Corner Office Views | Q4 2022
Business-to-Business (B2B) Platforms in the UK
Gaining importance as distribution gateways
- 43% of the managers Cerulli surveyed consider Business-to-Business (B2B) and Direct-to-Consumers (D2C) platforms very important to their fund sales success in the UK over the next 12 to 24 months.
- The most important platform characteristic to UK Independent Financial Advisors (IFAs) is the ease of doing business, which 63% of survey respondents prioritize, followed by overall functionality and service level (58% and 53% respectively).
- The availability of investment products and tax wrappers are the most important parameters to UK IFAs when they select platforms.
Fabrizio leads the European Retail/Wholesale Asset Management research practice, which focuses on analyzing asset management product development trends, investment, operational and marketing strategies, market and distribution dynamics, regulatory changes, and performing market and competitive intelligence in the United Kingdom, Continental Europe, and the Nordics.
Prior to joining Cerulli, Fabrizio served as a Lead Industry Analyst at State Street in London and as a Senior Analyst & Research Editor for the PwC’s Global Market Research Centre in Luxembourg. Previously, he carried out several field-based research projects in emerging and frontier markets for international market research and economic consulting firms, spending almost five years performing economic and industry analyses in several countries in Latin America, Africa, and the Middle East.
Full biography here.
Fund platform channel
In recent years, B2B and D2C platforms have gained importance as distribution gateways for European asset managers. The UK is one of the largest B2B and D2C market in Europe in terms of assets; it is also one of the most competitive in the region, with a number of diﬀerent independent, private equity-owned, insurance-owned, and asset manager-owned platforms. The fund platform channel is vital for asset managers operating in the country: 43% of the managers Cerulli surveyed consider B2B and D2C platforms very important to their fund sales success in the UK over the next 12 to 24 months.
The growth in assets of B2B platforms has been fostered by the increased use of such platforms by UK IFAs, which have focused more on ﬁnding eﬃciencies in the light of growing compliance and operating costs in the past ﬁve years. Platforms oﬀer an eﬃcient and cost-eﬀective infrastructure for operating client portfolios, so they allow IFAs to dedicate more time to maintaining client relationships.
During our research, Cerulli split the criteria UK IFAs use when selecting a platform into three main categories: platform characteristics, functionality and service, and product availability. The most important platform characteristic to UK IFAs is the ease of doing business, which 63% of survey respondents prioritize, followed by overall functionality and service level (58% and 53% respectively). Only 14% of the IFAs Cerulli surveyed in the UK consider brand reputation an important characteristic when they select platforms to use, but 53% consider financial stability a very important issue.
Our research also shows that 56% of the UK IFAs we surveyed consider high charges a key reason to change platform provider and 45% consider the lack of tax wrappers another main reason to change platform. In addition, 80% of respondents expect platform fees to continue to compress over the coming 12 to 24 months and 57% believe that B2B platforms will need to offer more bespoke propositions to remain competitive in the long term.
When it comes to functionality and services, half of the UK IFAs Cerulli surveyed believe that the quality of customer service is a very important feature when selecting platforms and 47% consider advisor functionality very important. However, just 17% of respondents consider business development support a very important characteristic of platforms (see below).
Products and wrappers
The availability of investment products and tax wrappers are the most important parameters to UK IFAs when they select platforms: 71% and 65% of IFA respondents identified these elements respectively as very important factors in platform selection. In addition, 33% consider the availability of model portfolios a very important criterion when selecting the primary platform to use for their clients and 19% consider the availability of DFMs another key element in the selection process.
Cerulli research shows that the use of DFMs and model portfolios has increased in the UK in recent years, with advisors preferring to outsource investment decisions to professional asset managers and focus on business development and client relationships. However, 34% of the UK IFAs we surveyed do not use DFMs for their client portfolios on platforms, although many of those we interviewed expect to increase their use of such players in the future. DFMs’ advantage is that they offer a cost-effective way to allocate money in client portfolios.
Moreover, nearly half (48%) of the IFAs Cerulli surveyed in the UK believe that the ESG fund offerings on platforms are not as developed as they would like. Around a third (33%) of the asset managers we surveyed in the market anticipate high demand for ESG products from IFAs and IWMs over the next 12 to 24 months. Despite the strong growth exchange-traded products have recently experienced across Europe, IFAs are still reluctant to include ETFs in their clients’ portfolios: just 16% often use exchange-traded funds (ETFs). Almost all (90%) of respondents do not use exchange-traded notes (ETNs) at all and 87% do not use shares listed on foreign exchanges. In addition, 85% of respondents do not use exchange-traded commodities (ETCs). However, ETF issuers are confident that investors across Europe will drive ETF growth. More than half (52%) of the ETF issuers Cerulli surveyed in the region agreed that digital fund platforms have been a key driver of ETF sales growth in Europe over the past 12 months, although only 3% strongly agreed.
Overall, three-fifths (60%) of the UK IFAs we surveyed use on platforms unit trusts and open-end investment companies (OEICs) extensively in their clients’ portfolios and another 63% use investment trusts to some extent.
Cerulli asked 101 IFAs operating in the UK to provide overall scores of the different B2B platforms operating in the local market. The IFAs we canvassed ranged from smaller players with AUA of less than €20 million (US$20.9 million) as of July 2022 to large players with AUA of more than €1 billion at the same point.
You May Also Be Interested In:
- Annual report
- The Cerulli Edge
STRATEGIC CONSULTING AND CUSTOM RESEARCH
Understand where to allocate resources to achieve your objectives. We can help you determine which initiatives are likely to be successful and those that may not achieve the desired effect. In an increasingly competitive market, our objectivity and experience can help you to advance your firm’s unique strengths.