Most D2C services provide guidance in some way, frequently in the form of select lists and investment solutions – either ready-made portfolios or funds.

Guidance is growing in importance. This is partly because it helps first-time investors – at a time that interest in investing is up.

The regulator appears relatively amenable to D2C guidance. It has already mandated default solutions for D2C pension decumulation, consulted on defaults for accumulation and expressed concerns about investors holding too much cash. There may be further opportunities to offer guidance that includes default options in a similar way to auto-enrolment (AE) in pensions.

The collapse of the Woodford Equity Income fund in the summer of 2019 prompted renewed scrutiny of select lists. Direct platforms have since become more cautious about how they promote third-party products and tightened governance of select lists.

In-house products are featuring more prominently in their guidance. Direct platforms are becoming more vertically integrated; earning margins on their own products as well as through their platform services. Running solutions in-house also affords them greater control over their offerings to investors.

Asset management rightly see inclusion in D2C select lists as a top priority. There are fewer select lists this year than last, following some consolidation in the sector, but almost all direct platforms have them. Conversely, the concentration of products across all the lists has reduced – ‘conviction’ of fund recommendations has fallen.

The lengthening of select lists presents more space for asset managers but – as platforms favour distribution of their own in-house solutions – asset managers are in competition with the gatekeepers.

Platforum published its latest update, UK D2C: Investment Distribution, this week. The report provides a detailed explanation of how direct platforms – and other D2C services – are collaborating with asset managers.