The platform market is expected to grow exponentially over the next few years.
Forecasts by consultancy The Lang Cat found that assets under administration (AUA) could double to £1trn ($1.4trn, €1.16trn) by 2025, up from roughly £500bn in 2020.
But this is a very optimistic estimate and is based on a compound annual growth rate (CAGR) of 17%.
To put this in context, the CAGR of the UK market has been 14% since 2013.
However, it has experienced some significant changes over the past decade or so, ranging from the introduction of Mifid II, Brexit, heavy M&A activity, several re-platformings and, of course, a global pandemic.
No ‘firm predictions’
In contrast, The Lang Cat’s more ‘realistic’ outlook assumes a CAGR of 12% over the next few years, factoring in slower growth as well as other elements, which would see advised AUA hit around £874bn.
But the firm said that, “if the events of the last year or so have taught us anything, it is that it’s dangerous to make firm predictions”.
So, in addition to its ‘optimistic’ and ‘realistic’ forecasts, the team has come up with a ‘pessimistic’ outlook.
This predicts that, with a CAGR of 6%, the market is likely to secure advised AUA of £663.5bn over the next four years.
Low disruption
Mike Barrett, consulting director at The Lang Cat, said: “Everyone hopes the next few years, and especially the immediate aftermath of the pandemic, are as positive as they can be.
“Of all the factors with the potential to impact growth one way or another, the economic picture is the most important. The pandemic hasn’t changed the demographics of an ageing population, or the fact that people will always need financial planning.
“But, as we saw over the last 12 months, when investor confidence takes a hit, new business flows will also fall. In the short-term, we do expect flows to remain volatile, although in the longer-term they will stabilise and continue to grow.
“Our realistic and optimistic scenarios are based on the belief that disruption from changes, including platform mergers and acquisitions and expensive re-platforming projects, will be relatively low level.
“Yes, there have been a number of ownership changes in recent months, and these still need to be fully implemented. But an increasing number of providers now have relatively new and/or stable ownership in place.
“And combined with a relatively benign regulatory environment – based on its platform market study, the FCA appears to have no major issues – platform providers should be able to focus on what matters for advisers and their clients,” he added.
