Fundscape: Net fund sales down 34% in months after RDR

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Fund sales in the first quarter of the year were held back by the impact of the retail distribution review, according to a new report by Fundscape.

Gross sales across the fund distribution universe amounted £28.2bn in the first three months of 2013, the report shows, which is 2 per cent down on the previous quarter. Net sales dropped by a more dramatic 34 per cent to £3bn, with Isa sales being “particularly disappointing.

Fundscape director Bella Caridade-Ferreira says: “Legislation always takes time to bed down so it’s too early to draw any conclusions from one quarter of sales.”

The report also notes that the squeeze created by the UK’s austerity conditions could have hampered fund flows, offsetting positive factors such as the soaring stockmarkets at the start of the year.

Sales through the direct-to-consumer channel appear to be the main beneficiary over the three-month period after jumping 32 per cent. Financial advisers saw a modest 1.4 per cent rise in flows but wealth managers witnessed a 6 per cent drop, the study adds.

Caridade-Ferreira says: “Some investors have been orphaned by their advisers and others simply don’t want to pay for advice so it’s inevitable that D2C flows have jumped. The disappearance of retail bank advice is also a factor driving investors towards D2C options.”

Fundscape adds that despite the slow start to 2013’s Isa season, activity appeared to pick up towards the closing stages of the season. It also predicts that the second quarter of the year will see stronger gross and net flows as RDR becomes more firmly established among the investment community.

The recent Pridham Report noted that fund inflows from retail investors were “disappointing” over the first quarter of the year, citing the impact of RDR, squeezed budgets and austerity.