Robo-advice hit the headlines again last week when Mark Carney upset the robo-advisers by linking the promise of fintech with the possibility of systemic risk. While the start-ups, sandboxes and incubators get all the attention, slowly but surely a quiet revolution is taking place away from the media glare: pension saving is being digitalised.
We will publish our Workplace Savings Guide next week showing healthy growth in employee pension assets. 64,000 small companies auto-enrolled their workers into a pension scheme for the first time in the year to March 2016 and the workplace pension is increasingly a digital account.
But the pension transformation isn’t just happening in offices, factories and hospitals, it’s also happening in the comfort of peoples’ homes and on the 07:02 to London Waterloo. I’m talking about self-directed investors increasingly taking retirement saving into their own hands.
Our latest UK D2C Market Size and Structure research finds that impressive growth in the D2C market over the last year was driven by assets going into SIPPs.
The number of direct platform clients has doubled to almost five million over the last six years and many of the new investors have SIPPs. This has led to larger balances and the average age of DIY investors falling by five years over that time.
Not only is the profile of those self-directed investors substantially different to what it was a short time ago, their requirements are different and, as a result, the services that are being offered to them are changing including:
- More guidance offered – 38% of fund flows go into select lists
- More variation in platform pricing – low cost providers are growing most quickly and fixed pricing is offered more widely
- More propositions combining online investing with online banking – Barclays is the latest and most integrated
- More mobile access offered
Asset managers also realise that they need to react to the changing investing patterns and while their institutional businesses remain important, distribution and communications channels to end investors can no longer be ignored or entirely delegated to intermediaries of different types.
LGIM’s appointment of the high profile Helena Morrissey to build their D2C relationships shows that some asset managers are making this a top priority.
They need to, because others are taking more of the value chain. Hargreaves Lansdown has over £6bn in funds under its own brand and a massive 38% market share in D2C distribution. By poaching Jupiter’s CFO this week, it is demonstrating further intent as a manufacturer.
So while fintech makes the headlines, let’s not lose sight of where the money is flowing. The most important thing is the connection with the end-investor as they channel assets into SIPPs. The most powerful fintechs are the propositions that do that, which is as much about Nest as it is about Nutmeg.