16 Nov Press release – Platform sales plummet in third quarter of 2016
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Following the EU referendum, the FTSE 100 and the FTSE All-Share indices rocketed by 6% and 7% in the third quarter of the year, on top of the growth already experienced in late June. Against this backdrop, according to the Fundscape Platform Report, platform assets rose 9% from £432bn to £469bn by end September 2016. Since the start of the year, UK platform industry assets have increased by £67bn, an increase of 17%.
Asset growth was strong across the board with a couple of significant outliers. These included Standard Life, which completed its acquisition of Elevate and saw assets rise by 46% as a result. With Elevate’s assets stripped out, growth was a more modest 5%. Aegon, which hopes to complete its acquisition of Cofunds in Q416, was also home to significant growth. It continued to transfer legacy accounts to the platform, resulting in a 25% jump in assets to £11.2bn.
Despite the post-Brexit bounce, sales were weak in the third quarter. Gross sales fell to £21bn, the lowest volume since the third quarter of 2014, while net sales plummeted to £8.6bn, the lowest sales have seen since Q113 when RDR was introduced. Bella Caridade-Ferreira, CEO of Fundscape said, “The third quarter is usually the quietest because of summer holidays, but flows were even lower than expected. Stock markets were soaring, but the UK’s uncertain economic outlook made investors extremely cautious with their investments.”
The strongest platform by net sales in the third quarter was Aegon, which was able to topple Hargreaves Lansdown from the top spot thanks to its ongoing customer upgrade programme. But in reality, only £300m of Aegon’s £1.6bn sales is attributable to net new flows, so platform industry net sales were actually lower (£7.3bn) and therefore particularly sluggish.
In this difficult terrain, only pension business gained any traction with £6.3bn invested through pension vehicles, in other words, 73% of net industry sales. Given their competitive advantage in delivering pensions, it is no surprise that four of the top five platforms are now insurance company owned.
“A prolonged period of uncertainty and volatility as a result of Brexit and the US election results is on the cards for the platform industry. We expect the precautionary motive, the low-interest rate environment and pension freedoms to keep platforms broadly on the right track. However, the business environment in 2018 will be tough and competition for business will be fierce,” said Caridade-Ferreira. “In this hostile and volatile environment, further consolidation is to be expected and insurance companies are likely to lead the way.”
Notes to Editors:
The Platform Report is a confidential report published by Fundscape LLP. To subscribe to the report, platforms must contribute asset and sales data on a quarterly basis. For further information about the report and Fundscape, please visit www.fundscape.co.uk.
A total of 19 platforms are included in the analysis. Platform coverage is estimated at 98% of the platform universe.
*For timing reasons and because the data is market sensitive, Hargreaves Lansdown and Cofunds report their figures to Fundscape a quarter in arrears. Hargreaves Lansdown’s gross figures have been estimated, but assets and net sales were sourced from its Q316 trading update.
For further information or background please contact Bella Caridade-Ferreira, tel: 020 7720 1183, email: firstname.lastname@example.org.