（英文）行业资料Capturing growth inthe evolving UK savingsand retirement market -mckinsey

March2023

InsurancePractice

CapturinggrowthintheevolvingUKsavingsandretirementmarket

CompaniesintheUKsavingsandretirementmarketcanconsidertargetingfourhigh-growthsegmentstocreateacompetitiveadvantageandtoboosttheirresilienceinchallengingtimes.

bySidAzad,RajivDattani,JonathanDeakin,andLedaZaharieva

©piranka/GettyImages

2CapturinggrowthintheevolvingUKsavingsandretirementmarket

Today’srapidlyevolvingmacroeconomicbygainingmarketsharerequiresanuanced

conditionsarecreatingconsiderableuncertaintyunderstandingofthetrendsandcompetitive

forbothconsumersandcompaniesparticipatingdynamicsatthecomplexintersectionofproducts,

intheUKsavingsandretirementmarket.Inthechannels,valuechainsegments,andconsumer

nearterm,inflationisposingsignificantchallengeswealthbands.)

forUKhouseholdsandislikelytoleadtoafurther

reductionintherealvalueoftotalsavingsandtheWiththisanalysisinmind,itbehoovesindustry

savingsrate.Itisnotyetclearjusthowdeepanplayerstoconsiderinvestinginthemostattractive

economicdownturnmightbe,theeffectitmighthigh-growthmarketsegments.Today’speriodof

haveonemployment,theextenttowhichrisinguncertaintyrepresentsadistinctopportunitytoget

interestratesmightoffsetalowersavingsrate,andaheadofthecurvewhilecompetitorsareprioritizing

howcustomerneedsandpreferencesregardingshort-termdefensivemovesoverlong-termgrowth.

productswithguaranteesordownsideprotection

willevolve.ThesearejustsomeoftheuncertaintiesInthisarticle,weexaminethetrendsshapingthe

thatwillshapeconsumers’savingsbehaviorandUK’ssavingsandretirementmarketandtheirimpact

theirneedforfinancialadviceandsupportintheoncompaniesandcustomers.Thesetrendsinclude

yearsahead.ashifttocapital-lightproducts,risingtechnology-

ledcustomerengagement,andgreaterchoice

Already,companiesthroughouttheindustryandresponsibilityamongindividualconsumers

arerespondingwithavarietyofbalancesheetforgeneratingandmanagingtheirsavings.We

actionsandrevenueandcostactionsintendedtoidentifyfourmarketsegmentsthatcouldenable

protectmarginsandsupportcustomersthroughthrough-cyclegrowthopportunitiesandthefactors

thischallengingperiodwhileinvestingtomeetthatmightgoverndecisionsregardingwhich

consumers’futureneeds.Managingthroughthissegmentstoprioritize.Wealsoexplorewhatitwill

volatileperiodwillrequirecompaniestobuildtake—forexample,capabilityshifts,culturaland

resilience,1maintaintheirstrategiccourage,2andorganizationalchanges,andM&Adealmakingto

takeathrough-cycleview.Thosewhodosowillhelpmeetcustomers’channelandproductneeds—

notonlymeettheirsocietalobligationsbutalsotosuccessfullyservecustomersinprioritized

buildacompetitiveadvantage,deliveringleadingsegments.

shareholderreturns.

AnalysisofhistoricalrevenuegrowthdataforThreetrendsintheUKsavingsand

morethan200largecompaniesaroundtheworldretirementmarket

indicatesthatacompany’sgrowthisdrivenlargely3Strongrevenuegrowthiswellestablishedasbeing

bymarketgrowthintheindustrysegmentswherecriticaltolong-termreturns.Ananalysisofpublic

itcompetesandbytherevenuesitgainsthroughcompanies4showedthatthoseinthetopthirdof

mergersandacquisitions.Thesetwoelementstheirindustriesinrevenuegrowthgeneratedtotal

explainalmost80percentofthegrowthdifferencereturnstoshareholdersthatexceededthoseoftheir

amongthecompanieswestudied;whetherabottom-thirdpeersbysixtoeightpercentagepoints

companygainsorlosesmarketshare—thethirdperyear—adifferenceof80to110percentovera

elementofcorporategrowth—explainsjust20ten-yearperiod.

percentofthedifference.(Capturinggrowth

1

2

3

4

“Something’scoming:HowUScompaniescanbuildresilience,surviveadownturn,andthriveinthenextcycle,”McKinsey,September16,2022.

MichaelBirshan,IshaanSeth,andBobSternfels,“Strategiccourageinanageofvolatility,”McKinseyQuarterly,August29,2022.

MehrdadBaghai,SvenSmit,andS.PatrickViguerie,“Thegranularityofgrowth,”McKinseyQuarterly,May1,2007.

ArielBabcock,SarahKeohaneWilliamson,andTimKoller,“Howexecutivescanhelpsustainvaluecreationforthelongterm,”McKinsey,July22,2021.

CapturinggrowthintheevolvingUKsavingsandretirementmarket3

Creatingbusinessmodelsbuiltonahybridofhumanandrobo-advisersisnowakeyagendaitemformostwealthmanagers.

MarketsegmentsintheUKsavingsandretirement

marketaregrowingatdifferentratesasstructural

macroeconomic,regulatory,demographic,

technology,andconsumerpreferencetrends

transformthesupplyof(anddemandfor)personal

financialproducts.Threetrendsstandout.

Ashifttocapital-lightproducts.Attheproductlevel,

assetflowsareshiftingfromtraditionalguaranteed

productstocapital-lightproducts,including

defined-contribution(DC)workplacepensions,

thatgiveconsumersmorepowertomanagetheir

overallwealth.Guaranteedretirementincome

productshavebecomesignificantlylessattractive

forprovidersandconsumersalike,givenhistorically

lowinterestrates(despiterecentrateincreases)

andthesignificantcapitalburdenplacedonthe

provisionofpolicyholderguaranteesbecauseof

SolvencyIIrequirements.Atthesametime,anaging

populationwithevolvingprotectionandsavings

needsandtherolloutofauto-enrollmentpension

schemesareincreasingdemandforaccumulation

anddecumulationsolutions.Andthereisagrowing

customerneedforhybridproductsthatoffercapital

appreciationwithdownsideprotectionandstable

income,especiallygiventheprolongedperiodof

uncertaintyduetotheCOVID-19pandemicand

ongoingmacroeconomicvolatility.

Apushfortechnology-ledengagement.Both

customersandcompaniesarepushingfor

technology-ledengagementintraditionaladviser

andworkplacechannels,withdigitalplatforms

andimprovedtechnologyenablinglowercost

propositions.Asmallbutfast-growingdigital-first

andmobilechannelisemerging,particularlyin

direct-to-consumer(D2C)distribution,drivenby

changingcustomerpreferencesandtechnological

developments.Creatingbusinessmodelsbuilt

onahybridofhumanandrobo-advisersisnowa

keyagendaitemformostwealthmanagers.So

far,however,fewparticipantsintheUKmarket

havemadeitwork,androbo-adviceofferingshavefocusedmoreonassetallocationthanondeep

financialengagementthatnudgescustomersto

act.Traditionallydistinctchannelsareconverging

asparticipantsincreasinglyviewcustomers’lifetime

financialneedsholisticallyacrossmultiplechannels,

thusblurringthelinesbetweenworkplace,D2C,

andadvisorychannels.Meanwhile,technological

developmentsaredrivingcommoditizationand

consolidationinassetadministration.

Ashifttotheresponsibilityofindividualsfor

savings.Withinthisincreasinglycomplexproduct

landscape,therehasbeenashiftinresponsibility

forgeneratingandmanagingretirementsavings

fromgovernmentanddefinedbenefitpensionsto

individuals.Fromavaluechainperspective,the

needforfinancialadviceisontherise;however,

asignificant“advicegap”remains,drivenbya

shrinkingadviserbaseandalackofaffordable

adviceofferings.Asaresult,consumersare

findingashortageofsimpleandaffordableasset

managementproductsandadvice.

Thesetrendshaveprofoundlytransformedthe

marketdynamicswithinandacrosssegmentsand

thenatureofcompanies’relationshipswiththeir

currentandprospectivecustomers.Inthenext

section,weexploretheimpactofthesetrends

onfoursegmentsthatoffersignificantgrowth

potential,focusingonasegmentalview(channel

orproduct)becausethisishowparticipantshave

4CapturinggrowthintheevolvingUKsavingsandretirementmarket

historicallyorganizedthemselves.Intheclosingsection,wecoverthebroaderimplicationsformarketparticipants,giventhegrowingimportanceofadoptingacustomer-focusedmindsetthroughtheirlifecycle.

Foursegmentsoffersignificantgrowthpotential

Ascertainsegmentsoftheindustryriseinvalueandpotential,othersaredecliningasthetrendsdiscussedabovetakehold(Exhibit1).WhileoverallsavingsandretirementassetsintheUKhavegrownatahealthy7percentannuallysince2015,heritagelifeproducts,forexample,areinrunoffandclosedtonewbusiness.AndafterUKpensionsderegulation,annualsalesofnewretailannuitiescollapsedbymorethan50percent,althoughrisinginterestrateshaverecentlyresuscitatedthe

segment’sgrowth.The7percentgrowthindefined-benefit(DB)pensionassetshasbeenafunctionofmarketforcesandtheneedforschemestomeetfundingrequirements.Infact,activemembershipinprivateDBschemeshasfallenfromabout2.1millionin2012tolessthan1.0millionin2021.DCmembership,ontheotherhand,hasincreasedfromabout1.0millionpeoplein2012tomorethan26.0milliontoday.

Lookingforward,foursegmentsinparticularofferattractivegrowthopportunities:bulkpurchaseannuities(BPA),DCworkplace,direct-to-consumer(D2C),andadvisedchannels(Exhibit2).TheBPAandD2Cchannelshavestrongtailwindssupportingcontinuedhistoricgrowthrates.DCworkplaceisexpectedtoseecontinuedgrowthfollowingauto-enrollment.Theincreasingneedforfinancialadvicewilldriveattractiveopportunitiesinadvised

Exhibit1

TheUKpensionsmarketgrewbyanestimatedCAGRof7percentfrom2015to2021.

TotalUKpersonalinancialassetsunderadministration

bysegment,¹£trillions

CAGR,

2015–21e,%

5.77Overall

22

13

9

0.2

0.4

0.6

BPA²

D2C³

OccupationalDC⁴pensions

3.8

0.3

0.8

1.2

7

0.10.2

Advised(on-platform,ISA,⁵SIPP,⁶drawdown)

0.6

0.5

0

7

Heritage(life)

Annuities

0.6

0.3

2.2

7

DB⁷pension

1.5

2015

2021e

1Excludescash,property,andprivate-bankingassets.

2Bulkpurchaseannuities.

3Directtoconsumer.

4Deinedcontribution.

5Individualsavingsaccount.

6Self-investedpersonalpension.

7Deinedbeneit.

Source:ABI;expertinterviews;HMRC;InvestmentAssociationUK;McKinseyUKPFAdistributionmodel;Platforum;ONS

McKinsey&Company

CapturinggrowthintheevolvingUKsavingsandretirementmarket5

N/A

N/A

Annuities

channels.Andseveralofthesesegmentsofferthe

potentialtogrowthroughM&A.

Bulkpurchaseannuities

Despitetheoverallshifttowardsalesofnewcapital-

lightproducts,BPAshavebeenamajorgrowth

segmentduetothelargenumberofcorporate

pensionschemesderiskingandtransferring

theirliabilitiestotheinsuredmarket.Thereis

approximately£1.7trillioninDBpensionscheme

assetsonUKcompanies’balancesheets.The

growthinBPAislikelytoincreaseinthenearterm

asrisingratesmaketransactionsmorefeasible

forpensionfundtrustees,withtheirfundingratios

increasingby12percentagepointsonaveragein

the12monthsprecedingSeptember2022.5Upto

£300billionoftransactionsisexpectedinthenext

fouryears,comparedtoapproximately£125billion

inthepastfouryears.6

Internalratesofreturninthemidteensremain

attractiveforBPAplayerstoday,afunctionofthehealthybalancebetweenthedesireonthepartof

pensionschemestotransferriskandthelimited

supplyofcapital(includingreinsurance)availableto

participants.

However,thevolumeofBPAdealsisprojected

topeakinthenextthreetofiveyears.High

investmentreturnsandstablelong-termcash

flowshavealreadyattractednewentrantsto

themarket,includingestablishedlifeinsurers

andprivatecapital-backedplayersawareofthe

currentwindowofopportunity.Theyaresettingthe

standardforthecapabilitiesneededtodrivereturns.

Thesecapabilitiesincludespecialistinvestment

capabilities(suchasilliquidassetorigination

andinfrastructure);increasinglysophisticated

technologyandoperationalcapabilities(including

Exhibit2

ThepotentialforgrowthintheUKpensionsmarketvariesconsiderablybysegment.

LowcompetitiveintensityHighcompetitiveintensity

LimitedgrowthSigniicantgrowth

Valuechainsegment

ChannelCore

products

PlatformorInvestment

administrationsolutions

Asset

management

Adviceor

guidance

Projectedassetgrowth

WorkplaceOccupational

DC¹pensions

DB²pension

(includingBPA³)

N/A

D2C⁴

ISA,⁵SIPP,⁶or

drawdown

Advised

On-platformISA,⁵

SIPP,⁶ordrawdown

Heritage(life)

N/A

Nocompetitionforassets;

focusonoperationalimprovement

N/A

1Directcontribution.

2Directbeneit.

3Bulkpurchaseannuities.

4Directtoconsumer.

5Individualsavingsaccount.

6Self-investedpersonalpension.

Source:McKinseyanalysis

McKinsey&Company

5WTWGlobalPensionFinanceWatch.

6Risktransferreport2022,Hymans-Robertson,February17,2022;Insuranceentersanewphase:Askyrocketingmarket,LaneClark&Peacock(LCP),October2022.

6CapturinggrowthintheevolvingUKsavingsandretirementmarket

technology-enabledpolicyadministrationsystems);anddeepdealexperience.Allcompanieslookingtoparticipatemeaningfullymustmeetthiscapabilitiesbarandcreatevalueacrossmultiplelevers.7

Defined-contributionworkplace

DrivenbytheshiftfromDBtoDCpensionsandtherolloutofauto-enrollmentschemes,DCworkplaceisoneofthelargestassetaccumulationchannelstoday.Withabout17millionactiveconsumersintheUKmarket,thesegmenthasbeengrowingatabout8percentannuallysince2018andisexpectedtocontinuetodosothrough2025.

However,revenueandoperatingmarginsforDCarelowerthaninothersegments;averagefeelevelsareabout50basispoints,comparedwith150basispointsforD2Cpensions.Andthesemarginsareunderconstantpressureforseveralreasons:Themarketishighlycommoditized,withlowmarginalcosts.Pensiontrusteeswhoseroleistoconstantlypushforbettervalueformemberscontinuetoputpressureonprices.Andthelevelofcompetitionisincreasing,particularlyasemployeebenefitconsultantsenterthemarket.Thetopsixplayersnowaccountfor80percentofthemarket.

GiventheDCmarket’ssheercompetitiveintensity,companieslookingtoparticipateinitsgrowthwillneedtobuildscale—acriticalfactorgivenitsplatform-likeeconomics—anddevelopdeepcustomerrelationships,whichcanunlockaccesstoagreatershareofacustomer’sassetsandextendtherelationshipintoandthroughdecumulation.RecentdevelopmentsintheUKandUSmarketsofferevidenceofmeaningfulgrowthopportunitiesinthissegment:

—InonerecentUKconsumersurvey,8halfofDC

workplacecustomersindicatedtheywouldconsiderseekingfinancialadvicefromtheircurrentproviderorpurchasingsavingsorinvestmentproducts.

—OurrecentUSsurvey9ofabout9,000

householdsshowedthatproviderswhoholdacustomer'sprimaryrelationshipmanagesixtimestheassetsofanyoftheirotherproviders.Bycontrast,intheUnitedKingdom,theaveragepersonmaintainstwoormorepensionpotsanddoesnotholdbroadersavingsandinvestmentswiththeirDCprovider.

—Byfocusingonaspecificgrowthopportunity

(potentialtransfersofassetsfromDCaccounts),oneUSassetmanagerhassuccessfullybuiltaleadingwealthandretirementoffering,capturing60percentofrolloversfromitsDCaccountsintoindividualproducts.

However,developingdeepcustomerengagementishard,evenforincumbentsthatbenefitfromscaleandalargebaseofexistingcustomers.Andithasbecomemorecompetitiveasnewdigital-firstconsumer-focusedcompaniesandothersprovidingfinancialadviceintheworkplaceenterthemarket.Regulatorychangewillsoonleadtothearrivalofapensionsdashboard,anonlineportalprovidingcustomerswithanintegratedviewofallpensionpots,increasingconsumerawarenessandmakingconsolidationofassetsmorelikely.Withtherightcapabilitiesandpropositiontoeffectivelyengageconsumers,thoseholdingacustomer’sprimarywealthrelationshipwillbewellpositionedtocapturethisgrowthopportunity.

Iftheyaretomaintaintheirposition,leadersintheDCworkplacesegmentmustbuilddistinctivecapabilitiesinlinewiththesenewmarketentrants.Stronganalyticswillbeneededtotargetthemostpromisingpotentialcustomers—boththosemostlikelytoengageandthoseofferingthehighestvalue—combinedwithtargetedcustomerserviceoutreachcapabilitiesacrosschannels,includingcallcentersandweb,mobile,andin-personchannels.Playersmustbeabletoprovideadynamiccombinationoffinancialadvice,guidance,andeducation,andcouldlearnvaluablelessonsfrom

7“Runninguponrunoff:Strategicoptionsforlifeclosedbooks,”McKinsey,February10,2021.

8McKinseyconsumersurvey,July2022,n=1,000.

9“Fromsavingtospending:AsecondfrontemergesintheUSretirementchallenge,”McKinsey,July29,2022.

Goodadvice

Workplacepensionprovidershave

inretirementpensionsandcreatea

acrossassetpoolstomeetcustomers’

takenavarietyofapproachestooffering

leadingworkplacewealthmanagement

financialgoals,optimizingriskand

cost-effectiveadvisoryservicesto

franchise.Differentiatingcapabilities

taxconsiderations.Theproductis

theircustomersandbuildingstronger

includeafinancial-wellnessplatform

supportedbyahybridadviceoffering

customerrelationships,oftenmaking

withtoolsandadviceofferings,amore

withanAI-poweredmobileassistant,

useoftechnologytoboosttheir

completefinancialsnapshotbeyondthe

whichprovidessimpleservicingneeds

presenceandaccessibility.

retirementplan(previouslynotpossiblewithintheworkplacecontext),anda

andoffersaccesstophone-basedfinancialadvisers.

OneUKadviceproviderhasbeen

financialadviser–firstdigitalsolutionfor

lookingtouseworkplacepensionsasa

high-net-worthclients(whichhelped

Inhopesofdrivingadditionalproduct

conversionchannelforcapturingbroader

reducechannelconflicts).Thegoal:to

salesandimprovingretentionofexisting

financialassetsbyworkingdirectly

buildlong-termcustomerrelationships,

customersandassets,anotherUSretail

withemployerstoengageemployees

retainplanparticipantsintoretirement,

savingscompanyrecentlybuiltarange

throughseminars,educationalmaterials,

andextendcustomerlifetimevalue.

ofcustomer-focusedfinancialeducation

andconnectionstoadviserstobuild

andautomatedadvicecapabilities,

relationshipsandtrustwithconsumers

AnotherUSretirementandwealth

includingfinancial-planningcalculators,

throughworkplacechannels.

managerhassuccessfullyapplieddigitalandanalyticstorevolutionizeits

creditimprovementadvice,budgetingworksheets,andspendinganalysistools.

AUSworkplacepensionprovider

decumulationoffering.Thisbespoke

Thankstothenewapp-basedresource,

paid$1billionforarobo-adviserthat

incomeproductusesanalgorithm-

thecompanycapturedmorethanfive

allowedittoexpanditsdigitalofferings

basedrobo-advisertoautomateinvestmentstrategiesandwithdrawals

millionusersinitsfirstyearandincreasedassetsbymorethan$35billion.

successfulcompaniesintheUnitedStatesandthe

UnitedKingdom(seesidebar,“Goodadvice”).They

mustalsoofferabroadrangeofproductofferings,

suchasindividualsavingsaccounts,self-invested

personalpensions,andbrokerageaccounts.Finally,

astrongbrandiscriticaltobuildtrustamong

consumers.

GiventheDCmarket’shighdegreeofconsolidation

andthechallengessurroundingintegration,the

potentialforgrowththroughconsolidationamong

themajorDCpensionplatformsisextremelylimited.

Atpresent,themostviableM&Aleverfordriving

revenuegrowthinvolvesmastertrusts.Singletrusts

willcontinuetobeconsolidatedintomastertrusts,

andthemastertrustmarket,whichhasalready

shrunkfrom82trustsin2017toabout30today,

willlikelyconsolidatefurtherinthenexttwotofour

years.Asaresult,DCproviderslookingtocapture

growththroughM&Awillhavetotakeadvantageof

thislimitedwindowofopportunitytoparticipatein

themarket’sconsolidation.

SuccessfullypursuingM&Ainthemastertrust

marketrequiresstrongintegrationcapabilities,

deepindustryrelationships,andattractive

participantpropositions,includingabroadrangeofinvestmentoptions,strongcustomerservice,and

expertfinancialeducationandadviceofferings.

Someofthesecapabilitiescanbedeveloped

internallyoracquiredinthemarket.Forexample,

onetop-fivepensionproviderrecentlyacquireda

financial-educationbusinessthatitplanstouse

todrivegreatercustomerengagementacrossits

workplaceofferings.

Direct-to-consumer

ThedynamicsoftheD2Csegmentarecomplex

andchallenging.Themarkethasbeengrowing

atabout13percentannuallysince2015,butitis

CapturinggrowthintheevolvingUKsavingsandretirementmarket7

8CapturinggrowthintheevolvingUKsavingsandretirementmarket

top-heavy.Threemajorplayershavecaptured

about70percentofdirectplatformassets.The

restofthemarketconsistsofalongtailofsmall,

typicallyloss-makingcompetitorsthatstruggleto

gainthescalerequiredtobeprofitableintheface

ofintensepricepressurefromthemarketleaders.

Thisincludesmultiplenewentrantsinrecent

years,bothprivatelyfundedandaspartoflarger

savingsandretirementgroups,whichhavenotyet

generatedstand-alonestableprofits.

Moreover,whilethesegment’srevenuemargins

arehigherthanintheworkplacesegment,margin

pressureisincreasingasparticipantscompetefor

scale.Anumberofthenewentrantsinthemarket,

includingseverallargeplayersfromtheUnited

States,hopetobuildacompetitiveadvantage

throughtheirlowercostbase,whileanewbreed

isemergingthatoffersadifferentiatedcustomer

propositionsuchasfreesharedealing.

Giventhesedynamics,thereareessentiallythree

archetypesofsuccessfulparticipantsintheD2C

market:thosethathaveorcouldgeneratethe

stand-alonescaletodriveprofitability;thosethat

couldactasanacquisitionchannelforotherareas

ofabusiness,suchasadvisedorworkplace,with

norequirementtoachievethescaleneededtobe

profitableasastand-aloneentity;andthosethat

couldactasasimpleself-serviceofferingaimedat

less-wealthycustomersunderahybridadvicemodel.

Thecriticalcapabilitiesneededtodevelopa

leadingcustomervaluepropositionincludea

strongconsumerbrand,alow-costplatform

builtonscalabletechnology,andtheright

customerengagementtoolsforthisstrategy.The

sophisticationofthetechnologyandengagement

toolsneededwilldependontheplatform’sstrategic

role,whetherstand-aloneorpartofabroader

offering.Therequirementtodevelopwinning

capabilitiesisincreasingasat-scaleinternational

playersentertheUKmarket,socontinuingtoinvest

inthesecapabilitiesremainsvital.

Recently,manycompaniestakinganorganic

approachtogrowthhavestruggledtobridgethe

capabilitygapandattractrequisitetalent.There

isanopportunitytoacquirepointsolutionsto

gainsomeofthenichecapabilitiesneededfor

marketleadership.Andgiventhelongtailof

smallerplatforms,thereisalsoanopportunityto

acquirescale,whichiscritical,giventhatplatform

administrationislargelyafixed-costbusiness.Indeed,largewealthandassetmanagementplayers

haverecentlybeenacquiringdigitalplatformsto

increasetheirmarketpresence.Forexample,a

largeUKassetmanageracquiredatop-fiveD2C

investmentsolutionscompanytogainanat-scale

position.Currentmarketconditionscouldprovide

opportunitiesforthosewiththecapitaland

operationalcapacitytoinvest.

Advised

Since2015,advisedassetshavegrownatabout7percentannuallytoatotalofabout£1.2trillion

today.AsintheD2Cmarket,advisernetworks

andplatformsareseeingincreasingfeepressure

WhiletheD2Csegment’srevenuemarginsarehigherthanintheworkplacesegment,marginpressureisincreasingasparticipantscompeteforscale.

CapturinggrowthintheevolvingUKsavingsandretirementmarket9

andM&Aactivityasthecompetitionforassetsintensifiesinthedriveforscale.

Inthefaceofthispressure,participantslookingtowininthismarketarebeingforcedtoadoptoneoftwomodels:verticalintegrationortargetedvaluechainparticipation.Eachrequiresadistinctsetofcapabilities.

Verticalintegration.Thismodel,whichcoversadvice,administration,investmentsolutions,andassetmanagement,aimstoattractassetsthroughadvicenetworksandcapturerevenuemarginacrossseveralofthesevaluechainsegments.Participantsadoptingthisstrategymustdevelopanat-scaleadvicenetworkwiththepotentialtoextenditintohybridadvice.Theywillalsoneedatop-quartileadviserplatform,withtheabilitytoaddadvisertoolsasneededto