Wealth Management in the UK 2009

Published by: Datamonitor

Published: Apr. 27, 2009 - 286 Pages

Table of Contents

Overview

Catalyst

Summary

Methodology

Executive Summary

RBS's wealth management service appears to be ripe for plundering

After many years of prosperity, Britons have fallen on hard times

HNWs are mostly defensive, but there are important differences in their attitudes that wealth managers need to cater for

Wealth managers need to consider the overlooked area of advisory services and step up the frequency of their client contact

Table of Contents

Table of tables

Special feature: RBS'S VULNERABLE WEALTH MANAGEMENT SERVICE

RBS's wealth management service is looking weak on a number of fronts and competitors would do well to exploit this

RBS has a significant wealth management operation in the UK

RBS has undergone a dramatic slide and has needed to be bailed out by the UK government

RBS's wealth management operations are being affected by these changes

RBS's brand and perception of financial stability have taken a knock, putting even more of an emphasis on service quality

RBS's wealth management offering is rated by its peers as slightly above average, but is nothing special

RBS has been relatively successful at keeping clients from defecting, but not at keeping relationship managers from defecting

There are plenty of weaknesses that RBS needs to address and that competitors should be exploiting

Key implications for RBS: concentrate on clients and relationship managers

Key implications for RBS's competitors: it is open season on RBS's clients and relationship managers

The UK's wealth

The years of heady growth and prosperity have come to a dramatic end in Britain

Redundancies, pay freezes and reduced bonuses have become the order of the day

For business owners it has become much more difficult to generate wealth

Property prices in the UK have undergone sharp falls

The stock market has been the centre of much selling activity

UK investors continue to play it safe with their wealth

Deposits have attracted a lot of money of late

Wealth data in 2009

The UK High Net Worth investor

UK HNWs have displayed typically defensive behavior but are starting to return to the riskier asset classes

UK investors have moved en masse into cash, but they are already moving money into equities in anticipation of a recovery

Wealth management service implication: provide clients with regular market commentary, and advise them when and where to invest in order to participate in the recovery

Innovative example from the UK: Hargreaves Lansdown takes positions and communicates them well

Over the next two years, fixed income, real estate and alternative investments will become more important in HNWs' portfolios

Wealth management service implication: capital protected products offer clients protection with upside potential

Innovative example from Europe: new capital protected product allows investors to lock in profits

The key product winners in two years' time will be closed ended real estate funds and corporate bonds

Wealth management service implication: help investors to position themselves for the inevitable recovery in property

Innovative example from Singapore: SG Private Banking creates global centre of expertise for real estate products

British HNWs may not be particularly knowledgeable on investments but they are demanding when it comes to service

HNWs exhibit lower than average knowledge of products and market conditions

Wealth management service implication: educating clients about investment matters makes sense on a number of fronts

Innovative example from Switzerland: UBS is investing in educating its clients

UK HNWs are demanding when it comes to their wealth management service

Wealth management service implication: wealth managers need to get up close and personal with their clients at this time

The current market declines have impacted on different clients in different ways

Clients' investment demands are changing but not in a uniform way

Wealth management service implication: one size will not fit all HNWs

Innovative example from the UK: Deutsche Bank launches more exchange traded funds in London

The UK wealth manager's view

Wealth managers disagree about what HNWs will be demanding in two years' time but agree about which areas to focus resources on

Several fundamental products and services will be in demand from HNWs in the next two years

There are a few common areas where wealth managers will be focusing resources in two years' time

While personal relationships are still key in HNWs' choice of wealth managers, clients are focusing much more on the financial stability of providers

Financial stability is very important to HNWs in Britain

British wealth managers see personal relationships as their biggest strengths, and brand, image and reputation as their biggest weaknesses

Customer contact is important both in terms of increasing share of wallet and improving client retention

Increased face to face contact is the key to increasing share of wallet

Wealth managers that do not make errors will be very successful at retaining HNWs

UK wealth managers are not talking to their clients with the same frequency as their European counterparts

British clients are being contacted by phone less frequently than in other countries

UK wealth managers are the worst in Europe at meeting their clients face to face

The performance of their overall portfolio is what HNWs most want to talk about when they speak to their wealth manager

UK wealth managers generally feel that competitors owned by nationalized or part-nationalized banks will become less competitive

Wealth managers are not particularly positive about the prospects for nationalized or part-nationalized banks

Wealth managers believe that nationalized and part-nationalized providers are not seen as more sound by clients, and will face a number of problems going forward

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 2009

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: Wealth managers' view about the strengths and weaknesses of RBS's wealth management services

Table 2: Wealth managers' view about the strengths and weaknesses of RBS's wealth management services

Table 3: Wealth managers' view about the strengths and weaknesses of RBS's wealth management services

Table 4: RBS is looking very vulnerable as a business

Table 5: What proportion of your HNWs' portfolios is allocated to the following five asset classes?

Table 6: HNWs' portfolio allocation now versus in 2 years' time

Table 7: HNWs' portfolio allocation by product area now, versus in two years' time

Table 8: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high)

Table 9: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high)

Table 10: What are HNWs demanding today?

Table 11: In two years' time, how much demand do you expect from HNWs for the following product areas?

Table 12: What product areas will your wealth management service focus most resources on in the next two years?

Table 13: What will determine HNWs' choice of wealth management service over the next two years?

Table 14: What are your company's biggest strengths and weaknesses today?

Table 15: What is the most effective means of increasing share of wallet today?

Table 16: What is the best way to retain clients today?

Table 17: On average, how often do your relationship managers speak by phone to each HNW client?

Table 18: On average, how often do your relationship managers speak in person to each HNW client?

Table 19: When speaking with clients, what do they most want to talk about today?

Table 20: To what extent do you agree with the following? (1 = strongly disagree, 2 = somewhat disagree, 3 = somewhat agree, 4 = strongly agree)

Table 21: To what extent do you agree with the following? (1 = strongly disagree, 2 = somewhat disagree, 3 = somewhat agree, 4 = strongly agree)

List of Figures

Figure 1: The luster has disappeared from RBS's brand, image and reputation, but it still offers above average service quality

Figure 2: RBS is slightly above average for products, about average in advisory service and below average for technology

Figure 3: RBS is not good at keeping its relationship managers from defecting

Figure 4: The labor market has been hit by higher unemployment and lower average real wages

Figure 5: The AIM market illustrates how hard things are for British entrepreneurs looking to create or realize wealth

Figure 6: The British property bubble has popped, and many predict further falls in value

Figure 7: The FTSE has been hit hard, but not as badly as other European markets

Figure 8: Britons have pruned back their holdings in bonds, shares and mutual funds

Figure 9: The majority of HNW wealth in the UK is invested in the 'equities' asset category, with this accounting for 30% of all investments

Figure 10: Investors will return to the out of favor asset classes in the next two years

Figure 11: In 2011, investors will have less of their portfolios in equities

Figure 12: HNW investors in the UK have a lower market and product knowledge than their European counterparts

Figure 13: Personal relationships and personal contact are still paramount in retaining HNWs

Figure 14: In the UK, HNW investors' greatest demand is for discretionary asset management services

Figure 15: In two years' time, the greatest demand amongst HNW investors in the UK will be for discretionary asset management with 25% of HNW investors demanding this category of product

Figure 16: Wealth managers in the UK will be focusing most of their resources on discretionary asset management in two years' time

Figure 17: HNW investors in the UK are most influenced by personal relationships with clients in their choice of wealth manager

Figure 18: The greatest strength of wealth managers in the UK is their personal relationships with clients

Figure 19: The best way for wealth managers in the UK to increase share of wallet is by increasing face to face contact

Figure 20: The best way for wealth managers in the UK to retain HNW investors is to make no/less errors

Figure 21: In the UK, wealth management relationship managers speak to clients by phone approximately once a month

Figure 22: Wealth management relationship managers speak in person to clients approximately once each half year

Figure 23: The majority of clients in the UK want to speak to their wealth manager about the performance of their overall portfolio

Figure 24: Wealth managers in the UK think that boutique wealth managers will have the best opportunities in the next few years

Figure 25: Nationalization and part-nationalization has lead to negative perceptions of wealth managers

Abstract

• HNW demographic and attitudinal attributes based on our Wealth Management Market Leaders Survey 2009
• Extensive primary research from 20 wealth management companies highlights their strategies for revenue growth, acquiring and keeping clients
• Indepth assessment of how RBS's UK wealth management operations are currently perceived, following the spate of bad news from the RBS group

• Understand the HNW population's investments by sector and geography, appetite for risk, and reasons for choosing/leaving their wealth service
• Assess the threats and opportunities for wealth managers by understanding how peers are planning to grow revenues, acquire and keep clients
• Gain an understanding of the strengths and weaknesses of RBS's UK wealth management operations, as well as the associated opportunities and threats

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