ISA withdrawals from adviser platforms rose 42.8% year-on-year in 2023 as the cost of living crisis started to bite, according to a new report.

The withdrawals pushed net sales of ISAs for the year for adviser platforms down to a loss of £3.49bn, down from £1.51bn in 2022, according to the latest State of the Platform Nation report from the Lang Cat.

Pensions also saw a rise in outflows, taking the net-to-gross ratio to 30.3, down from 48.6 in 2022. This is the lowest net-to-gross ratio for pension sales since the Lang Cat began tracking this data in 2016 – the average between 2016 and 2022 was 51.8.  

The top six adviser platforms in terms of assets under management commanded 60% of gross flows over the two years to the end of 2023.

With an increased share of new business, the gap between Quilter, Abrdn, Transact, AJ Bell, Fidelity and Aviva, and their smaller rivals is growing, according to the report. Making it harder for the rest of the pack to catch up in AUM terms through organic growth.

Rich Mayor, senior analyst at the Lang Cat, said plenty of smaller platforms are successful and making a good profit but it is hard to see how they can build much scale organically.

He added that pension withdrawals from adviser platforms are more concerning that those from ISAs.

He said: “While withdrawals from ISAs pushed net sales for the year into negative territory to the tune of an eyewatering £3.49 billion, they have always been the most liquid product in platform land and the most logical option for investors to access to cover increased costs. More concerning is the hike in outflows from pensions, which increased by 40% year on year.

“Pensions flows onto platforms have been absolutely essential to historical platform growth due to the historically high net-to-gross ratio, so for the ‘stickiness rating’ to drop down to the low thirties is not inconsequential. If the rating has been the viscosity of honey in the past, it was more akin to water in 2023.”

The Lang Cat added that increased scrutiny of cash is likely to impact revenue for a fair few platforms, and the trend for platform charges is going down.