It was a difficult first quarter for platforms with the expectation of a recession and the cost-of-living crisis dragging on sentiment and flows. Two Interest rate hikes didn’t help either, as the latest Fundscape data shows what’s been going on in the all important platform market so far this year.
Higher interest rates are usually bad for stock markets, but markets appeared to be Teflon-coated in Q1 with the FTSE 100 up 2%, the FTSE All World and S&P 500 up 7%, and the tech-heavy Nasdaq up a whopping 17%. This boosted platform assets to £880bn, although the industry’s £930bn high is still some way off.
Flows, however, disappointed. Total gross sales were £35.7bn and net just £9.5bn. The ISA season, which generally sets the tone for the rest of the year, was dire. Net ISA flows totalled £495m for the entire platform industry. All channels were affected. Adviser net flows, for example, plunged to £4.6bn, a 50% drop against Q122, as consumers reacted badly to poor economic news.
These sales numbers mask the fact that some platforms did much better than others. Aegon, for example, recorded gross flows of £10bn for the first time in nearly two years, while Quilter and 7IM’s flows rebounded to business levels last experienced in 2021.
In the adviser platform channel, vertically integrated platforms flourished in the challenging environment, with Quilter in pole position for gross sales for the sixth consecutive quarter, and True Potential for net sales for the fourth consecutive quarter (significantly aided by its adviser buyout programme). Transact, though, was second for adviser gross and net flows, highlighting the importance and resilience of independent adviser platforms in the industry.
Bella Caridade-Ferreira, CEO of Fundscape said, ‘Net flows were low in Q1 because of poor sentiment and investors withdrawing cash to meet living costs and help their families. The good news is that from January’s low point, flows improved month on month and the trend continued in Q2.
‘We’ve avoided a recession, the economic outlook is better, and sentiment indicators have jumped several points — spring is in the air and there are green shoots of optimism everywhere. The rest of the year is likely to be better than we initially feared. What’s more, with the pension changes announced in the budget we expect a long-term surge in pension flows and a corresponding rise in demand for advice. The future is looking rosier for the platform industry.’