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Advised platform assets to double in five years

Advised platform assets to double in five years

Specialist financial services consultancy The Lang Cat has estimated assets under administration on advised platforms will increase from £400bn now to £818bn in 2023.

The rationale behind the prediction is an increase in the value of assets by a compound annual growth rate of 19 per cent in six years, from £141bn in the third quarter of 2012 to £400bn in the third quarter of 2018.

The Lang Cat goes into greater detail on the fortunes of advised platform assets in its latest guide, Fixed That For You: state of the Platform Nation, which is available for purchase for £150, plus VAT, from The Lang Cat website.

The guide presents three scenarios, each based on different macroeconomic conditions, and takes into account the potential impact of wider market influences, including Brexit.

The consultancy considered it prudent to focus on the middle of the three scenarios, which predicted assets on advised platforms will grow by 15 per cent a year, to £818bn in 2023.

Of the two other models, the bear case foresaw growth at 9 per cent over the period, realising an asset value of £626bn, while the bull case saw growth at 19 per cent, delivering a value in 2023 of £971bn.

Mark Polson, principal at The Lang Cat, said: "Despite the potential headwinds created by on-going regulatory requirements and the economic uncertainty of Brexit and other global political developments, we still believe the sector is set fair for some time to come in terms of its opportunities.

"Even in our central scenario, advised platform AUA will reach £818bn within five years."

Looking even further forward, the Lang Cat's model puts the central case assets under administration (AUA) at £1.5tn in 10 years' time.

This would mean that by 2028, every 1 per cent of market share will equate to £15bn of assets under administration.

Based on the end of 2017 average yield of 0.29 per cent, the Lang Cat calculated that is £43.5m of annual revenue for every 1 per cent market share.

Mr Polson added: "That doesn’t mean, of course, that every platform will share equally in the spoils.

"Losing a small percentage share of such a large market will have a significant impact on the bottom line, so clearly there are huge incentives for platforms to get this right and win adviser trust."

Bill Vasilieff, chief executive of platform Novia, said: "Platform growth is dependent on two main factors, assets coming from real growth in the economy and from new products coming onto the platforms, of which pensions freedoms will pay a big part.

"As for the forecasts, I don’t think they are impossible, but am inclined to think they are at the optimistic end of the scale.”

dan.moore@ft.com