Net sales for direct investment platforms dropped 7% (year-on-year) to £3.9bn for the quarter ending 30 June, according to new data.

They were down 46% from Q2 2021 as investors adjusted to higher living costs, according to the latest data from Fundscape.

Gross flows were £11.4bn for the quarter.

Martin Barnett, head of content at Fundscape said: “The poor ISA season has set the tone for the rest of this year. In addition, the headwinds the direct market is currently facing are not going to disappear any time soon, so platforms must work very hard to attract new customers and flows. In such an environment, the benefits of scale come sharply into focus. Any improvement in markets help larger firms disproportionately, increasing assets and revenues (in most cases).

“‘The longer high inflation and interest rates continue, the greater the pressure on smaller platforms. We don’t expect the situation to improve until the mid-2024 at the earliest. The door is therefore well and truly open for larger players to potentially acquire distressed platforms at knockdown prices.”

Hargreaves Lansdown remained the largest platform by assets for direct platforms, with £113.6bn in assets under administration, a 4.5% growth rate in the first half of the year.

It was also the largest direct platform by flows with gross flows of 7.2bn in gross flows for the first half of 2023.

The fastest growing platform for the quarter was InvestEngine, with assets jumping 32% to £215m as its ETF-only proposition gained momentum.