D2C saw 23% growth last year. Will further growth come from new Guided Advice Rules?

10 February 2014

Last week saw publication of the latest Platforum report which gave us proof, if proof were needed, that the Direct to Consumer (D2C) market is the one to watch this year. Platforum confirmed that D2C sector now holds AUM of £116bn, up 23% from £94bn a year ago.

This actually means the D2C market’s annual growth rate is slowing very marginally as the size of the market they are grabbing increases:  

But players in the D2C market seem to be far from resting on their laurels. Alliance Trust Savings for example announced a major investment in additional technology to help improve the platform’s functionality this week. A new version of the platform will be unveiled early next year:  

The other big news in the D2C platform space was Hargreaves Landsdown’s back-pedalling on investment trust charges showing that charges transparency combined with tighter competition in this market are keeping charges in check even while HL continues to dominate the market with £43bn AUM (45% of the D2C market by value):  

So while the D2C market looks to be in rude health moving into 2014, there are still real concerns that D2C platforms will be accused by the regulator of providing online financial advice ‘by mistake’ (as it were). Will a full and final definition of simplified advice help platforms avoid this grizzly fate? A FCA consultation on Simplified or Guided Advice will kick off in the next month with a view to establishing these rules by the end of the year:  

Our view is the clarification of what is or is not Guided Advice and what is required by the regulator for providing this; will provide a further shot in the arm for the D2C platform market. It will also aid IFA nationals and other new entrants looking to plug the advice gap with online D2C and Guided offerings. As things mature it will be possible for customers to upgrade from execution only through Guided to full on Independent Financial Advice…all at the click of a mouse.

If the slightly more upbeat mood of early 2014 has passed you by so far, surely the fact that the much-vaunted advice gap is already closing must have lifted spirits a little? According to the FCA’s own figures numbers of pensions and investment advisers went up by 5% in 2013 to reach 21,881. But despite this clear bounce back we are still 15% off the adviser numbers recorded at the end of 2011 and bancassurer numbers continue to fall at a rate of roughly 1,000 every 6 months, now standing at 3,556:  

Finally, we spotted one online commentator’s recommendation that D2C financial product buyers might be requested to complete a Financial Literacy test to determine whether they are ‘qualified’ to buy the financial product that they are researching online. Good idea, unworkable, damn right intrusive or a key to D2C platform regulatory success? You decide.

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