Direct investment platforms: Sales drop off as new competitor surges into the field

Sales on direct investment platforms trended downwards last year but still remained strong, as a new competitor to the market has surged into the field.

Total direct market assets totalled £320bn last year, with £10.7bn of net new money coming in, data from Fundscape revealed.

The £10.7bn in net flows was down 12.2 per cent from 2022, but just a third of the £27bn gained in 2021.

While Hargreaves Lansdown topped the tables for gross sales, with £12.6bn in 2023, net sales figures revealed that Interactive Investor was the winner of 2023, bringing in £3.3bn compared to Hargreaves’ £1.2bn.

Direct investment platforms overall dropped quarter to quarter, hitting their lowest point in the last three months of the year as investors pulled out money to meet living costs.

In the last three months of the year, AJ Bell stayed climbed to the top of net sales, bringing in £700m of new money, while a newer competitor to the space, InvestEngine, broke into the top five.

The ETF trading platform gained £47m in net sales throughout the quarter, and has trebled its assets over the last year.

Bella Caridade-Ferreira, CEO at Fundscape, said, “Consumer sentiment is easily damaged and can take time to recover, but it is the principal driver of flows in the direct market. Everyone is looking for any signs of improved economic outlook and easing of inflation that will help that recovery, and hopefully a return to the higher levels of flows seen in previous years.

“The ISA season usually sets the tone for the rest of the year so a good ISA season will boost the industry no end, but a bad one could lead to further closures and/or fire sales. 2024 will be predicated on interest rates coming down and cash no longer being such stiff competition.”