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Affluent Investing - UK - November 2013

“Three quarters of affluent consumers are saving for their retirement, which is a much higher proportion than across the wider population. For wealth management firms, promoting SIPPPs and other pension products should be an important strategy in a bid to capitalise on the demand for retirement savings – and thus capture potential clients.”

– Stevan Obradovic, Financial Services Analyst

Some questions answered in this report include:

  • How is the RDR affecting the wealth management industry?
  • What drives saving and investing activity among affluent consumers?
  • How can firms target the affluent consumers of the future?
  • Could advertising play a bigger role in the wealth management sector?

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Table of contents

  1. Introduction

      • Report scope and definitions
        • Abbreviations
          • Key sources
          • Executive Summary

              • The market
                • Industry revenues expected to grow in 2013 and following five years
                  • Figure 1: Forecast of wealth management industry revenues – fan chart, 2008-18
                • Segment performance
                  • Discretionary management leads the way
                    • Figure 2: Investment assets held by wealth managers, by mandate type, 2008-12
                  • Portfolio composition
                    • Market factors
                      • Economic recovery finally getting underway
                        • FTSE 100 performing well
                          • The FCA announced a supervision model for the wealth management industry
                            • Impact of the RDR
                              • Companies, brands and innovation
                                • Coutts overtake Barclays to take top spot
                                  • Adspend on wealth management products and services down by 8% in 2012/13
                                    • The consumer
                                      • Investment portfolio
                                        • Figure 3: Saving and investment product ownership, August 2013
                                      • Saving and investing goals
                                        • Figure 4: Saving and investment goals, August 2013
                                      • Investment decisions
                                        • Figure 5: Investment management and decision making, August 2013
                                      • Sources of financial advice
                                        • Figure 6: Sources of advice when taking out an investment product, August 2013
                                      • Awareness of RDR changes
                                        • Figure 7: Consumer awareness of RDR changes, August 2013
                                      • What we think
                                      • Issues in the Market

                                          • How is the RDR affecting the wealth management industry?
                                            • What drives saving and investing activity among affluent consumers?
                                              • How can firms target the affluent consumers of the future?
                                                • Could advertising play a bigger role in the wealth management sector?
                                                • Trend Application

                                                  • Rising to the top
                                                    • Short-term pain for long-term gain
                                                      • Mintel futures: Old Gold
                                                      • Market Drivers

                                                        • Key points
                                                          • Market indices performing well in 2013
                                                            • Figure 8: FTSE 100 and FTSE All-Share – daily index movements, January 2005-August 2013
                                                          • Market capitalisation up by 15% in 2012
                                                            • Figure 9: Market capitalisation of global stock exchanges, by region, 2009-13
                                                          • UK economy showing signs of recovery
                                                            • Figure 10: UK quarterly GDP growth, Q1 2006-Q3 2013
                                                          • Consumer confidence continues to grow
                                                            • Figure 11: UK consumer confidence, January 1989-October 2013
                                                          • RDR already having an impact in the wealth management arena
                                                            • Wealth managers and private banks come under the eye of the FCA
                                                              • Basel III brings new capital requirements
                                                                • MIFID II and resolution of potential conflict with the RDR
                                                                • SWOT Analysis

                                                                    • Figure 12: Wealth management market – SWOT analysis, 2013
                                                                • Who’s Innovating?

                                                                  • Key points
                                                                    • Finding the right wealth manager for your personal needs
                                                                      • Barclays continues to develop its execution platform for wealth managers
                                                                        • Little Book of Wonders launched for HNW clients
                                                                          • Developments for HNW clients
                                                                          • Market Size and Forecast

                                                                            • Key points
                                                                              • Wealth management market continues to grow
                                                                                • Figure 13: Size of the UK wealth management sector, by number of clients, value of assets and total revenues, 2008-12
                                                                              • Net new assets down in 2012
                                                                                • Figure 14: Investment asset growth and net new business for wealth managers, 2009-12
                                                                              • Market forecast
                                                                                • Industry revenues expected to increase 19% over the next five years
                                                                                  • Figure 15: Forecast of wealth management industry revenues – fan chart, 2008-18
                                                                                  • Figure 16: Forecast of wealth management industry revenues, at current and constant prices, 2008-18
                                                                                • Forecast methodology
                                                                                  • Fan chart explanation
                                                                                  • Segment Performance

                                                                                    • Key points
                                                                                      • Wealth management firms grow assets and number of accounts
                                                                                        • Figure 17: Number of accounts and the value of assets managed, by type of firm, 2009-12
                                                                                      • Share of total revenues remains unchanged in 2012
                                                                                        • Figure 18: Total wealth management industry revenues, by type of firm, 2009-12
                                                                                      • Commission earning declined in 2012
                                                                                        • Figure 19: Proportional distribution of revenue streams, by type of firm, 2011 and 2012
                                                                                      • Costs as a proportion of revenues fall for wealth management firms
                                                                                        • Figure 20: Operational costs as a proportion of revenue, by type of firm, 2009-12
                                                                                      • Profitability among wealth management firms up in 2012
                                                                                        • Figure 21: Profit margin, by type of firm, 2009-12
                                                                                    • Portfolio Composition

                                                                                      • Key points
                                                                                        • Number of client accounts up by 5% in 2012
                                                                                          • Figure 22: Number of wealth manager accounts/portfolios, by value band (nominee accounts only), 2012
                                                                                        • Asset allocations remains relatively unchanged in 2012
                                                                                          • Figure 23: Proportional distribution of assets, by type of asset class, 2008-12
                                                                                        • Taxable holdings remain the most widely held asset type
                                                                                          • Figure 24: Proportional distribution of assets, by ownership, 2012
                                                                                      • Market Share

                                                                                        • Key points
                                                                                          • Coutts and Barclays account for over 20% of assets under management
                                                                                            • Figure 25: Largest 15 wealth managers, by assets under management and number of client accounts – UK, 2011 and 2012
                                                                                        • Companies and Products

                                                                                          • Coutts & Co
                                                                                              • Figure 26: RBS Group’s Wealth division – key interim data, H1 2012 and H1 2013
                                                                                              • Figure 27: RBS Group’s Wealth division – key financial data, 2011 and 2012
                                                                                            • Barclays Wealth and Investment Management
                                                                                                • Figure 28: Key interim financial data for Barclays Wealth and Investment management, H1 2012 and H1 2013
                                                                                                • Figure 29: Barclays Wealth – key financial data, 2011 and 2012
                                                                                              • St. James’s Place Wealth Management
                                                                                                  • Figure 30: St James’s Place Wealth Management – key interim data, H1 2012 and H1 2013
                                                                                                  • Figure 31: St James’s Place Wealth Management – key annual data, 2011 and 2012
                                                                                                • UBS Wealth Management
                                                                                                    • Figure 32: UBS Wealth Management division (Europe and Asia) – key interim data, H1 2012 and H1 2013
                                                                                                    • Figure 33: UBS Wealth Management division (Europe and Asia) – key annual data, 2011 and 2012
                                                                                                  • Brewin Dolphin
                                                                                                      • Figure 34: Brewin Dolphin – key interim data, H1 2012 and H1 2013
                                                                                                    • Hargreaves Lansdown
                                                                                                        • Figure 35: Hargreaves Lansdown – key annual data, 2012 and 2013
                                                                                                      • HSBC Private Bank
                                                                                                          • Figure 36: HSBC Private Bank – key interim data, H1 2012 and H1 2013
                                                                                                          • Figure 37: HSBC Private Bank – key annual data, 2011 and 2012
                                                                                                      • Brand Communication and Promotion

                                                                                                        • Key points
                                                                                                          • Advertising on wealth management services and products is relatively small
                                                                                                            • Figure 38: Total advertising expenditure on wealth management and other related products and services, 2010/11-2012/13
                                                                                                            • Figure 39: Top ten advertisers of wealth management products and services, 2010/11-2012/13
                                                                                                          • Press and outdoor media lead the way in the wealth management sector
                                                                                                            • Figure 40: Proportional distribution of adspend on wealth management, by media type, 2010/11-2012/13
                                                                                                          • A note about adspend
                                                                                                          • Channels to Market

                                                                                                            • Key points
                                                                                                              • Over 50% of accounts are under discretionary management…
                                                                                                                • Figure 41: Number of client accounts/portfolios, by mandate type, 2008-12
                                                                                                              • Discretionary management accounts for an even higher percentage of AUM
                                                                                                                • Figure 42: Investment assets held by wealth managers, by mandate type, 2008-12
                                                                                                              • Revenue returns continue to seesaw
                                                                                                                • Figure 43: Revenue return on discretionary and advisory assets, 2007-12
                                                                                                            • Segmentation of Investable Assets

                                                                                                              • Key points
                                                                                                                • Survey coverage
                                                                                                                  • Wealth tiers among affluent consumers
                                                                                                                    • Figure 44: Segmentation of the affluent market, by value of investable assets, August 2013
                                                                                                                  • Growing personal wealth over time
                                                                                                                    • Figure 45: Segmentation of the affluent market, by value of investable assets, August 2013
                                                                                                                  • Meeting the investable assets criterion
                                                                                                                    • Figure 46: Segmentation of the affluent market, by value of investable assets, August 2013
                                                                                                                  • Inheriting the next generation of affluent and HNW consumers
                                                                                                                    • Figure 47: Segmentation of the affluent market, by value of investable assets, August 2013
                                                                                                                • Investment Portfolio

                                                                                                                  • Key points
                                                                                                                    • Affluent clients tend to save/invest in a range of products
                                                                                                                      • Figure 48: Saving and investment product ownership, August 2013
                                                                                                                    • A quarter of affluent consumers invest in property
                                                                                                                      • Affluent and HNW clients have fingers in many pies
                                                                                                                        • Figure 49: Saving and investment product ownership, by segmentation of the affluent market, August 2013
                                                                                                                    • Saving and Investing Goals

                                                                                                                      • Key points
                                                                                                                        • Retirement is the number one financial priority
                                                                                                                          • Figure 50: Saving and investment goals, August 2013
                                                                                                                        • Circumstances dictate saving and investment goals
                                                                                                                          • Affluent and HNW clients most likely to save/invest for tax mitigation and inheritance planning
                                                                                                                            • Figure 51: Saving and investment goals, by segmentation of the affluent market, August 2013
                                                                                                                        • Investment Decisions

                                                                                                                          • Key points
                                                                                                                            • One in two affluent consumers makes their own investment decisions
                                                                                                                              • Figure 52: Investment management and decision making, August 2013
                                                                                                                            • Adults who own more complex products tend to delegate investment decisions
                                                                                                                              • Figure 53: Investment management and decision making, by ownership of unit trust/OEICs, property and corporate bonds/bond futures/gilts/gilt funds, August 2013
                                                                                                                          • Sources of Financial Advice

                                                                                                                            • Key points
                                                                                                                              • IFAs the top source of financial advice
                                                                                                                                • Figure 54: Sources of advice when taking out an investment product, August 2013
                                                                                                                              • Affluent and HNW clients more likely to seek advice from private banks
                                                                                                                                • Figure 55: Sources of advice when taking out an investment product, by segmentation of the affluent market, August 2013
                                                                                                                            • Awareness of RDR Changes

                                                                                                                              • Key points
                                                                                                                                • Around 80% of affluent clients have heard about the RDR
                                                                                                                                  • Figure 56: Consumer awareness of RDR changes, August 2013
                                                                                                                                • Affluent & HNW clients most likely to be aware about the RDR
                                                                                                                                  • Figure 57: Consumer awareness of RDR changes, by segmentation of the affluent market, August 2013
                                                                                                                                • More can be done to boost customer awareness
                                                                                                                                  • Figure 58: Consumer awareness of RDR changes, by sources of advice when taking out an investment product, August 2013
                                                                                                                                • Ownership of certain products leads to increased awareness
                                                                                                                                  • Figure 59: Consumer awareness of RDR changes, by ownership of select investment products, August 2013
                                                                                                                              • Attitudes Towards Investing and Financial Risk

                                                                                                                                • Key points
                                                                                                                                  • Affluent consumers like the challenge of making the most of their money…
                                                                                                                                    • Figure 60: Attitudes towards investment risk, August 2013
                                                                                                                                  • …but a large number also prefer to have peace of mind over higher returns
                                                                                                                                    • Figure 61: Attitudes towards having lower investment risk, August 2013
                                                                                                                                  • Risk attitudes change among the three wealth tiers
                                                                                                                                    • Figure 62: Agreement with the statement ‘I’ve tended to avoid taking financial risks in the past’, by segmentation of the affluent market, August 2013
                                                                                                                                  • Patience and a long-term outlook can help during turbulent times
                                                                                                                                    • Figure 63: Agreement with the statement ‘If I lost money on an investment, I would stay investment and hope that the investment recovers over time’, August 2013
                                                                                                                                • Appendix – Market Size and Forecast

                                                                                                                                    • Figure 64: Best and worst case forecast of wealth management industry revenues, 2013-18
                                                                                                                                • Appendix – Segmentation of Investable Assets

                                                                                                                                    • Figure 65: Segmentation of the affluent market, by value of investable assets, August 2013
                                                                                                                                • Appendix – Investment Portfolio

                                                                                                                                    • Figure 66: Most widely owned saving and investment products, August 2013
                                                                                                                                    • Figure 67: Saving and investment products, August 2013
                                                                                                                                    • Figure 68: Least owned saving and investment products, August 2013
                                                                                                                                • Appendix – Saving and Investing Goals

                                                                                                                                    • Figure 69: Most important saving and investment goals, by demographics, August 2013
                                                                                                                                    • Figure 70: Less important saving and investment goals, by demographics, August 2013
                                                                                                                                • Appendix – Investment Decisions

                                                                                                                                    • Figure 71: Investment management and decision making, by demographics, August 2013
                                                                                                                                    • Figure 72: Investment management and decision making, by segmentation of the affluent market, August 2013
                                                                                                                                • Appendix – Sources of Financial Advice

                                                                                                                                    • Figure 73: Sources of advice when taking out an investment product, by demographics, August 2013
                                                                                                                                • Appendix – Awareness of RDR Changes

                                                                                                                                    • Figure 74: Consumer awareness of RDR changes, August 2013
                                                                                                                                • Appendix – Attitudes Towards Investing and Financial Risk

                                                                                                                                    • Figure 75: Agreement with the statement ‘I like the challenge of trying to make the most of my money’, by demographics, August 2013
                                                                                                                                    • Figure 76: Agreement with the statement ‘I’m prepared to take some risks with my savings and investments in the hope of earning higher returns’, by demographics, August 2013
                                                                                                                                    • Figure 77: Agreement with the statement ‘I’d rather take a few risks with my investments than watch their real value reduced by inflation’, by demographics, August 2013
                                                                                                                                    • Figure 78: Agreement with the statement ‘If I lost money on an investment, I would stay invested and hope that the investment recovers over time’, by demographics, August 2013
                                                                                                                                    • Figure 79: Agreement with the statement ‘I’m happy to make a lower return on my savings if it means I don’t have to lie awake at night worrying about investment risk’, by demographics, August 2013
                                                                                                                                    • Figure 80: Agreement with the statement ‘I’ve tended to avoid taking financial risks in the past’, by demographics, August 2013
                                                                                                                                    • Figure 81: Agreement with the statement ‘Even if a risky investment offered higher returns, it wouldn’t compensate for the amount of worry it’d cause me’, by demographics, August 2013
                                                                                                                                    • Figure 82: Agreement with the statement ‘I think that I’m more willing than most people to take financial risks’, by demographics, August 2013
                                                                                                                                    • Figure 83: Agreement with the statement ‘I’d rather have money in the bank now than the chance of high returns in the future’, by demographics, August 2013
                                                                                                                                    • Figure 84: Agreement with the statement ‘I’d be prepared to borrow money to make a financial investment’, by demographics, August 2013

                                                                                                                                Companies Covered

                                                                                                                                • Adam & Company
                                                                                                                                • Barclays Bank plc
                                                                                                                                • Brewin Dolphin Holdings PLC
                                                                                                                                • Coutts & Co
                                                                                                                                • Hargreaves Lansdown Plc
                                                                                                                                • HSBC Private Bank (UK) Limited
                                                                                                                                • Lloyds Banking Group
                                                                                                                                • Marks & Spencer
                                                                                                                                • Royal Bank of Scotland Group plc
                                                                                                                                • St James' Place Plc
                                                                                                                                • UBS Wealth Management UK Ltd

                                                                                                                                Affluent Investing - UK - November 2013

                                                                                                                                £1,995.00 (Excl.Tax)