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Pandemic have-a-go investors force shake-up in UK wealth market

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By Reuters
Pandemic have-a-go investors force shake-up in UK wealth market
Pandemic have-a-go investors force shake-up in UK wealth market   -   Copyright  Thomson Reuters 2021   -  

<div> <p>By Iain Withers and Carolyn Cohn</p> <p><span class="caps">LONDON</span> – The explosion in <span class="caps">DIY</span> investing since the start of the pandemic has led to a scramble among Britain’s more traditional asset managers and banks to buy or build online platforms that give consumers more direct control of their investment portfolios. </p> <p>While the ‘meme stock’ frenzy that saw a rush by consumers to buy shares in companies talked up on social media such as Gamestop has simmered down a notch, there’s still a growth in demand from people to pick their own investments or tailored wealth products. </p> <p>This month abrdn bought interactive investor for 1.5 billion pounds ($1.98 billion) while earlier this year banks <span class="caps">JPM</span>organ and Lloyds snapped up wealth platforms Nutmeg and Embark respectively to bolt-on more customer-friendly digital products.</p> <p>“If you don’t move as an incumbent, you are in trouble. No doubt,” Antonio Lorenzo, head of insurance and wealth at Lloyds, told Reuters.</p> <p>Platforms offering investment tools directly to consumers are the fastest growing part of the consumer investment industry, according to data shared with Reuters by research firm Platforum.</p> <p>Assets under administration at these direct platforms jumped 40% to 289 billion pounds in the year to March, making up a third of the consumer market.</p> <p>Reuters was unable to obtain more recent industry-wide data, but some of the industry’s leading players said net inflows remained above pre-pandemic levels and were outstripping market gains. Research firm Fundscape forecasts the market will more than double in size to 658 billion pounds by 2026.</p> <p>Independent online platform Freetrade says its assets had leapt to 1.1 billion pounds, from 240 million prior to the pandemic. Its best month for sign-ups was October with 115,000 joiners, compared to 75,000 in February at the height of the meme stocks phenomenon typified by social media favourite Gamestop.</p> <p>“Gamestop was a catalyst for sure, but it’s not like that was the peak,” Freetrade co-founder Viktor Nebehaj said.</p> <p>“It’s obvious to us that investment accounts are going to be as normal as bank accounts.”</p> <p><span class="caps">NEW</span> <span class="caps">GENERATION</span> OF <span class="caps">INVESTORS</span></p> <p>Britain may not be as synonymous with have-a-go investors as the United States, but it’s growing a more lively retail investor community.</p> <p>Around 14% of adults in Britain are interested in automated investing, behind the U.S. (16%) but ahead of France (12%), surveys by Forrester show.</p> <p>UK consumers posted the highest rise in the world of those likely to invest in future, at 58% from 41% pre-pandemic, according to a survey by fund network Calastone.</p> <p>Britain sports a band of fast-growing platforms, including Hargreaves Lansdown, Trading 212 and Moneyfarm.</p> <p>Joiners are more likely to be younger or first-time investors. </p> <p>More than half of new investors – with less than two years experience – are less than 35 years old, according to a survey by Oliver Wyman in October. Freetrade said over 55% of its new customers were first-time investors. </p> <p>The platforms sense further opportunities. As many as 8.6 million people in Britain consistently have more than 10,000 pounds in cash deposits, research by the Financial Conduct Authority shows, a figure the regulator wants to reduce.</p> <p><span class="caps">SCRAMBLE</span></p> <p>Among those maneuvering to appeal to this new cohort of investors is AJ Bell. The 26-year-old firm is launching commission-free investment app Dodl, with those new to investing offered guidance from furry “monster” characters.</p> <p>Banks are also weighing in. <span class="caps">JPM</span>organ plans to offer investments to customers of its fledgling British bank Chase next year via Nutmeg.</p> <p>Lloyds wants to nearly double assets in personal pensions and investments to 100 billion pounds, from 60 billion today.</p> <p>Experts are concerned though that the new band of investors could face a rude awakening whenever the bull market ends.</p> <p>Only two in five <span class="caps">DIY</span> investors (41%) thought losing money they invested was a genuine risk, a survey by polling firm Britain Thinks found this year. The platforms say they educate customers on potential risks, but concerns remain.</p> <p>“There’s been a lot of concern about the gamification of investing,” said Ryan Skinner, principal analyst at Forrester. “In terms of the future of these platforms, a lot is going to be dependent on how regulators respond.” </p> <p>($1 = 0.7548 pounds)</p> <p/> </div>