nicholas smith - catching the wave of wealth management ...€¦ · cgnu wealth management vision...

norw ichunion.com

C atching the wave of wealth management

Nicholas A SmithManaging Director UK W ealth M anagement

29 March 2001

2

norwichunion.com

norwichunion.com

“The service has all the right ingredients,

it embraces open architecture on asset

management products and offers online

banking and trading, in addition to the core

life insurance and protection products of the

Group, through a variety of direct channels”

Source: Converging on the Mass Affluent – Feb 2001

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norwichunion.com

CGNU - a dynamic worldwide group

l 6th largest insurance group in the world

l £27bn premium income

l £220bn of assets under management

l 15 million customers worldwide

l Top 5 life company in Europe

l No.1 insurance group in the UKInternational Life

Europe Life

UK Life

International General

Europe General

UK General

4%7%

27%

8%

36%

18%

Premiums/Sales*

*Ongoing business. Life includes retail investment sales and healthpremiums

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norwichunion.com

Portfolio of leading businesses - the strongest platform in continental Europe of any UK financial services company

i Number 1 in UK

i Top 3 in Netherlands and Poland

i Top 5 in Ireland and Turkey

i Top 10 in France, Italy and Spain

Long Term Savings

Fund Management

i Number 2 UK based asset manager

i Top 10 in Europe

General Insurance

i Number 1 in UK, Ireland, Canada and New Zealand

i Top 5 in Netherlands and Australia

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norwichunion.com

CGNU has a strong track record in applying new technologies and transferring best practice

• assertahome.com

• norwichunion.com

• e-enablement of product

• Intermediary extranets

• Strategic alliances

• Interactive Digital TV

• Navigator / NU International

• Nuts Ohra

• Poland

Re-engineering the value chain

Enhancing the effectiveness of existing distribution channels

Developing new e-business models to capture new customers and improve cross sales capability

Transferring best practice

• Electronic Data Interchange

• Online policyholder information

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norwichunion.com

Norwich Union - a market leader pushing boundaries in the UK

l Norwich Union - No1 Insurance-based financial services group in the UK

l A top financial services brand

l Over 4m Long Term Savings (LTS) customers

l LTS new business sales in 2000 - £7.5bn

l £2.2bn maturing policy proceeds to 114k customers in 2001

l 85% of existing customers have income between£20k - £40k

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norwichunion.com

CGNU - moving decisively towards asset gatherer

0

10

20

30

40

50

60

70

80

1997 1998 1999 2000

General Long Term Savings

% of premium income*

* Total premiums written (after reinsurance). CGU and Norwich Union combined.Long Term Savings includes investment sales and health premiums.

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norwichunion.com

The mass affluent opportunity - our perspective on the Commerzbank analysis

44 Mass affluent is a significant and rapidly growing segment

44 Primary needs come before product needs. Customers want integrated-channel, multi-product offering and support at point of purchase

44 Traditional players need to demonstrate ability to build new business models and embrace open architecture product solutions

44 Providers need to harness the power of technology to transform manufacture and delivery

44 Providers need sufficient scale to enable a European footprint

CGNU is a transformer but not a shaper ??

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norwichunion.com

UK market a major opportunityUK market a major opportunity - personal disposable income has doubled over the last 10 years, with the wealthiest 28% of the population making up 84% of the savings market

Source: ONS, “Social Trends 2001”; Financial Services Consumer Panel, “Consumers in the Financial Market”, 1999, figures add to 101% due to rounding.Note: Personal disposable income = personal income after taxes, at current prices

0

100

200

300

400

500

600

700

1987 1995 1996 1997

7%

16%

5%6%

31%

10%

UK Distribution of Savings,1999, %

26%

42%

13%

13%

16%

7%5%5%

Savings %Population %

>£50,000

£500 - £4,999

£5,000 - £9,999

£10,000 - £19,000

£20,000 - £29,000

£30,000 - £46,999

<£500

£m

286,161

505,401534,972

568,746

UK Personal Disposable Income, 1987 - 1997, £m

This has led to the emergence of a broad based “mass affluent” segment with anincreasing ability to invest.

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0

20

40

60

80

100

120

140

1 2 3 4 5 6 7 8 9 10

This wealth growth, and affluent consumers’ tendency to invest, has fuelled rapid growth in the long term savings market

Favourable economic and demographic conditions indicate these trends will continue

The rising net

worth segment

Upper quartile income households spend around 10% of “wallet” per week

on financial services products*Financial Services Expenditure Share of

Wallet by UK Income Deciles

-16%

-14%

-12%

-10%

- 8%

- 6%

- 4%

- 2%

- 0%

We

ek

ly

ex

pe

nd

it

ur

e

on

sa

vi

ng

s

in

ve

st

me

nt

s,

li

fe

an

d

pe

ns

io

ns

(£

)

%a

ge

to

ta

l

we

ek

ly

ex

pe

nd

it

ur

e

sp

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on

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vi

ng

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in

ve

st

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nt

,

li

fe

an

d

pe

ns

io

ns

(%

)

Income Deciles Weekly expenditure (£) % of total expenditure

UK Long Term Savings APE1995 - 1999, £bn

2.9

2.1

1.71.4

0.9

0

5

10

1995 1996 1997 1998 1999

4.8 6.0 6.6 8.47.6

£bn

CAGR

5.7

7.48.3

9.7

11.3

Mutual Funds

*These figures exclude expenditure on home ownership Source: Family Expenditure Survey 98/99

Source: ABI, “Statistical Bulletin”, August 2000; Autif

Note: Unit Trust APE estimated as (gross retail sales/10); probably an underestimate

A. Defined as [(Total APE from ABI members) - (Collective investment APE from ABImembers) + (Estimated retail unit trust APE)]

Life & Pensions

18.4%

32.1%

15.1%

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norwichunion.com

Despite ABC1’s making up over 75% of the long term savings market, no non-cash product has greater than 35% penetration in this segment

Source: Mintel, “Personal Pensions”, March 2000; Mintel, “Collective Investments”, August 2000.

% ABC1’s Holding Financial Investments by Type, 2000

AB C1 C2 DE0%

20%

40%

60%

80%

100%

Annual value of product purchase bycustomer segment, 1999

Lump sum contribution to pensions

Pro

du

ct %

sh

are

of

each

seg

men

t

% Value of segment

100%

0

5

10

15

20

25

30

35

40

%

Tax FreeCash

Tax FreeFunds

Direct Stocks

CollectiveInvestments

PersonalPension

OccupationalPension

There remains scope for further considerable growth in the market as“mass affluent” customers invest in a broader range of products

Source: Prospektus

Lump suminvestment

Deposits

Regular contrib.to pensions

General InsuranceProtection

Long term savings

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norwichunion.com

Combination of strong preference for self research, and under penetration of existingdistribution channels, represents a significant opportunity for new self directed channel

Source: TGI, BMRB 2000

Consumers are using the wealth of information available to inform themselves before purchasing and are increasingly using the internet for this purpose

24%

76%

Use an adviser

Learning & Understanding

DetailedEvaluation Product Purchase

Irrespective of method of purchase 75% of ABC1 customerscarry out their own research

Do my own research, make my own decisions

Do my own research, but seek advice before purchase

Only ever seek professional advice

35%

40%

20%

Only 1 in 4 of UK ABC1’s use financial advisers

Ø Of the 12m ABC1 internet users, 52% have researched a financial product online in the last 6 months

Ø A quarter of the online population purchased a financial product online. The most popular purchases include credit cards, savings accounts and stocks and shares

Ø Over half of ABC1 customers are comfortable in dealing with a company

by phone, post or internet only

Source: NOP Omnibus May 2000 & CGEY analysis Forrester Research “UK Internet Monitor” November 2000 and MFS Jan - Sept 00

Awareness

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norwichunion.com

Furthermore, underlying supply-side inefficiencies and regulatory trendsare supporting the move to technology-based direct solutions

l EU developing a new policy framework for regulation, in part because of the opportunity for cross-border

activity driven by internet technology

l UK government seeking to move from regulating theprocess of sale to regulating product and pricing

l Supply-side action to withdraw traditional direct salesmodel in the UK accentuates supply side deficienciesand opportunity for new digital based distributionmodel

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norwichunion.com

CGNU Wealth Management vision and long-term strategy

l To build a top five UK wealth managemente-business offering individuals integrated assetmanagement, banking and protection products

l Create a new business model to act as theGroup's bridge to the future utilising marketleading technology and straight throughbusiness processing

l To attract and build profitable direct customerrelationships for the Group reducing reliance onboth the IFA channel and existing high costdirect distribution

l To progressively become the Group's retaile-distribution channel for direct long termcustomer relationships

l To develop skills, capability and learning that canbe exported across CGNU

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norwichunion.com

We are building a new, primarily digital wealth management business thatpositions us as ‘your trusted wealth management partner helping you to makethe most of your assets to maximise your wealth’

l Appeal to high value consumers with proposition based on simplicity, choice and trust

l Deliver an integrated personal financial management service, not a “product push” approach

l Capture and retain customers through a wide product range, virtual advisory support and strategic alliances

l Utilise the appeal of the Norwich Union brand

l Use strong cross sales techniques and sophisticated customer knowledge to drive profitability

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norwichunion.com

norwichunion.com - providing customers with a low cost, integrated and customised personal financial management service, enabling optimisation of personal assets and liabilities to maximise wealth on an anytime, anywhere basis

Target CustomersSelf

DirectedCustomers

OpinionSeeking

Customers

• High value• £20 - £40k income• ABC1• e-enabled

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norwichunion.com


DirectedCustomers

OpinionSeeking

Customers

Channelswww

Supported by customer contact centre


• Multi-channel• Focus on digital• Transitional

requirement forclicks and mortar

iDTV telephone financecentres


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norwichunion.com

Liabilities• Mortgage• Loan• Credit card

Transfer Facility


DirectedCustomers

OpinionSeeking

Customers

Products


Assets• Share dealing• Fund supermarket• e-bank services

Protection

• Integrated productproposition

• Optimise assets andliabilities

• Price competitive• Breadth of range• Choice where a

customer requirement

Virtual Advisory ServicesFinancial Planning Money Manager Education News

Integration


Channelswww

Supported by customer contact centre

• Multi-channel• Focus on digital• Transitional

requirement forclicks and mortar

iDTV telephone financecentres

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norwichunion.com

norwichunion.com … a rich customer experience and a wealth of ideas

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norwichunion.com

Virtual Advisory Services - a competitive differentiator

l A free, easy to use and comprehensive set of financial planning and money management tools, combined with a wide range of impartial information on financial products and options, plus up to date money news and fund/equity data

l Financial planning covers 5 key areas of Wealth Management:1. Personal borrowing2. Your Home3. Savings and Investment4. Planning for retirement5. Protecting your wealth

l Structured into a series of engaging planning journeys that enable customers to progress at their own pace and in a way that is focused on their needs and preferences

l At any point in the journey customers can access the latest news, jargon busters, financial knowledge resources and financial calculators and tools

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Virtual Advisory Services - the key to empowering the consumer

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norwichunion.com customer benefits

l Low cost, integrated and personalised financialmanagement from a trusted brand

l Pricing that takes account of assets andliabilities

l High degree of customer control and support

l 24 x 7 service

l Current net worth statement - single view offinancial assets

l Financial products and services covering alllong term needs

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norwichunion.com

We will operate norwichunion.com as a virtual business leveraging off the shelf packages, managed services, joint ventures and alliance capabilities

DTVWWW

Security

Money Manager

Financial Planner

Products and Services

Middleware - Transaction Engine

Chequesand Post

Mail/Image

Cashiers

Call Centre

email

Marketing &www.site

management

Legal

Compliance

Mail

Banking Partner

Pershings

eCRM

norwichunion.com core competencies

norwichunion.com non-core competencies

CGNU central servicesinfrastructure

Home Page

Pro

tect

ion

Inve

stm

ent

S/M

of

Fu

nd

s

Ban

kin

g

Sh

are

dea

ling

CGNU sourced

Mellon Bank

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norwichunion.com

Substantial investment to build a robust, flexible and scalable business model for the future

l Core IT systems and business processes built tohigh specification to provide scalable secure androbust long term capability

l Hub based systems architecture allows best ofbreed software for each component and enables‘plug and play’ of new digital distributionchannels and product servicing engines

l Hardware components chosen to maximiseflexibility, reliability and expandability

l Pathfinding new Group e-architecture systemsand applications - building a bridge to the future

l Extensive testing period prior to launch to ensurecustomer quality

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norwichunion.com

Phased Launch Strategy

2nd October 2000

Spring 2001

Summer 2001

Autumn 2001

Soft launch of demonstratorweb site

Market Introduction ofVirtual Advisory Services

Market Introduction of Fund Supermarket and Share dealing

Market Introduction ofFirst Phase Banking Products

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norwichunion.com

Our competitive edge will come through

l Unique positioning: - Norwich Union brand - Open architecture model - Virtual Advisory Services - Middle income mass market (circa 11m)

l Easy to understand customer value proposition centredon empowerment and strong product propositions

l Use of best of breed technology to provide a uniquelyintegrated and customised service giving a dynamicview of wealth on a 24 x 7 basis

l Significant investment in Customer RelationshipManagement technology to capture and develop newcustomers and fully exploit the scale of existingcustomer base

l Integration and alignment with core CGNU systems andinfrastructure providing two way use of capability

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norwichunion.com

CGNU – set to be a winner with the mass affluent

- It’s best to be both

l Profiting from first movers’ learning

l Harnessing brand strength

l Embracing open architecture

l Deploying cutting edge technology

l Providing customer centric and integrated proposition

l Capitalising on core competencies

l Understanding: - It’s good to be big

- It’s better to be good

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norwichunion.com

nicholas smith - catching the wave of wealth management ...€¦ · cgnu wealth management vision...

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