Platforum: Have we reached the consolidation tipping point?

Heather Hopkins

Just when financial professionals thought lack of sunscreen was their biggest worry, the world’s stockmarkets have been thrown into turmoil. Economic woes in China, fragility in the US and uncertainty in Europe may well drive investors out of funds, which spells bad news for the investment industry.

But despite these woes, we are confident on the future for the adviser platform market and optimistic for double-digit growth for the year. After all, Q1 was strong, with assets under administration up 8 per cent. In our Q2 report, released this week, we highlight the fact the adviser platform market grew by 1 per cent. A more modest figure perhaps but heading in the right direction nonetheless.

For sale

In the news last week, Axa has put its UK wealth management business Axa Wealth up for sale. Following a shaky 2014, its platform Elevate has had a good first half this year.

Assets are up, the platform is growing quicker than the competition and adviser reviews are positive. But with Cofunds and Elevate now on the block and Transact only recently taken off the market, we wonder if we have reached the tipping point in terms of consolidation.

We will watch sales figures closely for both Elevate and Cofunds. One in 10 advisers tell us they are transferring assets from at least one of the market’s platforms. Half of these are planning to move assets from Cofunds.

When we fielded our survey in late June/early July, news had only just broken about a potential sale, so even before it was announced, the platform struggled more than others to hold onto assets. The added uncertainty over ownership will simply not
help matters.

In other news, Zurich and Standard Life each added over £1bn in net sales for the quarter. This was the second consecutive quarter with net sales over £1bn for the latter. Other standouts were AJ Bell, Aviva and Aegon. Among the smaller players, Novia, Parmenion and Alliance Trust Savings all enjoyed above average AUA growth.

Pension reforms

The pension reforms are seen to be a big driver of growth for platforms in the coming years and, indeed, advisers tell us nearly two-thirds of former annuity assets are going into advised drawdown.

Nearly one- quarter of former annuity assets are going to annuities and only 6 per cent to cash. This data differs from figures published recently by the Association of British Insurers that show much higher shares for cash and annuities. The ABI data is not whole of market and neither is ours.

Our data is based on the opinion of financial advisers (who would tend to deal with larger pension pots) and is in line with what the platforms we spoke with are seeing. We expect the share of assets going to advised drawdown will continue to rise for advised assets.

In terms of the products being recommended in light of pension freedoms, equity funds and multi-asset income top the list with around three-quarters of advisers. Target date funds and structured products have not gained much traction with advisers, with 85 per cent saying they are unlikely to recommend them or are neutral towards them.

As this column went to press, markets appeared to be recovering. US stocks are up, China’s regained a tad and the relief is spreading to Europe. There is also less need for sunscreen in Blighty. Still, let’s hope the good news continues.

Heather Hopkins is research director at Platforum

These issues and more will be discussed at Platforum’s conference on 1 October at the Business Design Centre in London: