The challenges of 2022 perhaps seem even harsher when set against what was a particularly buoyant 2021. The world was emerging from lockdown and investment plans which had been put on hold could go ahead. Then came soaring inflation, the cost-of-living crisis and market volatility on a global scale.
It’s no wonder the lang cat in its recent new business data analysis said that ‘the latest figures make for some pretty bleak reading’. At the market level gross and net flows fell each quarter of 2022, reaching record lows. Asset growth fell for much of the year, only picking up slightly in Q4.
However, a small number of platforms have managed to buck that trend, including Morningstar Wealth Platform with positive asset growth in Q4 2022 compared to both Q3 2022 (7.13%) and Q4 2021 (3.54%). Net sales increased by 26.33% from Q3 2022 and our net to gross ratio – the measure of how much business written remains on the platform – was the third highest in the market at 70.92% for Q4. These results are hugely encouraging for us, particularly given the period of transition and change throughout 2022 that our business had to navigate.
Investment capabilities play an important role
We know from the lang cat’s State of the Adviser Nation research that centralised investment proposition (CIP) use has increased in recent years with 91% of advice firms using a least one CIP, up from 88% in 2021 and 87% in 2020. This has long been an area where we specialise, working closely with advisers and DFM/MPS providers alike to inform and develop our proposition to meet their needs. Feedback from our adviser users tells us how our range of account options, auto-rebalancing to avoid account drift and being fully digital make a difference to their business and clients.
Capturing the power of proprietary technology
If we look at the other platforms reporting growth in Q4 2022 there are some common themes: a lack of legacy business, a clear eye on the future and newer, owner-operated technology. These all play a part, but I think the technology issue is particularly pertinent.
Clearly other factors will be at play, but it seems to me a choice is being made between platforms in control of their own destiny and those that must stand in line and wait to see what happens next.
Quite rightly, advisers want a strong, sustainable and reliable home for client assets. A platform undergoing a change of ownership can quickly fail to meet that brief, and we know the pressure of that expectation better than most. Many platforms going through similar periods of change experience a drop-off in flows and assets but, as in our case, that doesn’t have to happen. It is testament to the hard work of our teams and the ongoing support of our clients and partners that Morningstar Wealth Platform made positive progress quarter on quarter throughout 2022, with the second half of the year stronger than the first.
Part of that is down to the smooth transition, largely thanks to our owning and controlling our own technology. We were able to say with confidence that there would be no deplatforming and, as a result, our customers didn’t experience any downtime.
It’s reassuring that we continue to score well for service in the lang cat’s adviser ratings, but we know that we can and must do more. These ratings matter more to us than you might think, giving us insight into how we’re being perceived and the quality of our adviser clients’ experience. We rely on our adviser users telling us what they need, what we’re getting right and, most importantly, what we could be doing better.
Looking to the future
We’re heading into an exciting time as we continue to develop the Wealth Platform proposition and prepare for the implementation of Consumer Duty. Owning our own technology puts us in control of our developments and we’re making good progress. We look forward to continuing to work with advisers for more positive outcomes all round.