2018年-FCA英国金融行为监管局_ms17_1_2_annex_4_28页_1mb

Summary of MS17/1.2: Annex 4 - Financial Analysis of Investment Platforms Market

Core Content

This annex provides a financial analysis of 20 of the largest firms in the UK investment platforms market, based on AUA (Assets Under Administration). These firms collectively represent approximately 90% of the market share and are representative of various business models. The analysis aims to understand the financial incentives and competitive dynamics within the market by examining revenue, operating expenses, and operating profit across different firm characteristics and segments.

Main Points

• Scope of Analysis: The study focuses on the financial performance of platforms, excluding comparable firms. It includes 5 stand-alone platforms and 15 vertically integrated platforms.
• Time Period: The data spans from 2013 to 2017, aiming to cover a full economic cycle, though regulatory and reporting changes impacted the timeline.
• Limitations: The analysis is based on limited data points and firms, which may affect the statistical significance of findings. Adjustments to data were made to improve comparability, but granular cost data was lacking.
• Key Financial Metrics: The analysis includes revenue growth, revenue sources, operating expenses, and financial performance, with a focus on operating profit and profit margins.

Key Financial Indicators

Revenue Analysis

• Revenue Sources:

  • Platforms generate revenue from retail consumers, corporate customers, and other charges.
  • D2C platforms have a lower proportion of revenue from headline platform fees compared to adviser platforms.
  • Adviser platforms reported 91% of their revenue from headline fees in 2017, while D2C platforms reported 53%.
  • Interest on client cash is a significant revenue stream, especially for D2C platforms, which had a higher proportion of assets under administration in cash compared to adviser platforms.
  • Transaction and exit fees contribute more to D2C platforms than adviser platforms.
  • Exit fees have increased in both absolute and relative terms but remain a small portion of overall revenue.

• Revenue Growth:

  • The platform market experienced strong revenue growth, with an estimated 60% growth over four years to December 2017, or 13% per annum.
  • Adviser platforms grew revenue more consistently than D2C platforms, even in years with weaker equity markets.
  • Pension freedoms introduced in 2015 likely contributed to the growth in AUA and, consequently, to revenue growth.

• Retail Prices:

  • A price proxy was calculated by dividing retail revenue by AUA, which showed a general decline in average fees paid by consumers over the period.
  • D2C platforms experienced a greater decline in fees compared to adviser platforms.
  • The weighted average revenue per consumer AUA for adviser platforms was 0.27%, while for D2C platforms it was 0.30%.

Operating Expenses

• Main Operating Expenses:

  • Staff costs are the largest expense, averaging 32% of the total cost base, ranging from 9% to 64%.
  • Technology costs are the second largest, averaging 15% of the cost base, ranging from 3% to 47%.
  • Marketing costs are the third largest, averaging 6% of the total cost base, ranging from 0% to 31%.

• Cost Efficiency:

  • The cost-to-income ratio (CIR) varied significantly between firms, with the largest firms having a CIR of 86% and smaller firms having a CIR of 191%.
  • Cost per AUA was lower for larger firms, averaging 28bps compared to 58bps for smaller firms.
  • Costs remained flat for the largest firms while decreasing for smaller ones.

• Technology Costs:

  • Two models were identified: proprietary and outsourced.
  • Proprietary technology firms had lower technology costs (1bps), while outsourced firms had higher costs (7bps).
  • The proprietary model allows for capitalisation and amortisation of technology costs, whereas the outsourced model typically incurs variable costs.

• Marketing Costs:

  • Marketing costs per net new customer averaged £120 in 2016, with large variation across firms.
  • Larger firms tend to have higher marketing budgets, which may help them maintain and grow market share.

• Regulatory and Compliance Costs:

  • Regulatory and compliance costs averaged 2% of total cost base, with some firms reporting up to 8%.
  • These costs were not considered significant in limiting competition, as no firm flagged regulatory capital as a concern.

Key Insights

• Vertical Integration:

  • Most platforms are part of vertically integrated groups, which affects cost allocation and capital structure.
  • The lack of granular cost data made it difficult to fully assess the impact of vertical integration on financial performance.

• Market Dynamics:

  • The market has seen a shift towards ad valorem pricing, where revenue increases with AUA growth.
  • Interest on client cash has been a major revenue source, particularly for D2C platforms.
  • Exit fees have increased but remain a minor component of overall revenue.

• Competitive Conditions:

  • Firms in the investment platforms market generally earn no more than a "normal" rate of profit.
  • The financial performance of the largest firms can serve as an indicator of competitive conditions.
  • The adviser platform segment appears to have a more stable and higher revenue margin compared to D2C platforms.

• Conclusion:

  • Despite data limitations, the analysis provides a representative picture of financial performance in the investment platforms market.
  • Revenue and operating profit margin metrics are considered reliable indicators of firm incentives and competitive conditions.
  • The industry is relatively asset-light, with a moderate economic cost of capital.