DIY investment is set to grow, finds Cerulli

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Investors are becoming more intolerant of advisory fees and are choosing to do their own investments using platforms, Barbara Wall, Europe research director for Cerulli Associates, has said.

Ms Wall said there was a discernible trend across the UK and Europe towards the direct-to-consumer platform market, with investors from all levels becoming more product savvy and intolerant of advice fees.

She said regulatory changes have favoured the end investor as the FCA’s Treating Customers Fairly programme underscored the need for transparency and clarity, while the retail distribution review had “created an advice gap, leaving so-called orphaned clients with nowhere to go”.

Ms Wall said: “It is risky to assume that the clients of smaller D2C platforms are those who cannot afford advice. Higher-net-worth investors also told us that they are reluctant to pay advisory fees.”

Cerulli Associates research found that 59 per cent of asset managers surveyed had a D2C/D2C platform distribution strategy in the UK.

The percentage in other markets was significantly lower, but a further 12 per cent planned to roll out a D2C proposition in the UK, while 7 per cent said they had similar plans in Germany.

Last year, D2C platforms’ assets under administration in Europe and the UK rose 29 per cent to £93.3bn in the year to the end of September 2013.

Adviser view

Nick McBreen, adviser for Cornwall-based Worldwide Financial Planning, said: “Leaving aside the undeniable economies and efficiencies of using “platforms” from both client and adviser perspective, the underlying story is a potential game-changer for the following reasons.

“The post-RDR world in the UK should have moved financial services and investment advice away from the transactional model towards the advice model; I believe this is still a work in progress.

“DIY investors’ portfolios perform poorly en masse, failing to even achieve the benchmark when making their own investment decisions and fund selections, because some 90 per cent of the success of any investment portfolio is attributable to the asset allocation. Get this wrong and you simply cannot get returns.”