View more on these topics

The Platforum: The Budget was big news for platforms

Holly-Mackay-Platforum-MM-700.jpg

Advised and non-advised platforms are set to win big following yesterday’s Budget and the The Platforum expects Assets under Administration on advised platforms to hit £495bn by December 2016.

We have also revised up our expectations for the direct to consumer platform market and predict it will hit £270bn by December 2016.

Prior to yesterday’s budget our expectation was for the direct market to be at £235bn by the end of 2016. 

The increase of the ISA allowance to £15,000, the ongoing move towards flexible open architecture pensions and the combined cash/shares New Isa (Nisa) are all contributing factors.

The ‘nicer’ ISA

Whilst affordability clearly means that relatively few of Britain’s 14.7m investors are able to set aside the full £15,000 per annum, we nonetheless expect Isa contributions to rise.

There are circa three million advised customers on platforms today, with assets of £265bn as at December 2013. Circa 30 per cent of these assets sit in Isas today. As a huge 98 per cent of all new advised Isa business is written on-platform, these businesses are clear beneficiaries of these changes.

If, for example, half of the three million advised clients on platforms contribute the additional £3,500 into Isas, that’s an additional £5bn of sales per year.

In the direct to consumer market there are circa two million individuals holding direct platform accounts. Of the £116bn held on direct platforms as at September 2013, 38 per cent (£44bn) was in Isas. Non-advised investors now identify platforms as the most likely route of purchase for their next investment and we anticipate greater inflows as a result of yesterday’s Budget to direct platforms.

Growth of the direct and advised platform markets since 2007, including growth projections for next three years:

Platforum Budget graph.jpg

Bridging the gap between savers and investors

Perhaps more important than the additional contributions is the change to savings behaviour we might see. One of the biggest opportunities for direct platforms at the moment is those savers who don’t currently invest – according to our research, 23 per cent of UK adults (11.4m people) have cash savings but no investments.

Bringing cash and stocks & shares Isas together under the Nisa label will bring savers into closer proximity with the investments world and we could see greater interaction between the two. This could see more of the UK’s savers dip a toe into the investment space, especially at a time of low interest rates.

Platforms attempting to appeal to less confident investors and focussing on guidance – such as Axa Self Investor, Bestinvest, Fidelity, Hargreaves Lansdown, rplan and The Share Centre – are likely to benefit from these changes.

Banks and building societies providing investments alongside savings – such as Barclays, HSBC and Nationwide – should be able to simplify the journey that people make from being Isa savers to Isa investors, so we would also see them as beneficiaries of yesterday’s announcements, if they can overcome their fear of Conduct Risk and make the customer journey easier.

Pensions

Increased flexibility in pensions will see platforms remain relevant for more people post-retirement. Previously platforms have focussed on customers in the 40-65 age bracket. At the same time as we see new investors starting to adopt platforms at earlier ages, we could now see some real innovation which will position a flexible, multi-faceted investment platform at the heart of a customer’s financial affairs for much longer.

The move by Aegon, for example, to house its accumulation and decumulation solutions on a single common platform starts to look a lot more relevant. We expect to see acceleration in the ongoing transfer of traditional life company pensions business to platforms, coupled with more assets remaining on platforms during retirement”.

In the adviser platform market those platforms with a large proportion of assets in pensions – namely Aegon, AJ Bell Sippcentre, Aviva, James Hay, Nucleus, Standard Life and Zurich – should benefit, although clearly firms with annuity businesses are digesting the anticipated impact to these particular product lines. 

Holly Mackay is managing director at The Platforum

Recommended

Justice-Fine-Ban-Court-Gavel-Judge-700x450.jpg
2

Lloyds adviser stole over £226k to fund gambling habit

An adviser for Lloyds Bank has been given a two-year suspended sentence after he stole more than £200,000 from six pensioners to fund his gambling habit. The Daily Mail reports Marc Burnett, a senior banking adviser for Lloyds, stole £226,508 in 45 false transactions between 2008 and 2013 to spend on football accumulator bets. Burnett, […]

Danny Alexander

Treasury sets out terms for public sector pensions cost cap

The Treasury has revealed the framework it will use to cap the costs of public service pension schemes. The cap, recommended by Lord John Hutton’s independent public service pensions review, only relates to member costs. It is designed to limit the cost to the taxpayer of providing pensions to public sector workers. The level of […]

Elderly-People-Paperwork-Old-Pension-Pensioners-700x450.jpg
2

LV= with-profits investment returns hit 11%

LV= has held or increased annual bonus rates for over 700,000 with-profits policyholders as investment returns surged during 2013. The mutual insurer’s 2013 with-profits performance statement, published this morning, reveals the LV= with-profits fund delivered investment returns of 11.1 per cent last year. Annual bonus rates range from 0 per cent to 6.17 per cent […]

What advisers are saying: The importance of defining your proposition

The RDR has failed to do a lot, by the regulator’s own admission. But there is much that it has achieved, not least creating an environment of higher expectation on a number of levels. Higher professional standards have been accompanied by a new regulator who has stated it will devote a significant part of its […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. Holly, I would have thought that any platform with any modicum of sense would offer some fixed rate deposit accounts now that the rules for switching between cash and investment are much improved. This ought to open up platforms to effectively do cash management as well, offering better time based deposits than any high street. This could see massive inflows if done well, if not it would be a gigantic missed opportunity – particularly as this combines neatly with drawing money from SIPPs etc. This of course all with the very big proviso that platform charges are considered very carefully and not making the exercise rather pointless due to low interest rates. This is precisely the competitive kick in the rear that Banks need and further broadens the cash and investment management that many people can now achieve, once the exclusive domain of large investment Banks. If they can get this right, your figures will need increasing considerably.

Leave a comment