Fundscape says investor sentiment has been “battered” by a seemingly endless succession of bad news.

The cost of living crisis, inflation, higher taxes, higher energy prices and the war in Ukraine have all hit new flows.

Business levels are down and stock market volatility means most platforms ended 2022 with lower assets than they started, Fundscape said.

Despite the gloom, Fundscape believes that longer term prospects for platforms are brighter.

Bella Caridade-Ferreira, CEO of Fundscape, said, "2023 will be a tough year for platforms. The ISA season always sets the tone for the platform industry for the year, and we suspect it will be lacklustre.

“Higher inflation, interest rates and taxes mean disposable income will be squeezed. The ability to save and invest, never mind the willingness to do so, will be affected. Cautious investors who can still afford to save and invest will undoubtedly be attracted by better interest rates on cash and deposits —despite the impact of inflation on their cash balances.

"Having said that, the market is underpinned by strong structural drivers, so the longer-term picture is healthy. But the short-term picture is less rosy. Investor sentiment will be a big factor. 2023 and potentially the first half of 2024, will be difficult. We expect a 12-18-month time-lag as savers and investors adjust to a new normal. After that, life should start to return to normal, investors to adapt, and risk to return to the table again.

Fundscape said that multi-channel platform businesses were set to perform better. As a result, the Aegon and Fidelity platforms, which support adviser, workplace and D2C propositions, wrote the most business in the final quarter and 2022 as a whole, according to Fundscape analysis.

Only one platform, True Potential, reported over £1bn in net flow in the fourth quarter. The figure was slightly down on True Potential’s quarterly run rate for 2022 as it wrote an “impressive” £5.1bn net for the year, Fundscape said.

The analyst added that the “remarkably consistent” AJ Bell was the only firm to top True Potential with net sales of £5.2bn.

Quilter and True Potential topped the Fundscape adviser platform tables for the fourth quarter and the year. True Potential’s buyout programme for retiring advisers helped push sales to new heights. Transact was in second place for gross and net sales across the board except for full year net sales where it was just edged out by Aviva.

The Platform Report from Fundscape covers 19 platforms and an estimated 98% of the platform universe.

• A new platform report from the lang cat consultancy reveals that at the end of 2022 just four platforms of the 21 monitored in the lang cat’s data had a higher AUA than they had 12 months previously. Those four were True Potential, Hubwise, Multrees and Morningstar Wealth Platform. A fourth quarter recovery in asset values, aided by positive movements in stock markets, was not enough to move more of their fellow platforms into positive territory at the end of a tough calendar year.

Since 2021, the lang cat’s data has shown the advised platform market running quarterly outflows of around £10bn-£11bn. The firm said a big part of that was because retirement plans that were put on hold during Covid were then put into action, which raised the level of regular outflows from adviser platforms. With gross sales suppressed throughout the year, and outflows up, the result is the lowest advised net sales (£4.3bn) figure on its records in Q4, breaking the previous record low set the previous quarter in Q3 2022 (£5.5bn).

The firm said: “It’s not quite time for platforms to panic, but a lot of the same headwinds remain going into 2023. There may be a bit of a bounce in Q1 and Q2, but that will likely be due to investors using up ISA and pension subscription limits.”

* The next issue of Financial Planning Today magazine, out shortly, will include a detailed review of the platform sector. Make sure you register for Financial Planning Today website to view the magazine.