Platform sales drop 22% on Brexit uncertainty

Transact and AJ Bell buck trend with growth in Q3

Fundscape

Platform assets under management (AUM), excluding Aegon, have risen by £14.4bn to £618bn in Q3, an increase of just 2.4%, according to research by Fundscape.

The report revealed that overall platform AUM increased by £30.3bn (5%) to £634bn over the quarter, albeit boosted by Aegon adding £16bn of defined contribution pension assets to its platform from Blackrock, a deal agreed in  May 2016.

With Aegon’s transfer stripped out, real gross sales were down 1.4% year-on-year to £28.2bn, with year-on-year sales down by 22% to £9.4bn.

Brexit uncertainty had an impact on sales and this was exacerbated by the holiday season and the continued slowdown in the defined benefit pension transfer pipeline, the report said.

On a year-to-date business, gross sales of £89bn were only marginally down from the £91bn achieved in the same period in 2017, while net sales of £36bn were considerably lower than the £41bn.

Clive Waller, consultant at CWC Research, said this is “nothing special”.

“We’ve seen markets fall by some 10% accompanied by high volatility and much uncertainty. Brexit is having an impact also, plus threat of a Corbyn government. As such, one would expect net returns to be modest at best.”

Fundscape said the net sales ratio dropped to 35%, making it one of the lowest rates on record.

Transact leads

However, the retail advised channel recorded a far more robust 48%.

Aegon topped the overall net sales table thanks to its newly platformed DC business, while Hargreaves Lansdown, which Fundscape said is usually first, came in third place.

TOP 5 RETAIL ADVISER PLATFORMS
BY NET SALES Q318

Transact£979.0m
Standard Life£976.0m
AJ Bell£960.0m
Aegon£759.6m
Aviva£628.8m

However, it explained that the biggest surprise occurred in the retail advised channel where Transact came first with £979m, beating Standard Life with £976m and demonstrating that “sticking to your knitting’ pays off in the long run” (see table above).

“Although Transact’s adviser base differs substantially from those of Aviva and Aegon, the fact that it is a publicly listed and financially robust platform is likely to have led to an uplift in adviser enquiries in response to Aviva and Aegon’s well documented re-platforming issues”, the research said.

Additionally, AJ Bell and Transact also saw 5.2% and 3.9% growth respectively in Q3, with year to date growth of 15% and 11.5%.

However, Waller argued there are no factors he is aware of which sets AJ Bell and Transact apart from their peers. “I wouldn’t be forecasting the demise of HL just yet.”

He added: “As platforms are paid by percentage of AUM, a severe correction would be troublesome given tight margins. Funds would walk and new flows diminish.”

More to follow

Meanwhile, Bella Caridade-Ferreira (pictured), CEO of Fundscape, said the fourth quarter will be “more of the same”.

“Geopolitical uncertainty bathed October’s stock markets in a sea of red with markets falling between 5% and 9%. Those concerns are unlikely to recede any time soon. Closer to home, if the government fails to pull off a Brexit deal in time, the outlook for the industry in 2019 will be fairly bleak.

“As the March 2019 deadline thunders down the track towards us, investors will become increasingly risk-averse. Isa business, the mainstay of the first half of the year, will be another damp squib for the industry.”

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