The final quarter of 2022 brought to an end a tough year for direct-to-consumer (D2C) platforms, but rising asset values did provide some respite for investors, according to data from Fundscape.
Total D2C platform assets had climbed to £280bn by the end of the year, up 4.2% on Q3 2022, but were still down 9% on the equivalent period in 2021.
D2C platforms tend to be an accurate barometer of consumer confidence, or lack thereof, and the drop in 2022’s total flows were indicative of the gloomy economic conditions. Gross flows totalled just £6.4bn for the quarter, bringing the annual total to £34.3bn, well below 2021’s £45.5bn.
The annual total net sales was just £11.5bn, one third of the figure in 2021.
Top Five D2C providers by assets in Q422
| Hargreaves Lansdown | £108.7bn |
| Interactive Investor | £52.6bn |
| Fidelity Personal Investing | £29.5bn |
| AJ Bell | £20.3bn |
| Halifax Share Dealing | £17.9bn |
The top five D2C providers in terms of asset growth comprised mostly the same constituents as the table above. The largest player, Hargreaves Lansdown, topped the list with £3.1bn of asset growth, while Interactive Investor and Fidelity completed the top three. AJ Bell dropped to fifth, generating £1bn of asset growth, with Vanguard taking the fourth spot.
The same names made up the top five platforms for gross sales, both in Q4 2022 and the year as a whole:
Top Five D2C providers by gross sales
| Q4, 2022 | FY 2022 |
|---|---|
| Hargreaves Lansdown | Hargreaves Lansdown |
| Vanguard Investor | Interactive Investor |
| Interactive Investor | Vanguard Investor |
| AJ Bell | Fidelity Personal Investing |
| Fidelity Personal Investing | AJ Bell |
Barclays and True Potential crept into the top five by net sales in the fourth quarter, but could not do enough to break into the five best-performers for the whole of 2022:
Top Five D2C providers by net sales
| Vanguard Investor | Vanguard Investor |
| AJ Bell | Interactive Investor |
| Interactive Investor | AJ Bell |
| Barclays | Hargreaves Lansdown |
| True Potential | Halifax Share Dealing |
Vanguard punched above its weight, securing strong gross inflows and topping the net sales rankings. With much of its client base in the US, the simplicity of its pricing and proposition particularly resonated with UK investors during difficult times, according to Fundscape.
Martin Barnett, head of content at Fundscape, identified that the direct-to-consumer market is the most susceptible to consumer sentiment. The immediate, day-to-day concerns of the consumer have been dominated by the squeeze on living standards brought about by inflation, energy prices and the war in Ukraine. He argued that as long as this continues, there are likely to be depressed levels of new business.
He predicted some smaller providers will struggle in the circumstances despite the boost to revenues from the recent recovery in asset values. “We expect some to exit the market or be acquired,” he added.
Barnett concluded: “For an industry reliant on a good economic outlook and positive investor sentiment, predictions of a downturn of 12-to-18 months make grim reading. However, in Davos where the great—and the not always so—recently gathered, the International Monetary Fund painted a more optimistic picture of the world economy in 2023, predicting an improvement in the second half the year. Let’s hope that includes the UK.”
