As from yesterday, Scalable Capital is now fully live in the UK. While it might represent the next generation of robo-adviser from an investment management perspective, the future for ‘independents’ looks challenging as they struggle to achieve scale. Having said that, our latest research shows that a significant number of active private investors (42%) are open minded about the concept of robo-advice and say they wouldn’t necessarily require some sort of personal advice and support.
But with all the focus on robo, arguably the direct platforms aren’t getting the attention they deserve and our latest research shows plenty of activity in this market. AUA is on the rise, although not at the sustained growth rates that we saw prior to the market slowdown last year.
Bucking that trend is Hargreaves Lansdown which is extending its leading position having increased market share for the fourth year in a row. It is bigger than the six next largest competitors combined!
Should everyone else pack up and go home or are there some angles to work? We see a few:
– Fixed pricing – Alliance Trust Savings, AJ Bell Youinvest, Interactive Investor and The Share Centre are all growing more quickly than the average.
– Guided journeys and investment solutions – they may prove to be the lasting legacy of robos which captured the imagination of the public. All the platforms are working on this: Fidelity Personal Investing has chopped its select list down to 50 funds, TD Direct launched its Recommended Funds, Charles Stanley Direct has minted some new ‘Foundation’ portfolios and AJ Bell has acquired an investment manager to allow it to offer its own branded funds in due course.
– The pensions opportunity – everyone agrees it’s massive but not all direct platforms have significant numbers of retirement age clients. So building these journeys is not top priority for many. Partnering is the approach favoured by the likes of Bestinvest working with Saga, and Aberdeen working with Hyman Robertson and acquiring Parmenion.
– The mobile opportunity – only 10% of active private investors are using mobile for sourcing information about investing but that is sure to change based on mobile use in other areas of life. Over half of those over the age of 35 are ‘hooked’ on their mobiles, according to Ofcom. It is a chicken and egg situation and where platforms are getting their act together with apps and responsive websites (including for account opening and trading), they are seeing an uplift in activity through the mobile.
Aside from platforms, we continue to see D2C opportunities for banks, pension providers and fund managers. British investors say they are most likely to use a high street bank for future investments and the most active private investors favour the DIY approach directly with the provider. They massively favour actively managed funds over passives which might come as a surprise to some in our retail investing echo chamber.
We think it’s worth asking consumers what they’re thinking from time to time and you can see our latest findings in the Consumer Insights Update that we published last week.