Wealth Management in the UK 2008

Published by: Datamonitor

Published: Sep. 25, 2008 - 7 Pages

Table of Contents

Overview

Catalyst

Summary

Methodology

Executive Summary

Promoting alternative investments to high net worths

The UK has provided an ideal setting for wealth creation

The UK HNWs is 52 years old and has inherited much of his wealth

UK wealth managers have long lasting client relationships

Table of Contents

Table of tables

Special feature: Promoting alternative investments to HNWs

UK HNWs have heavily invested in alternative investments and these products are well suited to their needs

UK HNWs have a strong appetite for alternative investments

Alternative investments are particularly well suited to HNWs

HNWs are seen as the key market for most types of alternative investments

Wealth managers are not seen as the preferred distribution channel to HNWs, and action is required to address this

Wealth managers are not the preferred distribution channel by asset managers

High perceived risk and low promotion are stalling take up of alternative investments by HNWs

Key implication: wealth managers need to be properly educated

Key implication: asset managers need to support wealth managers better

Key implication: wealth managers must better educate their clients about alternative investment products

Innovative example from Australia: Perpetual offers seminar on investing in volatile markets, which includes discussion of alternative investments

Innovative example from Switzerland: Pictet & Cie arranges multiple seminars and presentation for professionals

Innovative example from South Korea: financial services providers support educational seminar on alternative investments

Innovative example from the US: hedge fund experts discuss topical issues

Innovative example from the UK: Sucden runs educational seminars

The UK's wealth

The UK has experienced rapid growth in personal disposable income

Equity investment returns have been good for a number of years

Rising interest rates have added to depositors' wealth, but at a cost

UK property investors have enjoyed robust capital growth in the past

The UK's onshore investors have repositioned towards safe havens

UK investors have taken £60 billion out of shares and other equity

Wealth in the UK took a knock in 2007 as proceeds from equity sales failed to reappear in other liquid asset classes

The number of affluent UK individuals fell in 2007

Outlook for the UK's wealthy population in 2008-12

2008-09 will be characterized by struggling economies worldwide

Data tables

The UK HNW investor

UK HNWs are nearing retirement, less entrepreneurial and invested in alternative assets

UK HNWs have a similar average age to their European counterparts

Wealth management service implication: focus on retirement planning

Innovative example from the UK: HSBC premier offers Personal Retirement Plan

In contrast to the European average, UK HNWs' wealth comes from inheritance

Wealth management service implication: reach out to inheritors

Innovative example from Jersey: Key Group launches Inheritors of Wealth program

UK HNWs are heavily invested in alternative investments

Wealth management service implication: provide HNWs with access to alternative investments

Innovative example from Europe: AXA Private Equity offers leverage buyout fund

HNWs in the UK will shift even further into alternative investments

UK HNWs' onshore investments are less Europe-centric than their peers

Wealth management service implication: bring emerging market Asian opportunities

Innovative example from Vietnam: VinaCapital launches Vietnam's first fixed income fund

UK HNW customers are interested in financing; they are excited about emerging markets but less financially sophisticated than their European peers

Financing and tax optimization are key concerns for UK HNWs

UK HNWs have the greatest demand for emerging market equities/funds

Wealth management service implication: look globally for investment opportunities, including ETFs

Innovative example from France: Lyxor Asset Management offers Kuwait ETF

UK HNWs have a markedly lower knowledge of financial products than average

Wealth management service implication: Wealth managers need to embrace technology

Innovative example from the US: BNY Mellon Wealth Management launches new internet platform for clients

While personal relationships are less important to UK HNWs than to their European peers, they do want face to face contact

Wealth management service implication: get closer to the HNW client

Innovative example from the UK: private banks are moving closer to where the customers are

HNWs are becoming less loyal and more demanding

The UK wealth manager's view

Wealth managers in the UK have much longer-term relationships with their clients compared to Europe as a whole

UK wealth managers have longer-term relationships with HNWs, and are less likely to have to share them with other wealth managers

UK wealth managers are looking at a range of steps to drive revenue growth, and are particularly focused on alternative investments

Wealth managers are looking to both obtain new clients and increase share of wallet

Increasing face to face contact and cross-selling products will increase share of wallet, but wealth managers are missing the lending opportunity

Alternative investments hold the greatest business potential for UK wealth managers in coming years

The key to attracting clients will be personal recommendations

Personal recommendations are key influencers of wealth management services

Wealth managers' own clients are the best route to new clients

The key to keeping clients will be resolving problems and talking to them regularly

UK HNWs are likely to leave because of basic service failures

Speedy resolution of problems and regular communication are key to keeping customers

Appendix

The drivers of growth in the wealthy population

Income growth (combined with inflation, changes in GDP by sector, household savings rates and debt levels)

Investment returns (market capitalization, interest rates and bond yields)

The following measures are not, in themselves, drivers of wealthy population growth

Market capitalization

GDP

The following measures are not drivers of wealthy population growth except under very restricted circumstances

Primary residence value growth

Inheritance

Methodology

Wealth Management Market Leaders Survey 2008

Global Wealth Model

The UK sub model

Global sub model (for all other countries)

Forecasting methodology

Continuous refinement to the understanding of liquid wealth distribution

Datamonitor's wealth numbers compared with other wealth numbers

Bibliography

Definitions

Western Europe

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: Various seminars offered by Sucden

Table 2: Number of affluent individuals in the UK by liquid asset band, 000s, 2003-7

Table 3: Number of affluent individuals in the UK by liquid asset band, 000s, 2008-12

Table 4: Aggregate onshore liquid assets of affluent individuals in the UK by liquid asset band, EURbn, 2003-7

Table 5: Aggregate onshore liquid assets of affluent individuals in the UK by liquid asset band, EURbn, 2008-12

Table 6: Number of affluent individuals in the UK by liquid asset band, 000s, 2003-7

Table 7: Number of affluent individuals in the UK by liquid asset band, 000s, 2008-12

Table 8: Aggregate onshore liquid assets of affluent individuals in the UK by liquid asset band, GBPbn, 2003-7

Table 9: Aggregate onshore liquid assets of affluent individuals in the UK by liquid asset band, GBPbn, 2008-12

Table 10: What proportion of the HNW customer base in the UK is in each age band?

Table 11: What proportion of the HNW customer base in the UK accumulated their wealth through (source)?

Table 12: What proportion of HNW customers' portfolios in the UK is allocated to (product)?

Table 13: HNW customers' portfolio allocation now versus in two years time

Table 14: What proportion of the HNW customers' portfolio in the UK is allocated to (region)?

Table 15: What are HNW customers in the UK most interested in today?

Table 16: For which investment opportunities is there a lot of demand from HNW in the UK?

Table 17: HNW customer attributes in the UK on a scale of one to four (knowledge)

Table 18: HNW customer attributes in the UK on a scale of one to four (relationship drivers)

Table 19: HNW customer attributes in the UK (customer contact)

Table 20: How long have HNW customers in the UK been with their wealth manager?

Table 21: How many wealth managers do HNW customers in the UK have on average?

Table 22: What will most determine revenue growth in the UK's wealth management market in the next two years?

Table 23: What is the most effective means of increasing wealthy clients' share of wallet in the UK?

Table 24: From the product areas just mentioned, which three will wealth managers focus most resources on in the next two years?

Table 25: What are the key influences that determine a client's choice of wealth management service in the UK?

Table 26: What are the most effective wealth management customer acquisition techniques in the UK?

Table 27: What are the most likely reasons for clients in the UK to leave a wealth management service?

Table 28: What is the best way to retain wealthy clients in the UK?

List of Figures

Figure 1: Diversification is driving the demand for alternative investment

Figure 2: HNWs are the dominant customer segment across most of the product subcategories

Figure 3: Wealth managers aren't seen as being particularly successful distributors of alternative investments

Figure 4: High risk is seen as being a major barrier to HNWs take up of alternative investments over the next year

Figure 5: Personal disposable income has ballooned while savings have declined

Figure 6: The FTSE has been heading ever upward

Figure 7: Yields and interest rates have been tracked upwards

Figure 8: Equities were a particular casualty of the sell off

Figure 9: Changes in value of credit card outstandings and overdrafts in the UK

Figure 10: The number of wealthy in the UK fell year on year in 2007

Figure 11: The recovery should start in 2010

Figure 12: The 51-65 age band accounts for the greatest share of HNW customers in the UK at 42%

Figure 13: Inheritance is the main source of wealth in the UK accounting for 29% of all HNWs

Figure 14: 28% of HNW portfolios in the UK are invested in equities

Figure 15: In the UK over the next two years HNW customers will increasingly look to the 'alternative investments' category that will grow its share of HNW investors' portfolios from 19% to 21%

Figure 16: HNW investors in the UK have 57% of their portfolios invested in Europe

Figure 17: Financing needs is a key priority for 66% of HNW investors in the UK

Figure 18: Emerging market equities/funds is the investment opportunity most in demand from HNW clients in the UK

Figure 19: HNW investors in the UK have less product knowledge than the average European HNW investor

Figure 20: HNW investors in the UK place less emphasis on provider relationships than the average European HNW investor

Figure 21: Clients are demanding more face to face contact with their wealth manager now than two years ago in the UK

Figure 22: Approximately 48% of relationship managers have had relationships with their clients for more than 10 years on average

Figure 23: Obtaining new clients will be one of the key drivers of revenue growth in the next two years for wealth managers in the UK

Figure 24: Increase face to face contact is one of the most effective means of increasing share of HNW wallet in the UK

Figure 25: Approximately 60% of wealth managers in the UK are planning to focus resources on the 'Alternative investments' product area over the next two years

Figure 26: Personal relationship is one of the key influencers that determines a client's choice of wealth manager in the UK

Figure 27: Referrals from existing clients are the most effective customer acquisition technique for wealth managers in the UK

Figure 28: Failure to understand client needs is the most likely reason for clients to leave a wealth manager in the UK

Figure 29: Resolving all problems quickly and completely and talking to them regularly are the most effective means of retaining HNW customers in the UK

Abstract

• HNW demographic and attitudinal attributes based on our Wealth Management Market Leaders Survey 2008
• Sizes, segments and forecasts the number of affluent invididuals across 10 liquid asset bands from EUR50k
• Extensive primary research from 20 wealth management companies highlights their strategies for revenue growth, acquiring and keeping clients
• Aggregated data covers onshore liquid assets including cash and deposits, mutual funds, direct investment in equities and direct investment in bonds.

• Understand the HNW population's investments by sector and geography, appetite for risk, and reasons for choosing/leaving their wealth service
• Assess market attractiveness by reviewing size and growth forecasts for the potential wealthy client base through 2012
• Assess the threats and opportunities for wealth managers by understanding how peers are planning to grow revenues, acquire and keep clients

About MarketResearch.com
MarketResearch.com is an online aggregator selling over 300,000 market research reports, company profiles and country profiles from over 700 research firms. Our reports will provide you with the critical business and competitive intelligence you need for strategic planning and marketing research. Coverage includes the US, UK, Europe, Asia and global markets.