Navigant: Pension And Investment Bond Assets Will Grow UK Platforms To GBP300 Billion

New research from Navigant Consulting, Inc., a consulting firm providing financial advisory solutions, shows that the assets held on UK wrap platforms are set to more than triple over the next five years to over GBP300 billion. Other challenges for

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New research from Navigant Consulting, Inc., a consulting firm providing financial advisory solutions, shows that the assets held on UK wrap platforms are set to more than triple over the next five years to over GBP300 billion.

Other challenges for the UK platform industry include:

– Significant investment has been required to deliver these platforms, estimated to be GBP600 million to date, with further investment required to remain competitive;- Coupled with low margins, this means that much of the industry is still making a loss and may require long timescales to deliver expected returns;- The industry cant support a large number of platforms and should expect to see providers both exiting and consolidating in the future.

Five years ago, forecasts suggested that the industry would be administering closer to cGBP150 billion of assets by now, says Andrew Stewart, leader of Financial Services Europe practice, Navigant. Its taken time for the market to understand the role that platforms can play. Now that it does so, there is considerable potential to accelerate the growth of assets on platforms over the next five years.

Advisers have accelerated their use of platforms significantly in the past three years, with some organisations developing their own internal platforms. We believe that a combination of ongoing investment in collectives, combined with the transfer of assets from investment bonds and existing pension schemes means that assets on platforms will increase to more than 300bn by 2014.

Two thirds of the UKs liquid wealth, estimated at c1.5tn, is held by 11% of the population, typically aged 55+, continues Stewart. This investor group is clearly highly attractive to both advisers and the platforms. Typically less than 20% of their non-pension assets are invested in Collectives and Investment Bonds, providing considerable scope for platforms to gain market share through a combination of supporting a broader set of asset classes and converting investments to existing platform financial solutions.

We estimate there is GBP350 billion in pension assets that could be transferred into schemes offered by platforms. The investment bond market has also been affected, typically making these products less tax efficient than collectives. There is GBP200 billion invested in Investment Bonds that could be directed elsewhere when they come to maturity, or earlier.

In conclusion, we estimate that the combination of ongoing success in attracting collectives plus greater penetration of pension and investment bond assets could help platforms grow to GBP300 billion within the next five years.

L.D.

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