Market research - UK Equity Income

At Elston Consulting, we design investment solutions delivered as portfolios, funds and indices for our financial adviser, investment manager and fund provider clients.  In the same way that advisers need to think about their target market of retail customers, we as a co-manufacturer need to think about our target market of UK financial advisers.  Target market research and testing forms an important part of our solutions design process to ensure what we develop is helpful to UK advisers and solves a client need and can be clearly communicated.  Thank you to those advisers that are participating in our market research surveys.  It might give a clue as to what is currently in the laboratory!

Clarity and Confidence: Insights from the UK Equity Income Index Survey

This survey was to explore the potential index names for an alternative weighting scheme index that focuses on Dividends, rather than market capitalisation.

In a recent survey of financial advisers in the our UK adviser community, the importance of clarity in index naming and understanding of investment terminology emerged as central themes. The findings reveal a strong preference for transparency and simplicity in fund labelling, particularly when communicating with retail investors.

A resounding 95% of respondents agreed that it is either “important” or “very important” for an index name to be descriptive and readily understandable. This sentiment was echoed in comments such as, “Names should reflect the strategy clearly—jargon only alienates the end investor.” The emphasis on clarity suggests a growing awareness of the need to bridge the gap between complex financial products and consumer comprehension.

When asked about familiarity with the term “Smart Beta” (a technical term for alternative weighting schemes) responses were mixed. While 65% reported being “familiar” or “very familiar,” confidence in explaining the term to retail investors was notably lower. Only 30% felt “confident” or “very confident” in doing so. One respondent noted, “Smart Beta is a nuanced concept—explaining it without oversimplifying is a challenge.” This highlights a disconnect between professional understanding and consumer communication, suggesting room for improvement in educational outreach.

In contrast, the term “Equity Income” was far more widely understood. A full 80% of respondents were “very familiar” with the term, and **85%** felt “confident” or “very confident” in explaining it to retail investors. This suggests that traditional investment concepts retain stronger recognition and communicability than newer, more technical strategies.

The survey also explored expectations around fund categorisation. When presented with a hypothetical “Smart-Beta UK Fund” label, 80% expected it to fall under the UK Equities sector, while only 30% associated it with UK Equity Income. Confidence in its exclusive categorisation within UK Equity Income was low, with only 25% expressing high confidence. One participant remarked, “Smart Beta straddles multiple strategies—it’s hard to pin down to one sector.”

Conversely, when shown a “UK Equity Income Fund" label, all respondents (100%) expected it to be categorised within the UK Equity Income sector, and 75% were highly confident it would be placed there exclusively. This reinforces the value of conventional naming conventions in setting clear expectations.

Finally, respondents ranked five potential index names for a fund investing in the largest dividend-paying UK companies. The “UK Equity Income Index” emerged as the most clearly understood, followed by “UK Dividend Index.” Names incorporating “Smart Beta” consistently ranked lower. One comment summed up the prevailing view: “Keep it simple—Smart Beta adds complexity without clarity.”

Overall, the survey underscores a strong preference for straightforward, descriptive fund names and reveals a gap between professional familiarity with technical terms and the ability to communicate them effectively to retail investors. As one respondent aptly put it, “The clearer the name, the easier the conversation.”

Editorial note: survey results have been summarised with assistance from AI.