The D2C market has been on a rollercoaster ride with the explosion of personal investing in the pandemic, followed by a decline in asset prices and deflated investor confidence. Potential headwinds are reflected by the flak that Hargreaves Lansdown took from city analysts this week as it posted its interim results.
Our annual UK D2C: Market Overview, published this week, shows that AUA is indeed down across the market, but this hides some positive signs.
We find that while the youngest investors have taken flight, overall customer numbers are up. We also see that there is a greater desire to improve personal financial resilience than there was pre-pandemic. People are too squeezed by the cost of living to do much about it now, but this will become a tailwind as the macro-economic climate improves.
Cash holdings are up, but a good chunk of this is because there are more cash platforms offered by investing services. These have attracted new deposits, previously held elsewhere, and we haven’t seen significant conversion to cash or outright withdrawals from investment accounts. There is little evidence from this downturn that self-directed investors are panic sellers in times of market stress.
Looking to the medium term, we see opportunities for both D2C and advised firms as current regulatory initiatives shift the rules relating to targeting people in the advice gap. A new simplified advice regime is in consultation and a holistic review of the advice/guidance boundary is likely to facilitate more personalised guidance.
The macro climate is gloomy, but the fundamentals in the D2C market remain strong and the digital revolution has much further to run to the benefit of online investing services.