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Wealth in the UK: Sizing the Market Opportunity 2017

Wealth in the UK: Sizing the Market Opportunity 2017

Summary

Wealth in the UK: Sizing the Market Opportunity 2017 analyzes the UK's wealth and retail savings and investments markets, with a focus on the HNW segment. The report is based on our proprietary datasets.

Despite the surprising result of the Brexit referendum and a slowing economy, the UK’s liquid assets grew by over 8% in 2016, the highest growth rate since the end of the financial crisis. Growth continues to be driven mainly by mutual funds, which performed well despite the volatility, as fund managers were able to capitalize on the opportunities provided by the UK stock market. With low interest rates, UK investors may be showing growing demand for well-performing funds. However, as the country’s economy faces the challenges of lower GDP expansion and growing inflation, future growth will remain muted. Wealth managers will still be able to find opportunities to grow their business, with demand for tax and estate planning advice remaining high as the government continues to fiddle with tax or pensions regulations.

Specifically, the report -

  • sizes the affluent market (both by the number of individuals and value of their liquid assets) using GlobalData’s proprietary datasets
  • analyzes which asset classes are favored by UK investors and how their preferences impact the growth of the total savings and investments market
  • examines HNW clients’ attitudes towards non-liquid investments, such as property and commodities
  • identifies key drivers and booking centers for offshore investments
Scope
  • Affluent individuals represent less than 29% of the UK population but hold 91.8% of the UK’s liquid assets.
  • UK wealth is concentrated mainly in London and the South East, and the unequal wealth distribution is unlikely to change during the period of economic slowdown.
  • 48.4% of UK savings are held in deposits (mostly in instant access accounts), but the solid performance of mutual funds has been attracting inflows to this asset class.
  • Despite holding 11% of their investment portfolios in commodities, property, and alternatives, the UK’s wealthiest individuals show a strong preference for liquid products.
  • Tax efficiency remains the main driver for HNW individuals opting to offshore wealth, with the Isle of Man and Ireland being the preferred booking centers.
Reasons to buy
  • Benchmark your share of the UK wealth market against the current market size.
  • Forecast your future growth prospects using our projections for the market to 2020.
  • Identify your most promising client segment by analyzing the penetration of affluent individuals in the UK – both at country and regional level.
  • Evaluate your HNW proposition by understanding how the ever-changing UK tax system affects your HNW clients.
  • Review your offshore strategy by learning about HNW motivations for offshore investments and their preferred booking centers.


  • Executive Summary
    • Growth in the UK will be muted after a strong 2016
    • Key findings
    • Critical success factors
  • Sizing and Forecasting the UK Wealth Market
    • The UK has a major offshore business
      • Table Figure 1: Non-resident deposits accounted for 41.7% of the UK retail deposit market in 2016
    • Growth in the onshore market is driven by the HNW segment
      • The UK affluent market remains the fourth largest in the world
      • Affluent individuals represent 28.9% of the adult population
        • Table Figure 2: HNW individuals account for 0.69% of the UK adult population, making the big opportunity mass affluentfocused
      • The affluent population holds 91.8% of retail liquid assets, with the wealthiest set to record the strongest growth
        • Table Figure 3: The affluent population hold 91.8% of retail liquid assets in the UK
      • The UK's onshore wealth is concentrated in London and the South East
        • Table Figure 4: London and the South East account for 29.2% of onshore affluent liquid assets in the UK
  • Drivers of Growth in the UK Wealth Market
    • 2016 saw the highest growth in retail savings and investments since the financial crisis
      • The total value of savings and investments in the UK will exceed £3tn in 2018
        • Table Figure 5: The value of UK retail savings and investments increased by more than 8% in 2016
      • Deposits account for 48.4% of the total market
        • Table Figure 6: Deposits account for half of the UK retail savings and investments market
      • Mutual funds will continue to drive growth
        • Table Figure 7: Mutual funds will be growing faster than any other savings or investment products
    • Retail deposits have outperformed GDP
      • After a strong 2016, shrinking real rates of return will limit future growth
        • Table Figure 8: Retail deposits have shown strong growth, outperforming GDP
      • Net inflows have been the primary driver for standard deposit growth
      • UK savers prefer instant access accounts to time deposits
        • Table Figure 9: 2016 saw record-high inflows into deposits as savers shifted from ISA accounts to regular bank products
    • Bonds account for only a fraction of UK retail savings, and inflation will limit future growth
      • Table Figure 10: Higher inflation will limit growth in direct retail bond investments
    • Uncertainty regarding future stock market performance is restraining equity holdings but boosting mutual funds
      • Fueled by the weak pound, the FTSE 100 reached record levels in 2016
        • Table Figure 11: As of December 2016, the oil and gas industry is the top industry in the FTSE 100 index
      • The performance of the stock market has had a direct impact on equities and mutual funds
        • Table Figure 12: Retail mutual fund and equity investments correlate strongly with the performance of the UK stock market
        • Table Figure 13: Stock market volatility has had a negative effect on direct retail equity investments
      • Mutual funds are relatively well diversified, which shields performance from the vagaries of the stock market
        • Table Figure 14: UK mutual funds have been continuously attracting new money
        • Table Figure 15:Mutual funds in the UK are predominantly invested in equities
  • HNW Investment Preferences
    • UK HNW individuals show a strong preference for liquid investments
      • UK HNW investors have switched from direct property to ETFs
      • The wealthiest UK individuals are once again turning their attention to hedge funds
        • Table Figure 16: Outside traditional assets, property ETFs and hedge funds are the most notable components of UK HNW
    • In addition to their onshore portfolios, UK HNW individuals hold 22.7% of their wealth offshore
      • Table Figure 17: UK HNW individuals hold 22.7% of their portfolios offshore
      • Tax efficiency remains the number one motivation for offshore investment
        • Table Figure 18: Tax is the key driver of offshore investment among UK HNW individuals
        • Table UK Income tax rates
        • Table Dividend tax rates
        • Table Capital gains tax rates for individuals
        • Table Stamp Duty Land Tax rates
        • Table Land and buildings transaction tax rates in Scotland
        • Table Annual tax on enveloped dwellings rates
      • The Isle of Man and Ireland are the primary booking centers for UK HNW offshore wealth
        • Table Figure 19: The Isle of Man and Ireland combined host almost half of UK HNW offshore wealth
        • Table Figure 20: The UK has DTCs and TIEAs with a number of global offshore centers
  • Appendix
    • Abbreviations and acronyms
    • Supplementary data
      • Table Total retail resident and non-resident deposits (£bn), 2006-16
      • Table Total UK adult population by pound sterling asset bands (000s), 2010-15
      • Table Forecast total UK adult population by pound sterling asset bands (000s), 2016e-20f
      • Table Total UK adult population by US dollar asset bands (000s), 2009-15
      • Table Forecast total UK adult population by US dollar asset bands (000s), 2016e-20f
      • Table Total UK onshore liquid wealth by asset band (£bn), 2010-15
      • Table Forecast total UK onshore liquid wealth by asset band (£bn), 2016e-20f
      • Table Total UK onshore liquid wealth by asset band ($bn), 2010-15
      • Table Forecast total UK onshore liquid wealth by asset band ($bn), 2016e-20f
      • Table Total UK onshore liquid assets by region and affluent segment (£bn), 2016
      • Table UK retail savings and investments by asset class ($m), 2010-15
      • Table Forecast UK retail savings and investments by asset class ($m), 2016e-20f
      • Table Net inflows and interest performance of UK retail deposits excluding cash ISAs (£m), 2007-16
      • Table Net inflows and performance gains of UK retail equities (£m), 2007-16
      • Table Net inflows and performance gains of UK mutual funds (unit trusts, OEICs, and investment trusts) (£m), 2007-16
    • Definitions
      • Affluent
      • Domicile
      • DTC
      • Exchange of information
      • FATCA
      • HNW
      • Liquid assets
      • Mass affluent
      • Mass market
      • Net inflows
      • Onshore
      • Performance/interest growth
      • Residency
      • TIEAs
    • Methodology
      • GlobalData's 2016 Global Wealth Managers Survey
      • Global Wealth Model methodology
      • UK Retail Savings and Investments Methodology
      • Exchange rates
        • Table Pound sterling-US dollar exchange rate, December 31, 2015 and December 31, 2016
    • Bibliography
    • Further reading

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