The platform market could grow to more than £1trn by 2025 in a best-case scenario, but sector growth overall is likely to slow, according to the Lang Cat.
The consultancy has predicted that the market’s compound annual growth rate (CAGR) would be 12 per cent for the next few years, down slightly from the 14 per cent seen since 2013. This would see assets under administration hitting £874bn by 2025.
However, the firm has also outlined its predictions for an ‘optimistic’ forecast, where CAGR hits 17 per cent, which would push AUA to just over £1trn. The Lang Cat’s ‘pessimistic’ forecast would see 6 per cent growth, and £664bn in assets.
Mike Barrett, consulting director at the Lang Cat, said: “Of all the factors with the potential to impact growth one way or another, the economic picture is the most important.
"The pandemic hasn’t changed the demographics of an ageing population, or the fact that people will always need financial planning. But as we saw over the last 12 months, when investor confidence takes a hit, new business flows will also fall.
"In the short term we do expect flows to remain volatile, although in the longer-term they will stabilise and continue to grow."
The Lang Cat's realistic and optimistic scenarios are based on the assumption that disruption from changes, including platform mergers and acquisitions and expensive re-platforming projects, will be relatively low level, he said.
"Yes, there have been a number of ownership changes in recent months, and these still need to be fully implemented. But an increasing number of providers now have relatively new and/or stable ownership in place. And combined with a relatively benign regulatory environment (based on its Platform Market Study, the FCA appears to have no major issues) platform providers should be able to focus on what matters for advisers and their clients.”
In August last year, research showed that financial advisers’ use of platforms was on the up as more than a third (35 per cent) of advisers said they intended to increase business on their main platform over the next 12 months.
Figures from CoreData Research, published on August 26, showed all of the advisers it had polled now used platforms, up slightly from 99 per cent in 2019, while 68 per cent use them daily — up from 60 per cent last year.
The firm polled 1,000 UK advisers in May and June and found adviser platform use had boomed across all client wealth segments.
The sector posted inflows in the first quarter of this year that haven't been seen since since 2018 when DB transfers and pension freedoms boomed.
In the first three months of the year, advised net flows reached £9.4bn, up 32 per cent on Q4 last year and 34 per cent on the same period last year, according to the Lang Cat.
The last time flows reached this level was Q2 2018, when pension transfers boomed.
sally.hickey@ft.com
