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2023 was a second tough year for the direct investment platform market. Headwinds buffeted the market and consumer confidence took a pummelling from news of the Israeli-Hamas war and rampant inflation prolonging the cost-of-living crisis. Despite the wall-to-wall gloom, markets performed strongly in the final quarter, taking total direct market assets to £320bn and giving platforms a welcome boost to revenues. Hargreaves Lansdown, interactive investor and AJ Bell were the fastest growing platforms this year with Hargreaves Lansdown adding the equivalent of the industry’s annual net sales in assets.

Global stock markets were down, but UK stock markets were up in the third quarter. The net effect was that platform assets flatlined with a tiny 0.2% rise to £906bn. The UK economy also flatlined in the third quarter, narrowly avoiding a recession as high interest rates and inflation weighed on consumer confidence and households struggled with living costs. Gross sales were stable at £32.7bn, but uncertainty, lower disposable incomes and the siren call of cash and gilts, resulted in substantial outflows. Net flows plummeted to just £2.3bn — the worst quarterly net sales on Fundscape’s records —resulting in a net-to-gross sales ratio of just 7%. Seven!

With a disappointing ISA season having set the tone for the rest of 2023, the third quarter was always going to be a struggle. But thanks to modest upturns in stock markets, assets crept back over the £300bn mark, regaining a significant milestone for the direct platform market. Flows, however, disappointed with gross flows slumping to below £9bn and net flows dropping to a dismal £1.8bn — not their lowest ever, which was £1.5bn in the last quarter of 2022, but not far off it either.

As the tax-year-end approached, platform activity warmed up and there were high hopes that the momentum would carry through into the second quarter and beyond. Unfortunately, that was not the case. The second quarter of the year spectacularly failed to deliver on the sales front, but stock-market performance gave platform assets a reprieve (and therefore revenues). The FTSE All-World Index was up 3.2% for the quarter, although the FTSE 100 fell by 1.3%. As a result, platform assets were back over the £900bn* mark for the first time since the fourth quarter of 2021 (when we were still feeling optimistic about the future).

The trading environment in the second quarter provided no respite from the headwinds that have been pummelling the direct platform market. Platforms have been helped by modest market gains, meaning the majority were able to post positive asset growth. Gross flows were a comfortable £11.4bn for the quarter, but the all-important net figure was in the doldrums at £3.9bn as investors adjusted to higher living costs and prioritised cash products.

It was a difficult first quarter for platforms with the expectation of a recession and the cost-of-living crisis dragging on sentiment and flows. Two Interest rate hikes didn’t help either. Higher interest rates are usually bad for stock markets, but markets appeared to be Teflon-coated in Q1 with the FTSE 100 up 2%, the FTSE All World and S&P 500 up 7%, and the tech-heavy Nasdaq up a whopping 17%. This boosted platform assets to £880bn, although the industry’s £930bn high is still some way off.

After a difficult 2022, the D2C industry had been counting on business picking up in Q1 2023. For many D2C platforms, the ISA season is when they generate most of their flows so a buoyant Q1 is critical for annual revenues. However, a perfect storm of negative factors — rapidly rising interest rates, stubbornly high inflation, the ongoing cost-of-living crisis, a wave of public sector strikes and geopolitical uncertainty —had a major impact on investor sentiment. Despite this, assets rose by 4% on the back of strong stock markets and gross sales rebounded to £11.3bn – well up on Q422, and marginally ahead of Q122 figures.

The going got exceptionally tough for the platform industry in the third quarter. The cost-of-living crisis, rampant inflation, the uncertain economic outlook and political instability together had a huge, negative impact on investor confidence. Investors were spooked, abandoned risk in their droves and retreated to the safety of cash.