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Affluent Investing - UK - December 2011

“Although a large proportion of wealth manager funds continue to be under discretionary management, changing investor attitudes and behaviour, as well as ongoing advances in internet technology, suggest further growth in self-directed investment management among the high net worth. By giving their non-managed accounts a higher profile in the market, wealth managers may be able to benefit from this trend.”

– George Zaborowski, Senior Financial Services Analyst

Some questions answered in this report include:

  • How is new technology influencing wealthy client behaviour?
  • What kind of impact is the RDR having on wealth managers?
  • In what key ways have affluent investor attitudes and behaviour changed in the last few years?
  • How can the industry turn the trend toward self-directed investing in its favour?

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Table of contents

  1. Introduction

      • Abbreviations
        • Key sources
        • Executive Summary

            • The market
              • 15% of population in the target wealth market
                • Figure 1: Size and segmentation of the target wealth market based on investible assets*, July 2011
              • Total wealth manager revenues rises by 8% in 2010
                • Near to mid-term growth likely to be less robust
                  • Figure 2: Overall wealth manager revenue, 2006-16
                • Rising costs hit pre-tax profits
                  • Portfolio numbers rise across the board
                    • Figure 3: Number of accounts/portfolios held, by firm type, 2006-10
                  • Portfolio segmentation
                    • Figure 4: Assets by ownership as a proportion of total investment assets with wealth managers, 2010
                  • Over two thirds of funds under discretionary management
                    • Market factors
                      • Lethargic economic growth to continue for foreseeable future
                        • Markets will remain susceptible to wild swings in valuation
                          • Equity-based investments will remain attractive despite malaise
                            • Internal market environment
                              • Clients have become harder to please
                                • Regulatory developments
                                  • Companies, brands and innovation
                                    • Market share
                                      • Brand communication and promotion
                                        • Apps, social media and sports stars
                                          • The consumer
                                            • Asset ownership
                                              • Sources of financial advice
                                                • Personal financial management style
                                                  • What we think
                                                  • Issues in the Market

                                                      • How is new technology influencing wealthy client behaviour?
                                                        • What kind of impact is the RDR having on wealth managers?
                                                          • In what key ways have affluent investor attitudes and behaviour changed in the last few years?
                                                            • How can the industry turn the trend toward self-directed investing in its favour?
                                                            • Future Opportunities

                                                              • Taking advantage of the trend toward self-management
                                                                • Tapping into unrealised asset growth potential
                                                                • Internal Market Environment

                                                                  • Key points
                                                                    • The asset allocation shift to collectives continues
                                                                      • Figure 5: Asset types as a proportion of total investment assets for wealth managers, 2006-10
                                                                    • Managed asset revenue in a slump but could rise in 2011
                                                                      • Figure 6: Revenue return* on discretionary and advisory assets for wealth managers (excludes execution-only stockbrokers), 2005-10
                                                                    • Top wealth management firms struggling to rebuild reputation
                                                                      • Firms will need to up their game to satisfy a more demanding client base
                                                                        • Current regulatory developments
                                                                          • RDR’s impact on investment advice
                                                                            • Sophisticated advice could become harder to come by
                                                                              • Rundown of tax changes impacting the affluent
                                                                              • Broader Market Environment

                                                                                • Key points
                                                                                  • Persistent challenges drag down near-term economic growth prospects
                                                                                    • Figure 7: GfK NOP Consumer Confidence Index, September 2006-September 2011
                                                                                  • Wealth manager fortunes largely tied to the prevailing economic mood
                                                                                    • Sharp market movements keeping wealthy investors on edge
                                                                                      • Figure 8: FTSE 100 and FTSE All Share – daily index movements, November 2006-November 2011
                                                                                    • High inflation, taxes and low interest rates make equities attractive
                                                                                      • Figure 9: Monthly changes in the rate of annual inflation* and Bank of England base rate – UK, October 2008-October 2011
                                                                                  • Swot

                                                                                      • Figure 10: Affluent investing – SWOT analysis, 2011
                                                                                  • Who’s Innovating?

                                                                                    • Key points
                                                                                      • Barclays Wealth launches exclusive iPad app
                                                                                        • Coutts taking advantage of social media
                                                                                          • Private banks tying lending rates to level of client investment
                                                                                            • Private banks getting creative about recruiting top sports stars
                                                                                            • Market Size and Forecast

                                                                                              • Key points
                                                                                                • Total wealth manager revenues rises by 8% in 2010
                                                                                                  • Figure 11: Total revenues of wealth managers, by firm type, 2006-11
                                                                                                • 2011 growth expected to be more subdued
                                                                                                  • Investment management fees the key source of revenue growth in 2010
                                                                                                    • Figure 12: Wealth manager revenue streams, by firm type, 2009 and 2010
                                                                                                  • Solid growth in portfolio numbers for all firm types
                                                                                                    • Figure 13: Number of accounts/portfolios held, by firm type, 2006-10
                                                                                                  • Value of assets managed nears £400 billion
                                                                                                    • Figure 14: Number of accounts and the value of assets managed, by wealth managers, by firm type, 2006-10
                                                                                                  • £20 billion net inflow of funds in 2010
                                                                                                    • Figure 15: Wealth manager investment asset growth and net new business, 2007-10
                                                                                                  • Wealth manager profitably impacted by rising costs
                                                                                                    • Figure 16: Wealth manager costs as a proportion of total revenues, by firm type, 2006-10
                                                                                                  • Five-year forecast
                                                                                                    • Figure 17: Overall wealth manager revenue, 2006-16
                                                                                                  • Revenues forecast to remain in positive territory…
                                                                                                    • … but are highly sensitive to unresolved issues facing global economy
                                                                                                      • Figure 18: Overall wealth manager revenues, by firm type, 2006-16
                                                                                                    • Forecast methodology
                                                                                                      • Fan chart explanation
                                                                                                      • Portfolio Segmentation

                                                                                                        • Key points
                                                                                                          • All firms see a rise in portfolio numbers across all value bands
                                                                                                            • Figure 19: Number of wealth manager accounts/portfolios, by value band – nominee accounts only, 2010
                                                                                                          • Majority of assets continue to be held in taxable accounts
                                                                                                            • Figure 20: Assets by ownership as a proportion of total investment assets with wealth managers, 2010
                                                                                                        • Market Share

                                                                                                          • Key points
                                                                                                            • Top four firms control half of global assets under management
                                                                                                              • Figure 21: Top ten largest global wealth managers, by assets under management, 2011
                                                                                                            • Barclays Wealth and Coutts & Co manage a fifth of UK assets
                                                                                                              • Figure 22: 25 largest wealth managers, by assets under management – UK, December 2010
                                                                                                          • Companies and Products

                                                                                                            • Key players
                                                                                                              • Barclays Wealth
                                                                                                                • Coutts & Co
                                                                                                                  • UBS Wealth Management
                                                                                                                    • HSBC Private Bank
                                                                                                                      • Goldman Sachs Private Banking
                                                                                                                        • St James’s Place Wealth Management
                                                                                                                          • Lloyds TSB Private Banking
                                                                                                                          • Brand Communication and Promotion

                                                                                                                            • Key points
                                                                                                                              • Private banking and asset management adspend falls by an eighth
                                                                                                                                • Figure 23: Top 20 advertisers of asset management and private banking, 2009-11
                                                                                                                              • Press ads dominate wealth management industry adspend
                                                                                                                                • Private banks use sponsorships to raise brand awareness
                                                                                                                                  • Note about NMR data
                                                                                                                                  • Channels to Market

                                                                                                                                    • Key points
                                                                                                                                      • Over two thirds of assets in discretionary management
                                                                                                                                        • Figure 25: Investment assets held by wealth managers, by mandate type, 2007-10
                                                                                                                                        • Figure 26: Investment assets held by wealth managers, by mandate type, 2006-10
                                                                                                                                    • Size and Profile of the Target Wealth Market

                                                                                                                                      • Key points
                                                                                                                                        • 15% of UK adults say they fall into the target wealth market in 2011
                                                                                                                                          • Figure 27: Size and segmentation of the target wealth market based on investible assets*, July 2011
                                                                                                                                        • 4.2 million adults have £100K or more worth of investible assets
                                                                                                                                          • Figure 28: Distribution of investible assets among the UK population, 2011
                                                                                                                                        • Target wealth market is skewed toward affluent over-55s
                                                                                                                                          • Figure 29: Target wealth groups, by demographics, July 2011
                                                                                                                                        • Level of investible assets of primary significance for wealth managers
                                                                                                                                          • Figure 30: Target wealth groups, by demographics, July 2011
                                                                                                                                      • Asset Ownership

                                                                                                                                        • Key points
                                                                                                                                          • Direct link between level of wealth and range of assets owned
                                                                                                                                            • Figure 31: Asset ownership, by level of investible assets, July 2011
                                                                                                                                          • Age and asset ownership positively correlated
                                                                                                                                            • Figure 32: Asset ownership, by gender and age, July 2011
                                                                                                                                          • Socio-economic status and income matter
                                                                                                                                            • Figure 33: Asset ownership, by socio-economic group and gross annual household income, July 2011
                                                                                                                                        • Sources of Financial Advice

                                                                                                                                          • Key points
                                                                                                                                            • Direct link between level of wealth and source of advice
                                                                                                                                              • Figure 34: Sources of financial advice, by level of investible assets, July 2011
                                                                                                                                            • Age and financial advice
                                                                                                                                              • Figure 35: Sources of financial advice, by gender and age, July 2011
                                                                                                                                            • The future is being shaped by the tech-savvy young and wealthy
                                                                                                                                              • Income and socio-economic background key indicators
                                                                                                                                                • Figure 36: Sources of financial advice, by socio-economic group and gross annual household income, July 2011
                                                                                                                                            • Personal Financial Management Style

                                                                                                                                              • Key points
                                                                                                                                                • The majority are actively involved in managing personal finances
                                                                                                                                                  • Figure 37: Preferred method of money management, by level of investible assets, July 2011
                                                                                                                                                • Who’s making nearly all financial decisions on their own?
                                                                                                                                                  • Who occasionally consults with a professional adviser?
                                                                                                                                                    • Who relies heavily on a professional adviser?
                                                                                                                                                      • Who delegates all decisions to a professional adviser?
                                                                                                                                                      • Appendix – Market Size and Forecast

                                                                                                                                                          • Figure 38: Overall wealth manager revenue, 2011-16
                                                                                                                                                      • Appendix – Size and Profile of the Target Wealth Market

                                                                                                                                                          • Figure 39: Size and segmentation of the target wealth market based on investible assets, by demographics, July 2011
                                                                                                                                                          • Figure 40: Size and segmentation of the target wealth market based on investible assets, by demographics, July 2011
                                                                                                                                                      • Appendix – Asset Ownership

                                                                                                                                                          • Figure 41: Most popular financial product ownership, by demographics, July 2011
                                                                                                                                                          • Figure 42: Next most popular financial product ownership, by demographics, July 2011
                                                                                                                                                      • Appendix – Sources of Financial Advice

                                                                                                                                                          • Figure 43: Sources of financial advice, by demographics, July 2011
                                                                                                                                                      • Appendix – Personal Financial Management Style

                                                                                                                                                          • Figure 44: Use of professional advice, by preferred method of money management, July 2011
                                                                                                                                                          • Figure 45: Preferred method of money management, by demographics, July 2011

                                                                                                                                                      Companies Covered

                                                                                                                                                      • Adam & Company
                                                                                                                                                      • Barclays Bank plc
                                                                                                                                                      • Coutts & Co
                                                                                                                                                      • Ernst & Young
                                                                                                                                                      • Goldman Sachs Group, Inc., The
                                                                                                                                                      • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                      • HSBC Private Bank (UK) Limited
                                                                                                                                                      • Lloyds Banking Group
                                                                                                                                                      • Lloyds TSB Insurance
                                                                                                                                                      • NatWest
                                                                                                                                                      • Royal Bank of Scotland Group plc
                                                                                                                                                      • St James' Place Plc
                                                                                                                                                      • UBS Wealth Management UK Ltd

                                                                                                                                                      Affluent Investing - UK - December 2011

                                                                                                                                                      £1,750.00 (Excl.Tax)