Hargreaves Lansdown and St James’s Place are titans in the new wealth management landscape bringing brand, scale and efficiency to what was previously a cottage industry. They have joined the FTSE 100 in recent years and have subsequently grown the assets they manage and their own market capitalisations. Both have avoided the RDR banana skins and continue to succeed as premium services with premium pricing.
Maintaining current growth rates will be difficult. On the positive side, there is an undersupply of advice, which started with the banks pulling out and compounded with the pension freedoms. In addition, both groups have made strong vertical integration plays to grab more of the value chain. However, competition is hotting up, particularly around three areas.
1: Price pressure
Our consumer research finds investors more price sensitive than in the past. The end-investor is beginning to notice that they have options for what they choose to pay. Fixed price platforms are more ubiquitous these days in both the advised and self-directed markets and Interactive Investor’s acquisition of TD Direct Investing will mean that fixed pricing is offered by a scale player for the first time this year.
2. Return of the banks
They have been slow to reverse their post-RDR exodus and their desire for control means we’re hearing lots of talk about robo-advice. In the meantime we have seen a very significant D2C launch from Barclays which is a well-integrated online banking and investing proposition.
It looks good and the pricing is competitive which may tempt some of its millions of banking customers and possibly a few people who are not.
3. Investment solutions
Many commentators have been quick to write off the robos. However, Nutmeg’s current assets and impressive growth rate means that they will probably make it, although they may not conquer the world Facebook-style.
I expect digital investment solutions to become increasingly popular but not the sole preserve of the robos.