- How to diversify their revenue stream and move away from a heavy reliance on distributing their products through either the intermediated market and/or institutional market, by accelerating penetration of the D2C market;
- Where they have a D2C book, how to attract younger customers to help reduce the average age of their ageing book of business, which is on the decline, because their existing customers are either retiring or dying; and
- How to ensure their brand continues to be relevant among retail investors of all ages for generations to come.
For some, the easiest way to overcome these challenges is to acquire an established D2C brand. Aviva’s acquisition of Wealthify was one of the earlier ones, and more recently, we’ve seen the acquisition of Nutmeg by JPMorgan Chase as well as Lloyds Bank’s decision to buy Embark.
Lloyds said this was driven by a desire to cater to the broader financial needs of its customers and to retain "more of the circa £10bn assets under administration which customers invest with third parties each year".
Antonio Lorenzo, Lloyds’ wealth and insurance chief executive, said he wants to use the Embark acquisition as a springboard to rival Hargreaves Lansdown. Furthermore, we have recently seen reports of Abrdn’s interest in Interactive Investor.
As the trend in D2C investing continues to grow and the existing platforms continue to grow their customer base, we will no doubt see an increased interest from other established brands in this space.
Some will be acquired for their AUM and number of clients and others for their tech and proposition.
Whatever the reason, it would be interesting to see how sustainable these valuations will be in the future and whether those acquiring will be able to extract the value they hoped to achieve.
Janine Menasakanian is investments consulting director at Altus