Swirls of movement continue on the D2C supply side. Pension assets are going direct through SIPPs. Stockbrokers continue their march into funds. The life companies and platforms are facilitating execution-only for adviser firms. And as for fund managers, the growing masses of self-directed clients will need solutions not single strategy building blocks.
We sense that we might be seeing the beginning of a migration away from advice and a massive 86% of today’s UK investors will either fully self-serve or dip in and out of advice. Many are looking for guidance and validation and Simplified Advice is thin on the ground. Content is becoming the new battle ground for customer acquistion.
This report looks at the UK D2C market size, who the major players are and the economics of direct platform businesses. The 'consumer' part uses research from Ipsos MORI, Consensus Research and readers of The Telegraph to build up a picture of the number of private investors and their preferences. Our Road Testing chapter compares the top D2C propositions from the user perspective.
It is for those with or developing D2C proposition or for fund managers and others interested in the rapidly evolving D2C distribution channel.
The Direct Platform Guide is available to purchase at £7,200 +VAT ($11,400, €8,450)*. For further information please email Jeremy Fawcett.
For a sneak preview of the guide please click here
Holly Mackay talks about the rapidly evolving direct platform market
Five Myths of Platforms in 2013
Our recent D2C research unveiled a market which looks substantially different to the market we started reviewing in detail in 2010. Some lazy urban myths persist today:
- "This market is all about Hargreaves Lansdown and a few discount brokers" - errr, think again. Some of 2012's new entrants included an Indian bank, plenty of digital innovators, a fund manager in disguise and movement on the life company front too. The stockbrokers are getting better at funds too. Going direct doesn't necessarily mean an open architecture approach either. We're talking to lots of fund managers about 'closed architecture' platforms... go figure.
- "How can we copy Hargreaves?" Flawed thinking. A) You can't - 20 years, proprietary IT and direct marketing skill are not easily copied. B) You don't need to. Not everyone wants to spend the time fiddling around with portfolio construction tools and earnest fund manager videos. 42% of investors don't want to spend any more time or effort on their investments than they have to and a further 17% say they largely leave them to look after themselves. At best they want guidance and validation - in short, filtered lists, packaged products and a big, fat brand. There is room to think differently.
- "If I sell to the direct channel my IFA customers will go loopy." No, they won't. Lots of IFAs are setting up execution-only propositions to cater for smaller accounts. The days of the Cold War between advice and direct are over. Most direct platforms in France and Germany have sales teams and internal advisers... and admittedly rather less stern regulators. But welcome to the new hybrid.
- "Direct platforms are panicking about future revenues." Yes, the replacement of cash 'loyalty bonuses' with unit 'investment boosters' will likely hit all revenue levels. But too little is mentioned about costs. With customer acquisition costs sometimes hitting £400 per client, average account sizes of £27,000, revenue levels of 25bps - 60bps... well, you do the maths. Time to focus a bit more on costs.
- "The direct channel is a sideshow." Oh will you get into 2013 already! Of the 11 million investors in Q3 2012, a whopping 3.3 million are entirely DIY and only 1.5 million are entirely advised. The rest adopt a hybrid approach. Look at the threats to adviser charging in the corporate world and you start to see how workplace savings could become a sub-section of the direct channel. Assumptions about correlations between wealth and propensity to seek advice are also over-egged. The non-advised market has to be a central pillar of any major investment company's approach.
Key Points
- The direct platfrom market was £94.3bn as at September 2012
- The biggest providers are Hargreaves Lansdown, Barclays Stockbrokers, Fidelity, TD Direct Investing, Selftrade and Alliance Trust Savings
- The three key drivers of change are regulation, auto-enrolement and technology
- 100% of investors say a well-known and trusted company name is important; only 25% say price
- 26% of investors have used a platform and 28% plan to by their next collective from a platform
- Hargreaves Lansdown receive our Direct Platform Best User Experience rating followed by Interactive Investor and Alliance Trust Savings
'Direct Platform Guide – Issue 3' in the News
Charles Stanley slams Newton for D2C clean share refusal
Ben Yearsley: Newton should be ambivalent. Charles Stanley Direct has hit out at Newton Investment Management for not making its clean share classes available to direct to consumer platforms.
Fundweb, 4th April 2013
Fund rivals cut fees for savers
Investors are reaping the benefits of competition among fund supermarkets, which are cutting fees to attract new customers.
The Sunday Times, 24th February 2013
Beware costly exit fees at fund supermarkets
Investors who use a fund supermarket and take no financial advice could be trapped by huge exit fees if they want to switch to another platform.
The Sunday Times, 10th February 2013
Clean share classes: What the execution-only platforms are offering
Many execution-only platforms are holding off adding clean share classes ahead of final rules from the FSA which will confirm whether they are able to retain fund manager rebates.
Money Marketing, 8th February 2013
The Platforum tips life companies for D2C platform move
Life Companies are in a prime position to offer direct-to-consumer platforms to clients who are unable to afford advice as a result of the RDR, according to The Platforum.
Money Marketing, 1st February 2013
Holly Mackay: Doing the D2C hokey-cokey
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.
Money Marketing, 25th January 2013
D2C platform assets rise 29% to £94.3bn
Assets under administration on execution-only platforms increased 29 per cent from £73.2bn to £94.3bn in the 12 months to 31 September.
Money Marketing, 24th January 2013
Fund supermarket comparison site launches
Investors can now use a comparison website to find the cheapest online fund supermarket for their Isas and personal pensions.
Money Observer, 23rd January 2013
Previous Direct Platform Guides
The Direct Platform Guide – Issue 2: More activity under the surface
February 2012
On the surface there's not much movement in the direct-to-consumer (D2C) sea but beneath the waves there are exciting changes. A market of 6.5 million active private investors in the UK are not unnoticed by providers. The RDR, changing consumer behaviour and the march of digital technology continue to disrupt this market. What are the opportunities and who is taking the initiative?
