Investors at all levels – from mass retail to ultra-high-net-worth – are not only more product savvy but also intolerant of advice fees, according to research from Cerulli Associates.
In addition, regulatory changes have favoured the end investor as Treating Customers Fairly (TCF) underscores the need for transparency and clarity, while the Retail Distribution Review (RDR) has created an advice gap, leaving so-called "orphaned" clients with nowhere to go.
Mass retail investors have embraced the go-it-alone model of the D2C platform. Two such platforms target young investors with an average of GBP30,000 (USD48,000), but they also have clients who invest GBP1 million-plus. One of the companies also offers an advisory service.
"The customers of these two platforms are not on the radar of most asset managers, which is an omission that needs to be addressed," says Barbara Wall, Europe research director at Cerulli Associates. "It is risky to assume that the clients of smaller D2C platforms are those who cannot afford advice. Higher-net-worth investors also told us that they are reluctant to pay advisory fees.”
Cerulli Associates research found that a total of 59 per cent of asset managers surveyed have a D2C/D2C platform distribution strategy in the United Kingdom. The percentage in other markets is significantly lower but a further 12 per cent plan to roll out a D2C proposition in the UK, while seven per cent say they have similar plans in Germany.
"D2C platforms' assets under administration rose 29 per cent to GBP93.3 billion in the year to the end of September 2013. Managers cannot afford to ignore this channel," says Angelos Gousios, senior analyst at Cerulli Associates. "The new platforms offer a way in for managers and by nurturing relationships with these platforms, managers can access today's mass retail investors, who will be tomorrow's high-net-worth clients.”