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Affluent Investing and Banking - UK - November 2009

  • The equivalent of 6.3 million UK individuals over the age of 21 falls into the target wealth market (those with investible assets of £50K or more). Only 1.4% of the adult population, however, report owning investible assets worth over £500K.
  • The increasingly harsh tax treatment of wealthy UK residents will increase demand for specialist tax advice. In order to remain competitive wealth managers and private banks should consider making tax planning a more central feature of their service offering.
  • Rising demand for control and advancements in online wrap technology, which allow wealthy investors to view and manage all their assets in one convenient central location, is altering the client-wealth manager relationship. Firms who do not adjust to these changes in the client relationship will increasingly find themselves losing business to firms that do.
  • Although the worst of the financial crisis may already have passed longer term economic growth prospects in the UK and other developed economies appear disappointing. With more room to grow in the first place emerging market investments will look more attractive to wealthy investors. It is important wealth managers are properly placed to satisfy this demand.
  • While clearly in the minority consumer research data indicates there are at least 280,000 ultra affluent or HNW individuals who can be classified as asset-rich but income-poor. There may be an opportunity to provide so called ‘lifestyle’ financial planning services for wealthy individuals in this type of situation – many of whom are likely to be retired.
  • Consumer research has indicated considerably low reported ownership of SIPPs and ETFs among the target wealth market – the equivalent of 380,000 and 60,000 individuals with over £50K to invest respectively. With interest in both these products finally set to grow it would be wise that providers of wealth management services position themselves to take advantage of it.

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Table of contents

  1. Issues in the Market

      • Key issues
        • Market definitions
          • Abbreviations
            • Key sources
            • Future Opportunities

              • Wrap technology set to be an industry standard
                • Tax advice to play a more central role
                  • Emerging markets will look more attractive than ever
                    • Strong growth potential for SIPPs and ETFs
                      • Lifestyle solutions for asset-rich income-poor retirees
                      • Market in Brief

                        • Profile of the target wealth market
                          • Figure 1: Distribution of investible assets among the UK population, 2009
                        • Decline in asset values puts pressure on wealth manager revenues
                          • Figure 2: Total wealth management industry revenue*, by firm type, 2003-08
                        • Private banks enjoy greater stability via revenue stream diversification
                          • Limited growth in the number of wealth manager portfolios
                            • Despite tough 2008 wealth managers see £7.63 billion in new assets
                              • Two thirds of funds held with wealth managers are on a discretionary basis
                                • Figure 3: Investment assets held by weath managers, by mandate type, 2005-08
                              • Investor confidence returning but uncertainties still remain
                                • Internal market environment
                                  • Barclays Wealth and Coutts & Co top wealth managers in the UK
                                    • Asset management and private banking adspend down by 30% in 2009
                                      • Key consumer research findings
                                        • Asset ownership
                                          • Use of professional advice
                                            • Attitudes towards banking and financial management
                                            • Internal Market Environment

                                              • Key points
                                                • The gradual shift away from direct securities
                                                  • Figure 4: Asset types as a proportion of total investment assets for wealth managers, 2004-08
                                                • Wealth manager ‘revenue return’ stayed positive in 2008
                                                  • Figure 5: Revenue return* on discretionary and advisory assets for wealth managers (excluding execution-only stockbrokers), 2003-08
                                                • Discretionary and advisory investment management fees remain resilient
                                                  • Many clients disappointed in wealth manager performance
                                                    • Regulatory environment
                                                      • Wealthy to see their tax burden increase from April 2010
                                                        • Conservative Party threatens to widen non-domiciled tax net further
                                                          • The harsher the UK tax regime, the more wealthy that will leave
                                                            • RDR will shift independent advice upmarket
                                                              • Conservative Party refuse to commit to RDR deadline
                                                              • Broader Market Environment

                                                                • Key points
                                                                  • UK recovery put on hold while others emerge from recession
                                                                    • Low base rate helps boost risk appetite as investors seek higher returns
                                                                      • Figure 6: Monthly changes in the rate of annual inflation* and Bank of England base rate – UK, September 2005-September 2009
                                                                    • Wealthy need to protect themselves from future rises in inflation
                                                                      • Stock markets have rallied but slower growth looks likely
                                                                        • Figure 7: FTSE 100 and FTSE All Share – daily index movements, October 2003-October 2009
                                                                      • Picking domestic winners will be more challenging
                                                                        • More investors likely to seek out better returns abroad
                                                                          • Figure 8: Market capitalisation of global stock exchanges*, by region, year to October, 2004-09
                                                                      • Strengths and Weaknesses in the Market

                                                                          • Figure 9: Affluent investment and banking – SWOT analysis, 2009
                                                                      • Who’s Innovating?

                                                                        • Key points
                                                                          • SEI outsourcing solutions for wealth managers and private banks
                                                                            • SEI Global Wealth Services
                                                                              • SEI's private banks segment
                                                                                • Bluefin prepares for RDR by restructuring private client business
                                                                                  • Eight boutique wealth managers ally to rival the big private client banks
                                                                                    • The Coutts & Co charity giving account
                                                                                      • Fidelity’s personal guidance consultation
                                                                                      • Trade Perspective

                                                                                          • Where the wealthy are putting their money
                                                                                            • Savvy investors doing more of their own research
                                                                                              • The impact of changes in the regulatory environment
                                                                                                • European Commission's Alternative Investment Fund Managers Directive
                                                                                                  • The Retail Distribution Review (RDR)
                                                                                                    • IFA qualifications
                                                                                                      • More user-friendly wrap technology needed
                                                                                                      • The Size of the Target Wealth Market

                                                                                                        • Key points
                                                                                                          • 8% of adults report owning investible assets worth £100K or more
                                                                                                            • Figure 10: Distribution of investible assets among the UK population, 2009
                                                                                                        • Market Size and Forecast

                                                                                                          • Key points
                                                                                                            • Decline in asset values puts pressure on wealth manager revenues
                                                                                                              • Figure 11: Total wealth management industry revenue*, by firm type, 2003-08
                                                                                                            • Private banks enjoy greater stability via revenue stream diversification
                                                                                                              • Figure 12: Proportion of revenue, by firm type and stream, 2007 and 2008
                                                                                                            • Value of assets held with wealth managers down by 16% in 2008
                                                                                                              • Figure 13: Value of investment assets, by firm type, 2005-08
                                                                                                            • Despite rough 2008 wealth managers see £7.63 billion in new assets
                                                                                                              • Figure 14: Wealth manager investment asset growth and net new business, 2005-08
                                                                                                            • Wealth managers see limited growth in the number of portfolios
                                                                                                              • Figure 15: Number of portfolios, by firm type, 2003-08
                                                                                                            • Forecast
                                                                                                              • Prospects still promising for wealth managers
                                                                                                                • Figure 16: Forecast of wealth management industry revenue*, by firm type, 2004-14
                                                                                                              • Factors incorporated
                                                                                                              • Market Segmentation

                                                                                                                • Key points
                                                                                                                  • Considerable decline in the number of accounts worth over £250K
                                                                                                                    • Figure 17: Number of nominee* portfolios, by firm type and size, 2008
                                                                                                                  • Average portfolio size for wealth managers falls to £235K in 2008
                                                                                                                    • Figure 18: Number of nominee* portfolios and total value of assets, by size of portfolio for wealth managers, 2008
                                                                                                                  • Most wealth manager client funds held in taxable accounts
                                                                                                                    • Figure 19: Asset ownership for wealth managers as a proportion of total invesment assets for 2008
                                                                                                                • Market Share

                                                                                                                  • Key points
                                                                                                                    • Bank of America tops global assets under management table
                                                                                                                      • Figure 20: Top ten largest global wealth managers, by assets under management, 2008
                                                                                                                    • Barclays Wealth and Coutts & Co top in the UK
                                                                                                                      • Figure 21: Largest 25 wealth managers, by assets under management – UK, December 2008
                                                                                                                  • Companies and Products

                                                                                                                    • Major players
                                                                                                                      • Barclays Wealth
                                                                                                                        • Brewin Dolphin
                                                                                                                          • Coutts & Co
                                                                                                                            • Goldman Sachs
                                                                                                                              • JPMorgan Private Bank
                                                                                                                                • Lloyds TSB
                                                                                                                                  • UBS Wealth management
                                                                                                                                  • Brand Communication and Promotion

                                                                                                                                    • Key points
                                                                                                                                      • Asset management and private banking adspend down by 30% in 2009
                                                                                                                                        • Figure 22: Total advertising expenditure on asset management and private banking and other related products and services, 2005-09
                                                                                                                                      • Bank of Scotland accounts for over a third of all adspend
                                                                                                                                        • Figure 23: Advertising expenditure on asset management and private banking, by top 20 advertisers, 2008 and 2009
                                                                                                                                      • Press the key type of advertising media used
                                                                                                                                        • Figure 24: Proportional distribution of adspend on private banking and asset management, by main media type, 2009
                                                                                                                                      • Non-traditional marketing channels widely used
                                                                                                                                      • Channels to Market

                                                                                                                                        • Key points
                                                                                                                                          • Two thirds of funds held with wealth managers are on a discretionary basis
                                                                                                                                            • Figure 25: Investment assets held by weath managers, by mandate type, 2005-08
                                                                                                                                          • Increased product complexity leads to ‘open architecture’ approach
                                                                                                                                            • The rise of platform-based wealth management services
                                                                                                                                            • The Consumer – Profile of the Target Wealth Market

                                                                                                                                              • Key points
                                                                                                                                                • 14% of the population fall into the target wealth market
                                                                                                                                                  • A cautionary note
                                                                                                                                                    • Figure 26: Size and segmentation of the target wealth market based on investible assets*, October 2009
                                                                                                                                                  • Over half in the target wealth group are over-55s
                                                                                                                                                    • Figure 27: Profile of the target wealth groups, by gender, age, socio-economic group, detailed lifestage, lifestage and marital status, October 2009
                                                                                                                                                  • Most are in full-time employment or otherwise likely to be retired
                                                                                                                                                    • Figure 28: Profile of the target wealth groups, by working status, gross annual household income and region, October 2009
                                                                                                                                                  • Level of investible assets usually more important than income
                                                                                                                                                    • Catering to the income-poor but asset-rich
                                                                                                                                                      • The wealthy are highly tech-savvy
                                                                                                                                                        • Figure 29: Profile of the target wealth groups, by internet usage frequency, web use and newspaper readership, October 2009
                                                                                                                                                    • The Consumer – Asset ownership

                                                                                                                                                      • Key points
                                                                                                                                                        • One in five who are Ultra Affluent or HNW are business owners
                                                                                                                                                          • Figure 30: Asset ownership, by total value of investible assets, October 2009
                                                                                                                                                        • Half the Ultra Affluent and HNW own five or more types of investments
                                                                                                                                                          • SIPPs and ETFs major potential growth areas
                                                                                                                                                            • The influence of gender and age on asset ownership
                                                                                                                                                              • Figure 31: Asset ownership, by gender and age, October 2009
                                                                                                                                                            • Tax treatment a key factor behind asset allocation for high earners
                                                                                                                                                              • Figure 32: Asset ownership, by socio-economic group and gross annual household income, October 2009
                                                                                                                                                          • The Consumer – Use of Professional Advice

                                                                                                                                                            • Key points
                                                                                                                                                              • High street banks play a prominent role among the target wealth market
                                                                                                                                                                • Figure 33: Sources used for financial or investment advice, by total value of investible assets, October 2009
                                                                                                                                                              • Age-related differences in the use of information/advice
                                                                                                                                                                • Figure 34: Sources used for financial or investment advice, by gender and age, October 2009
                                                                                                                                                              • Use of private banks and other wealth managers drops after retirement
                                                                                                                                                                • The tech-savviness of older generations is impressive
                                                                                                                                                                  • Savvy will be doing their own research in addition to getting advice
                                                                                                                                                                    • Figure 35: Sources used for financial or investment advice, by socio-economic group and gross annual household income, October 2009
                                                                                                                                                                • The Consumer – Attitudes towards Banking and Financial Management

                                                                                                                                                                  • Key points
                                                                                                                                                                    • Highly competent service the top demand of the target wealth market
                                                                                                                                                                      • Figure 36: Most important attributes in choosing a company to deal with, by total value of investible assets, October 2009
                                                                                                                                                                    • Key attitudinal target groups
                                                                                                                                                                      • Figure 37: Key attitudinal target groups, April 2009
                                                                                                                                                                    • The Standard
                                                                                                                                                                      • Value Seekers
                                                                                                                                                                        • Highly Demanding
                                                                                                                                                                          • Attitudinal groups and level of investible assets
                                                                                                                                                                            • Figure 38: Total value of investible assets, by target groups, October 2009
                                                                                                                                                                          • Highly Demanding and Value Seekers well invested in all asset classes
                                                                                                                                                                            • Figure 39: Currently owned assets, by target groups, October 2009
                                                                                                                                                                          • Highly Demanding are the private bank and wealth management clients
                                                                                                                                                                            • Figure 40: Sources used for financial or investment advice, by target groups, October 2009
                                                                                                                                                                        • Appendix – Mintel’s Wealth Model

                                                                                                                                                                          • Segmenting the target wealth market
                                                                                                                                                                            • Figure 41: The UK wealth pyramid, based on ownership of investible assets
                                                                                                                                                                          • A multitude of wealthy types
                                                                                                                                                                            • Figure 42: Examples of wealthy client types
                                                                                                                                                                        • Appendix – The Consumer – Profile of the Target Wealth Market

                                                                                                                                                                            • Figure 43: Profile of the target wealth groups, by demographics, October 2009
                                                                                                                                                                            • Figure 44: Penetration of the target wealth market, by demographics, October 2009
                                                                                                                                                                        • Appendix – The Consumer – Attitudes towards Banking and Financial Management

                                                                                                                                                                            • Figure 45: Most important attributes in choosing the company to deal with, by key attitudinal target groups, October 2009
                                                                                                                                                                            • Figure 46: Attitudinal target groups, by demographics, October 2009

                                                                                                                                                                        Companies Covered

                                                                                                                                                                        • Adam & Company
                                                                                                                                                                        • Asda Group Ltd
                                                                                                                                                                        • Bank of America Corporation
                                                                                                                                                                        • Bank of England
                                                                                                                                                                        • Barclays Bank plc
                                                                                                                                                                        • British Bankers' Association (BBA)
                                                                                                                                                                        • Clydesdale Bank
                                                                                                                                                                        • Co-operative Group
                                                                                                                                                                        • ComPeer Limited
                                                                                                                                                                        • Coutts & Co
                                                                                                                                                                        • Deutsche Bank AG
                                                                                                                                                                        • Financial Services Authority (The)
                                                                                                                                                                        • Fleming Family & Partners
                                                                                                                                                                        • Fundsdirect
                                                                                                                                                                        • Gfk NOP
                                                                                                                                                                        • Goldman Sachs Group, Inc., The
                                                                                                                                                                        • Government Actuary's Department (GAD)
                                                                                                                                                                        • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                                        • HSBC Private Bank (UK) Limited
                                                                                                                                                                        • International Monetary Fund
                                                                                                                                                                        • Investec
                                                                                                                                                                        • Lloyds Banking Group
                                                                                                                                                                        • Merrill Lynch (UK)
                                                                                                                                                                        • Morgan Stanley & Co International Ltd
                                                                                                                                                                        • NatWest
                                                                                                                                                                        • Newton Investment Management Limited
                                                                                                                                                                        • Office for National Statistics
                                                                                                                                                                        • Rensburg Sheppards
                                                                                                                                                                        • Royal Bank of Canada
                                                                                                                                                                        • Royal Bank of Scotland Group plc
                                                                                                                                                                        • Royal London Group
                                                                                                                                                                        • Royal Opera House
                                                                                                                                                                        • Scottish Widows Bank plc
                                                                                                                                                                        • Société Générale Group
                                                                                                                                                                        • The Boston Consulting Group Inc.

                                                                                                                                                                        Affluent Investing and Banking - UK - November 2009

                                                                                                                                                                        £1,995.00 (Excl.Tax)