What do Volkswagens, SEATs and SKODAs have in common with Porsches, Lamborghinis and Bugattis? Despite huge differences in price, status and exciting optional extras, they are all manufactured by Volkswagen.
Regardless of the broad availability of modest, personalised cars, the very wealthiest in society continue, and will continue, to buy supercars. In fact, over the past 50 years the majority of car manufacturers have diversified to cater to all budgets.
Today you can pick up a Volkswagen Polo for less than £15,000* or a Bugatti Chiron for over £2.5m**. But, crucially, both are produced by Volkswagen.
70% of revenue from the mass market
Offering both enables Volkswagen to access the entire market. They can sell high end, luxury cars, with fine Italian leather upholstery, starlight headlining, and carbon ceramic brakes to those who want them, at the same time as selling simple, safe and affordable cars to those who need them.
In fact, if Volkswagen had only sold Bentleys and Porsches last year it would only have made 10% of its annual revenue (see Figure 1). Despite the huge difference in price between its top end and mass market cars, over 70% of Volkswagen Group's 2017 revenue came from the sale of Volkswagen passenger cars, SKODAs, SEATs and Audis.
Figure 1: Volkswagen Group Annual Report 2017: key figures by brand***
|Brand||Vehicle sales||Sale revenue (millions)||Average value of each vehicle||% of Group annual revenue|
|Volkswagen Passenger Cars||3,573,000||€ 79,979||€ 22,384||35%|
|Audi||1,530,000||€ 60,128||€ 39,299||26%|
|Porche Automotive||248,000||€ 21,674||€ 87,395||9%|
|Bentley||11,000||€ 1,843||€ 167,545||1%|
The same is true for financial advice
Today, IFAs are servicing just 11% of the UK market (see Figure 2). Financial advice is generally the prerogative of the very wealthy. The cost of providing face-to-face financial advice, with full behavioural coaching and access to the full range of assets, is high. This inevitably restricts your potential client base.
Research by Deloitte shows that less than 25% of the UK obtain any kind of professional advice at all when choosing where to invest their money (see Figure 2). Or in other words, over 75% of the UK does not.
Figure 2: Usage of advice on product purchases among GB adults, 2014-2016****
Source: YouGov 23-24 January 2017, Deloitte analysis. Sample: 2,046
The missing market: how to access the majority of your 2020 revenue
With increasing regulatory burdens and decreasing margins, this number could fall further. Technology can help. By automating various stages of the process, advisers can segment the financial advice market and access a previously untapped customer base at least 3x the size of the current pool.
With a digital investment advice platform like Munnypot, IFAs can service three distinct market segments with three distinct products:
- very high net worth individuals with face-to-face advice;
- future pipeline clients with hybrid advice led by a customer adviser;
- next generation clients and the mass market with a fully digital, online platform.
The Bentley of financial advice
The wealthy will always want face-to-face financial advice from their trusted financial adviser. Complex circumstances demand an in-depth knowledge of tax law, asset allocation and behavioural finance, which only an investment adviser can bring to the table. But by segmenting the market, advisers can spend more time focussing on the demands of their most profitable clients.
An income generating pipeline
Through a hybrid advice offering, IFAs have early and ongoing contact with a very wide base of customers. This provides access to a huge collection of data on future high net worth individuals. Using this contact, IFAs can know when to reach out to clients who have accumulated sufficient wealth to require more bespoke advice, proactively offering them an upgrade from the Passat to the Porsche (excellent performance as standard but bespoke build for extra).
A hybrid solution enables customer service agents to provide clear and consistent financial advice using the straightforward direction of the Munnypot platform. Use of agents instead of advisers decreases the time and cost required to service each client and use of the platform ensures any compliance risk is kept to a minimum.
We estimate the marginal cost of providing hybrid financial advice is just £100 compared to face-to-face advice costs of over £500.
End to end automation for accessibility
For next generation clients and the mass market, IFAs can offer a fully digital robo-advice solution via their website. We believe our award-winning, simple, online user interface appeals to the next generation of millionaire investors.
Full end-to-end automation results in very low marginal costs to servicing online clients and no ceiling on capacity. In fact, we estimate the marginal cost of providing automated advice is less than £5 per customer.
Moreover, making financial advice accessible and affordable demonstrates to the younger generation the invaluable nature of obtaining appropriate investment advice throughout your life. Once a customer has received some form of advice and understood the huge value of it, we believe they are unlikely to go it alone.
Digital advice does not undermine the immense value of financial advice. It demonstrates and democratises it. Munnypot enables IFAs to focus their time and attention on their most profitable clients, while simultaneously appealing to new generations, as well as building up a pipeline of new profitable business, without any effort at all.
For more information on Munnypot or to arrange a demo, please email email@example.com or contact our offices on 01293 224 281.
*Source: whatcar.com (https://www.whatcar.com/volkswagen/polo/hatchback/review/n83)
**Source: whatcar.com (https://www.autocar.co.uk/car-review/bugatti/chiron)
****Source: Deloitte, The future of automated financial advice in the UK (https://www2.deloitte.com/content/dam/Deloitte/lu/Documents/financial-services/lu-future-automated-financial-advice-uk-15052017)
Munnypot is a trading name of Munnypot Limited which is an Appointed Representative of Resolution Compliance Limited which is authorised and regulated by the Financial Conduct Authority. FRN 574048.