Axa Wealth chief executive Mike Kellard casts his eyes on the challenges and opportunities he expects 2013 will bring.
Last year was a tough one for the industry as a whole, and entering 2013 we are still operating in a challenging market place. You only have to pick up a paper, watch the news or hear the headlines to know that global economies are in continual turmoil.
On top of that, we have experienced a number of huge shifts in our industry, which are influencing how consumers behave.
The Retail Distribution Review (RDR) has brought about changes and there is well-publicised financial market volatility adding to a lack of consumer trust in the financial services industry.
Changes of course present us with challenges but, as with all changes, a number of opportunities also arise.
In order to gain from the opportunities you have to try and spot the paradigm changes from a long way out, and perhaps what seems obvious today was not so apparent to everyone several years ago.
It can take a lot of investment, both in time and money, to set up structures for the future when the temptation is always to focus on today.
Future opportunities include:
• advisers are recognising the efficiency of managing assets on wrap platforms and we expect them to start transferring these assets away moving from traditional life companies and fund supermarkets to platforms
• advisers are increasingly outsourcing their investment proposition to specialists
• a growing number of consumers are trading direct, with many clients not requiring ongoing financial advice or unwilling to pay a fee for a simple transaction, such as an ISA.
The implementation of the RDR has certainly been a long time coming and its full effect will not be known for some time yet.
However, I believe the strong RDR-ready business we have built is well placed to help advisers adapt to the new environment and thrive during 2013. All of our products across all of our platforms, both new and legacy, are now RDR- trading.
The benefit of time has shown that most of the old world life companies and some of the fund supermarkets are now seeing net negative asset flows.
By comparison, AXA Wealth is continuing to make the most of the opportunities RDR has brought.
Elevate, for example, has continued to have the strongest growth (in funds under management) across the market, and has grown 6% in a market that has shrunk by 9%.
Architas, still an infant business; just four years old, is already profitable in the UK and Europe. Both propositions are growing strongly and we fully expect this to continue.
We have also seen advisers demand high performance but low cost platforms, outsourced investment propositions and pension consolidation schemes and the evidence suggests that these trends are set to continue this year.
One potential game changer this year could be the future of cash rebates.
The big question of future rebates, the potential for unit rebates, clean share class proliferation and the potential application of this concept to a wider solution set such as self-invested personal pensions (SIPPs) need to be answered and possibly implemented by 31 December 2013.
I still believe that cash rebates offer consumers greater simplicity and the most pragmatic solution.
The introduction of unit rebates will require yet more changes for the adviser to understand and communicate to their client and a huge amount of work to embed.
All of this continual mandatory change could be argued to be detrimental to the consumer in some way as the ability for providers to engage in innovation is stifled by legislative tinkering.
The consumer has to be at the heart of any change, and I would question whether this is the case here. Only time will tell.
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