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Direct platforms face losing market share to banks

The direct platform market is facing the threat of rapid growth in savings apps, which consultancy the Lang Cat says could see banks stealing their market share.

The Lang Cat has released its 2018 direct investing market guide, which finds there has been an increase in the number of such apps as a result of open banking, which lets savers share their bank account details with third party providers including finance apps and challenger banks.

The Lang Cat says those third party providers can then use the account details to create wealth management apps, for example Moneyhub, Money Dashboard and Squirrel Investing.

The apps are not necessarily an investment service but give savers one place to see their finances and can also encourage saving.

Barclays rolls back on robo-advice plans

The Lang Cat acknowledges that while this market is growing quickly, not many savers are getting on board yet.

The report says: “For that to happen will potentially take the familiarity and financial clout of a big household brand. In time, this could lead to the banks fulfilling their early promise in the direct investing market, whilst seeing off the threat that open banking initially appeared to represent to them.”

It adds: “Direct platforms aren’t insensitive to all this…Hargreaves Lansdown and AJ Bell Youinvest have probably been the most vocal in this regard. However, they and their peers will have to jolly along, or the banks will have sorted it and they will be simply supplying data for someone else to crunch, and that’s a dangerous place to find yourself.”

The report also includes price heatmaps for Isas, Sipps and trading accounts on direct platforms.

FCA warns advisers over platform inducements

However, the Lang Cat says that despite more information being made available to investors through the introduction of Mifid II regulation, there is still little clarity for direct investors on the cost of investing through a platform.

The Lang Cat principal Mark Polson says: “Transparency has improved for investors but clarity remains in short supply. As the consumer research in the [FCA’s] recent study found there is a clear correlation between clarity of costs and charges and the extent to which investors will take them into consideration.”

Polson adds: “Improvements in pricing structures, terminology and clarity will help investors understand charges and factor them in when making investment choices.”

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