As the Retail Distribution Review approaches its first anniversary, Andrew Power, lead RDR partner at Deloitte, outlines how the rules are affecting investment and financial advice markets.
Platform market will consolidate
Increased competition and falling charges will lead to consolidation in the investment platform market. Assets held on platforms will grow from £200 billion today to £600 billion by 2018. However, margins will be squeezed and the breakeven point will rise from £20 billion assets under management to about £40 billion. The result will be that the intermediary platform market will consolidate to fewer than 10 large providers.
Financial advisers will restructure business models
The economics of delivering financial advice means that advisers will need to focus on clients outside the mass market if they to have a sustainable business, or develop guided-advice models.
Direct to consumers advice will become more important
The non-advised market represents about 20 per cent of the wealth market and will grow as consumers who increasingly use the internet to manage their finances and legacy portfolios are migrated to clean share classes. Fund managers, advisers and insurers have two to three years to establish direct to consumer business models successfully.
Passive funds and risk rated portfolios will grow in popularity
Low-cost passive funds and risk-rated portfolios are likely to continue gaining market share as advisers optimise charges to clients and focus on financial planning rather than picking investments.
Press release
© Deloitte LLP
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