As we launch our third D2C platform report, there is more of a buzz in the air about this than before. D2C has become trendy, a buzzword.
It has got a little bit fatter too, and has expanded its horizons so that even IFAs are talking about execution-only services. No longer an either or, we see that a massive 84 per cent of today’s UK investors will either fully self-serve or dip in and out of task-based advice. David Cameron might even call it hokey-cokey advice.
Looking at those active in this space in 2012 and, well, not that much has changed. Hargreaves, Barclays, Fidelity and TD Direct still dominate with the wounded Selftrade and the growing transparency champions Alliance Trust also visible. Brand is hugely important with 100 per cent of consumers citing this as a key element – only 25 per cent cited price. Of course the adviser platforms are not alone in having complex pricing structures, highly difficult to compare and contrast.
How to efficiently manage the investment process has been a question the advisory community have grappled with since platform functionality made model portfolio management possible for the one-man bands. The CIP, or centralised investment process, was born. People want to delegate to an expert. This need is more pronounced in the direct market where the third biggest barrier to platform use cited by consumers was “confusion and too much choice. Where do I invest?” There is a reason that more than 70% of flows go to shortlists, model portfolios and multi-manager funds in the direct space. Open architecture sucks as a concept for the average Joe.
As the industry looks ahead and tries to anticipate the outcomes of the RDR, we see a few other interesting developments on the horizon.
1. We think it is likely that workplace savings platforms will absorb the entire savings pots of many customers with smaller balances. With the future role of advisers challenged in this space – and the DWP to make a decision on whether to ban consultancy charging for auto-enrolment in March or April – we might well see the move away from mandates to collectives as this market starts to look a lot more ‘retail’. It’s not impossible that workplace savings will in fact become a substantial sub-category of the bigger direct market.
2. We also anticipate a greater focus on content. If you don’t have content, you won’t attract customers. Now what’s easier? To be a publisher and bolt on transactional services? Or to be a transactional platform and develop publishing skills? This is about collaboration. Partnering up. And incidentally with only 40 per cent of consumers showing any interest or enjoyment of financial affairs, to go on about education is missing the point. People want guidance. Validation. Not a lecture.
3. That takes me to the Advice Canyon. The most glaring problem we see in the market today is the vagaries of Simplified Advice. New digital innovators are pushing the boundaries of financial advice. Is it compliant? Discuss. Does it meet a customer need? Yes. You can’t put a ‘tax’ on fruit and get cross when people eat sweets.
4. And as for fund managers, welcome back to the balanced fund. The growing masses of self-directed clients will need solutions not single strategy building blocks. Once again, what we have seen in the advised space is finding its way to consumer-ville.
Of course the bit that really interests us in all of this is what exactly is the role of a platform? Front-end or back-end? Transactions or content? Custodian or toolset provider? I’ve been explaining what platforms are for thirteen geeky years now. Suddenly, I’m not so sure I know anymore and we see great soul-searching by platform bosses as they work out where exactly they fit, and where their remit begins and ends. We’ll be tracking this with greater interest than ever as the impacts of the RDR start to filter though.
Holly Mackay is managing director at The Platforum