More than 9mn people have at least £10,000 in investable assets, but hold most or all of it in cash, according to the Financial Conduct Authority. Nevertheless, more than two-fifths had some appetite to take investment risk — and it seems that providers are taking notice too.
The end of January saw M&G Wealth launch digital investment service “&me” in partnership with Moneyfarm, an app that enables users to invest in active and passive funds, or exchange traded funds.
M&G’s app comes less than a year after AJ Bell launched “Dodl” in April 2022, in a bid to make investing easier and accessible via what the fund platform describes as a “no-nonsense” app.
While some have gone down the development route, others have acquired. JPMorgan Chase, for example, acquired digital wealth manager Nutmeg in 2021, a year after Wealthify became a wholly owned subsidiary of Aviva.
So what factors have been driving activity in the direct-to-consumer investment market over the past few years?
“The Retail Distribution Review made it difficult for large financial providers to provide large-scale, cost-effective advice and investment solutions,” says Bella Caridade-Ferreira, chief executive of research house Fundscape.
“The reason large bancassurers are partnering with or acquiring smaller fintechs, is because it’s a match made in financial services heaven. The bancassurers have the captive client audiences but don’t have the technology; and the fintechs have the technology but don’t have the captive client bases.”
D2C activity “exploded” in 2020, adds Caridade-Ferreira, and although it has subsided, it is still higher than before the pandemic.
“Lockdowns helped [show] younger generations just how precarious their situations were with no savings to fall back on. They began to engage during lockdown, and the engagement has remained high.
“However, with no one to advise or hold their hand when the going gets tough, D2C investors can often panic or make the wrong decisions in adverse market conditions.”
Indeed, M&G highlights how users of its investing app can contact an “&me consultant” through the app for guidance and to increase their confidence in investing.
As M&G Wealth’s managing director David Montgomery put it, not everyone wants, or can afford, to take full advice. “We want to enable more people to save and invest for the financial future they want and dream of,” he says.
While describing the advice gap as an “old topic”, Jeremy Fawcett, head of research consultancy Platforum, says: “I wonder if we’re beginning to look at [the advice gap] in a slightly different way.
“The old way was, ‘everyone needs financial advice, and how do we make it available to people who maybe can’t afford to pay for an ongoing relationship with a financial adviser?’
