Now all of the market data for 2019 has arrived, Chris Bredin takes a look at how advised platforms are shaping up
It feels strange to be writing about the 2019 platform sector as we enter spring 2020, but end-of-year reporting delays us geeks at the lang cat from speaking too much about it before now.
So, before I dive into some numbers, here is a quick round up about what has happened in platformland in the past few months. On the surface, 2020 seems to have kicked off in much the same way as 2019 ended.
The first thing to mention is the acquisition of Wealthtime by private equity firm AnaCap in February. Wealthime is a small platform (about £2.1bn under administration at the last count) and is well-liked by its loyal band of adviser firm users who value the personal nature and tech driven solution. The challenge the new management team face is to grow the company at a pace - and to a size - where it's beneficial to the new bean counters, but still maintains everything good about the platform as it stands. We are sure they will.
The markets have taken fright since the beginning of March amid fears over the coronavirus and global oil wars. Market shocks such as this will inevitably cause some panic among investors, and advisers will be, rightly, reminding clients of the benefits of investing over the long term and not to focus on the short term.
Next, the long-rumoured sale of Ascentric by its parent Royal London (RL). It's had a long relationship with RL, from the first shareholding in 2007 to becoming fully owned in 2014, but has never felt completely at home at RL. It has had a number of difficult years, including a long and expensive re-platforming project, but we think it's over the worst and is ultimately a good business underneath, on new technology and with a lot of good people.
To Quilter, which can see light at the end of the tunnel as the World's Longest Re-platforming moves into the next stage. The first tranche of firms moved to the new tech over the weekend of the 22 and 23 of February and the first signs are positive - we have not heard of any issues so far. Here's hoping the rest of the project continues without any problems.
Sticking with Quilter, it also shaved a few basis points from its charging structure, meaning a discount of about 0.04% for their average portfolio size. So not huge savings, but certainly nothing to be sniffed at. Alongside this, it also introduced family linking, which is a very welcome change. This also includes multiple generations, not just spousal linking.
To the numbers
So much has been written over the last year or more about decreasing gross and net flows on platforms and the underlying reasons for this. And there has been much to write about. DB transfers, Brexit and market volatility have all contributed in their own way. But I think we are beginning to see some change. There has been some form of progress on Brexit now we have left the EU. How exactly the transition period will proceed and what the picture is this time next year, we don't know, but early signs are that some confidence has returned to the sector.
In Q4, £8-9bn of Alliance Trust Savings assets migrated to D2C platform Interactive Investor, which meant there was only a relatively modest increase in total assets under administration for advised platforms of 1.45%. This movement excluded, the increase would be around 3%. Since Q4 2018, AUA is up by 16%. Advised business (ignoring any D2C or institutional business) is now £446bn, an increase of 3% over the quarter and 19% when compared to Q4 2018.
Advised gross and net flows have been falling consistently quarter-on-quarter since mid-2017 and really started to accelerate over 2018. Flows were lacklustre in 2019 but, crucially, we saw signs of advised gross flows plateauing at around £14.2bn per quarter and advised net flows at around £5.2bn. However, over Q4 2019, advised gross and net flows jumped by 6% and 16% respectively to £15.2bn and £6bn. So, while 2019 was poor in comparison to the boom years of 2017 and 2018, it's important to look at the positive underlying trends.
That all said, the markets have taken fright since the beginning of March amid fears over the coronavirus and global oil wars. Market shocks such as this will inevitably cause some panic among investors, and advisers will be, rightly, reminding clients of the benefits of investing over the long term and not to focus on the short term. But, that isn't to belittle the feelings of clients when market downturns happen - this is an emotive subject and in many cases a significant fall in value can have a lasting impact. Clients will be rightly concerned and seeking assurance.
Looking at the data from Q4 in isolation, I'd be bullish about the sector to kick on and continue to grow in 2020. But, from what we've seen over the past couple of weeks, there is evidence to be a bit more cautious - the current market jitters just might put the brakes on the progress we've seen over Q4.
Chris Bredin is an anaylst at the lang cat
This article appeared in the April issue of Professional Adviser's bi-monthly sister title Multi-Asset Review. To make sure you receive your own copy of the next issue, please register your interest here
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