The flow of funds is shifting toward an ever-shrinking number of players. Fund managers are becoming more reliant on strategic partnerships and we believe that trend will continue.

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We wrote earlier in the year about the rise of segregated mandates in retail. Wealth managers running their own funds concentrate flows to a smaller number of players and at lower margins. Mattioli Woods recently announced it will move to seg mandates. We estimate that assets in segregated mandates in retail rose by approximately 15% in the past six months.

The rise in outsourcing to DFMs for on-platform models has also concentrated flows. We are hearing that sales to DFM models have peaked but we think they’ll pick up pace again as DFMs sort out their decumulation offering.

Meanwhile Hargreaves is pruning its Wealth 150 to a smaller number of funds and putting the screws to asset managers for the privilege of being on the list.

For our forthcoming report, “The Shape of Flows,” we’ve been noodling some of these shifts and their implications for asset managers. We think the stakes are high but the approach will need to be different for different firms. Those that get it right stand to gain in assets but at lower margins.

In our recent Retirement Regulation and Innovation Report, published with Richard Parkin and kindly supported by Bravura Solutions (thank you!) we highlighted an example of the opportunities from big strategic partnerships. The proposed introduction of investment pathways as part of the FCAs Retirement Outcomes Review may provide opportunities for asset managers in the long run with investors entering drawdown. Partnerships will be essential.

Stay tuned for our Shape of Flows report, coming out this month.

NextWealthLive: 26 March 2019

Save the date! On 26 March 2019 we are hosting our first annual conference. NextWealth Live explores upcoming trends in retail investing. It will bring together some of the smartest thinkers in the industry and will challenge attendees to innovate amid disruption. Stay tuned for details, but save the date: 26 March 2019.

Our articles and blog posts

AI will soon be doing compliance for advisers. In my latest column for New Model Adviser, I wrote about how technology might help to fill the advice capacity gap by looking at how US doctors are using natural language processing to cut down on paperwork. 

Retirement Market Regulation and Innovation. A blog post summarising findings from our latest report on the outlook for retirement regulation and innovation. 

ETF Distribution Trends. Miranda Seath hosted a conversation on camera about ETF Distribution Trends. 

Read elsewhere

Bitcoin and blockchain – both buzzwords represent a potentially radical shift to our financial system and idea of money. This excellent long-form piece from The New Yorker is worth the time to get more familiar with blockchain and cryptocurrency and the motivations behind some of the founders.

Many of you will have been following Australia’s Royal Commission on banks. For those of you interested in learning about the investigation, this summary from ABC News in Australia traces how we got here and where things may go. Most people I speak with seem to think we’ll have a similar inquiry in the UK in a few years. Advisers, you may not be charging dead clients — but are you charging a fee to clients who decline an annual review meeting? Might be worth a look. Thanks to Paul Resnik for keeping us updated on the Royal Commission. 

Finally, ONS data suggest that life expectancy improvements have stopped. Advisers projecting a lifespan of 103, or some other rudimentary estimate, take note! Life expectancy remained at 79.2 years for males and 82.9 years for females in 2018. 

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About the Author

Heather is a data and research expert specialising in retail investment distribution. Heather is the Managing Director and Founder of NextWealth. She is also a Director of Clive Waller Consulting Ltd and serves as Vice-Chair of The Investment Network and the Schroders UK Platform Awards.