UK stockbroker Liberum has published an in-depth look at the UK’s savings and investment platforms this week. The note is 191 pages long and leaves few stones unturned, if any, in the sector.
Liberum believes that the UK investing app and platform market has an addressable market of £3.0 trillion, which is the maximum amount of AUM or asset under management they think that the sector can hope to attract from UK private investors.
Analysis conducted by Liberum, and based on data from the ONS and sector specialists Platforum, suggests that current market penetration sits at a relatively modest 33.0%.
This of course means that 67% of the £3.0 trillion cake is still up for grabs, which is good news for the D2C stock brokers and their shareholders.
However, the report also contains some very sobering data about the state of pension provision in the UK.
Liberum quotes WEF or world economic forum data that suggest the shortfall between our current level of pensions savings and what is required, is £5.80 trillion or roughly 2.80 times UK GDP.
It’s estimated that at the current level of pension provision, that shortfall could balloon to £23.80 trillion, by 2050.
Against that background, Liberum believes that the UK investment platform market has grown, at a compounded rate, over the last 9 years, of 14% per annum.
The broker expects that growth to continue accelerating and forecasts 13.0% annual compounded growth out to 2026.
The best pension accounts in the Liberum report are AJ Bell and Quilter. Liberum believes that AJ Bell has the best EPS growth potential and it trades on a PEG ratio ( price-earnings growth) of just 2.1 times, the second-lowest among the stocks covered in the research note.
The broker points to what it calls a big sector de-rating saying that stocks in the sector have declined by an average of -15.0% YTD and that Hargreaves Lansdown and AJ Bell have fallen the most and are now trading on 12-month forward pe ratios that are -34.2% and -34.3% below their respective 5-year pe averages.
Liberum also highlights a gradual yet persistent decline in gross margins in the sector, that decline is of course a function of increasing competition within the space.
Overall then the report paints a picture of a sector that is growing consistently and which has only addressed a fraction of the total potential market. Though the figures about the shortfall in pension provision are disturbing, from the savings and investment platforms’ perspective they create a compelling narrative with which to try and woo new customers.
However, over the near to medium term consumers and would-be savers may be more focused on meeting the rising cost of living (versus investing with inflation), than on provisioning for their future and those challenges may not be so easily overcome.