While the political chaos reigns, the retail investment industry continues a transformation in response to the mega trends of digitalisation and shifting retirement demographics. Profound regulatory changes continue to influence the behaviour of companies and individuals aside from their response to the impact of Brexit.

Today’s newsletter is the predictions of the Platforum analyst team for investment distribution in 2019. What are financial advisers thinking and doing? What impact will regulation have across the industry in 2019? How is D2C and the end-investor evolving?

Thank you for reading this year and we’d love to hear any feedback and comments. Our 2019 research schedule can be accessed here.

Jeremy Fawcett, Head of Platforum (@jfawcett)

Asset managers, banks, platforms and wealth managers will woo the end-consumer and while there are no household names in investing, the race is on to become one. In particular, asset managers hate their diminished role in the value chain – no longer are they the paymasters of distributors. No rebate, no influence. Financial advisers devolve investment selection, platforms are becoming competitors and so fund groups don’t know where to put their marketing budgets. Step up consumer campaigns and digital propositions from asset managers, including for investment trusts whose revamp for the digital age will be direct distribution.

Richard Bradley, Associate Research Director (@R_S_Bradley)

Charges across the value chain will be under the microscope in 2019 like never before. At the end of April, we have MiFID II bringing in ex-post charges disclosure across the market. In the UK, AFMs will also have to start assessing value for money for their funds, with the first results expected early 2020. We anticipate an initial flurry of interest following both of these – including from the national press – resulting in some ‘interesting’ client conversations. Past experience of pricing disclosures suggest that this interest will subside pretty quickly. However, if markets over the prior 12 months have been flat or negative, these conversations could be far more heated.

Danby Bloch, Head of Editorial Strategy (@danbybloch)

The tide is going out for consolidators and in 2019 we will find out which of them really knows how to swim in choppy waters and which have been bathing without costumes. There’s a fine line to tread between making private equity-style returns from acquisitions on the one hand and avoiding shoe horning customers into investment propositions on the other. And then there’s the need to integrate newly acquired businesses. Consolidators have to be tough and be prepared to lose advisers – just not too many. It is all far harder than it looks.

Andrew Ashwood, Analyst (@Ashwood47)

The decumulation market is one of huge untapped potential for asset managers and other product providers. With all but a handful of annuity providers stepping out of the ring, what will be the product of the future for advised drawdown? I predict that in 2019 we’ll see the first new drawdown-centric product launches from asset managers. Whilst maybe not being the finished article, we’ll see the first genuine attempts at innovation for an ever growing adviser and investor demand.

Mariam Pourshoushtari, Analyst (@mariamp_etc)

2019 will be a testing year for advisers, with MiFID II coming into full effect and the looming prospect of a market correction. Many advisers are predicting market volatility to continue in the new year and are concerned that this will coincide with aggregated cost summaries being sent to clients. Client pressure on fees that has been nearly non-existent for the past few years will start to rise. We will see more adviser firms seriously reviewing their percentage-based charging structures – wary of the fact that when markets go down, so will their revenue streams.

Joshua Taylor, Associate Analyst 

UK investors have steadily taken to passive funds post-RDR, and I predict that in 2019 we will see an acceleration of passive funds’ share of the wider European fund market. In 2018 net flows of tracker funds picked up across several European markets. With MiFID II now implemented and improving the visibility of fund charges, economically savvy investors will seek out cheaper passive funds and ETFs. This growth will be fuelled by providers eager to launch new ETF offerings, adding to the relatively small European ETF market (in comparison to the US).

Cristina Puscas, Associate Analyst 

The launch of several retail bank robo propositions marks a return to regulated financial advice for the banks following the exodus of branch-based financial advisers post-RDR. Increasingly we expect to see robo becoming the advice layer for established brands. We expect the ‘democratisation’ of investing to be driven more by banks finding automated ways to provide mass-market financial advice to their millions of customers than by independent start-ups driving millennials to new digital propositions.