
I will expect more regular contact from my wealth adviser
31%
I will be more sceptical of investment products offered by my provider
24%
Research Partner

18. Clients’ opinions of wealth managers / advisers
Proportion of investors AGREEING with the following statements:
My wealth manager/adviser ensures my investment products are
appropriate for my declared preferences
67%
My wealth manager/adviser listens to my opinions and needs
65%
My wealth manager/adviser is independent
64%
My wealth manager/adviser employs highly capable personnel
57%
My wealth manager/adviser delivers value for money
56%
My wealth manager's/adviser's interests are aligned with their clients
53%
My wealth manager/adviser delivers a premium service
44%
My wealth manager/adviser pushes products at clients that they don't
really need
13%
My wealth manager/adviser hides the true levels of fees
13%
Research Partner

19. Client-centric: yes or no?
Would you describe the following as client-centric?
Strongly agree
Agree
Neutral
Disagree
Strongly disagree
Wealth
Management in
General
5%
30%
50%
12%
3%
Your main Wealth
Manager
12%
42%
38%
7%
1%
Research Partner

20. Conclusions
• Communication a major concern
• Formation of an advice gap with clients becoming
self-directed
• Clients expecting higher charges to cover increased
regulatory costs
• Wish for greater punishment for non-compliant firms
and more reward for legitimate firms
• Room for improvement when raising trust and clientcentricity
Research Partner
• Investment performance is very important