Affluent and HNW Investing - UK - November 2014
Introduction
 
Six years on from the 2008 financial crisis and the UK wealth management industry is in fine form. Client asset wealth is rising and companies are boasting of robust balance sheets. However, it is not all roses round the door. Financial firms operating in this exclusive and higher-margin market space continue to face a number of external pressures, alongside significant internal challenges. They are having to adapt to a more complicated regulatory and tax environment, a more volatile and uncertain investment landscape and a more demanding and technically sophisticated client base. 

Growing revenue and improving margins remain the primary objectives, but these are becoming harder to achieve. The rules of the game are changing, and this is increasing the cost of doing business. Firms must balance the need to control costs, through finding operational efficiencies, with the need to invest more in new digital technology and service capabilities, in order to attract and retain the most lucrative clients. 

Mintel’s report looks at how traditional players are responding to these changing market dynamics, and how technological innovation and regulatory intervention are paving the way for new, cheaper and more transparent forms of wealth management and investment advice. In addition, the report summarises and comments on recent market performance, drawing on various industry data and trade research. This feeds into an assessment of the market’s prospects for revenue growth over the medium term. Lastly, the forecast analysis is complemented by the findings of a specially commissioned survey, which offers insight into the investment approaches, interests and plans of wealthy investors. 

Report scope and definitions
The focus of this report is on wealth management products and services, which are targeted mainly at the following groups of individuals:

●	high net worth (HNW) – with investable assets of over £500K
●	affluent – with investable assets of £250K-500K. 

To a much lesser degree, the following are also served by sections of the wealth management market:

●	mass affluent – with investable assets of £100K-250K
●	aspirational – with investable assets of £50K-100K or £100K+ in household income.

Hence, Mintel’s consumer analysis is based on a targeted sample of 498 individuals with £50K+ in investable assets or £100K+ in gross annual household income. The report concentrates on the advisory and investment management aspects of the market rather than banking, which provides the focus of a separate report, Premium and Mass Affluent Banking – UK, November 2014.

Market size data covers all firms offering wealth management services, as well as some data on execution-only brokers for comparative purposes. For a more detailed examination of the execution-only sector, please see report, Share Dealing – UK, October 2014. 

The three main types of wealth management firm are as follows: 

Full-service wealth managers (formerly referred to as full-service stockbrokers) – these firms focus on private client discretionary and advisory business, often supplemented by wider financial planning services, and are differentiated by being members of the London Stock Exchange. (Note: there are 36 firms included in ComPeer’s research.)

Private client investment managers – these are differentiated from the private banks in that they operate under client money rules rather than as licensed deposit takers. (Note: ComPeer’s research covers 53 investment managers, including some multi-family offices. However, firms that manage less than £50 million of assets and hedge fund managers are excluded, as are firms providing advisory services to clients, such as IFAs, where the firm does not have permission to undertake investment management.)

Private banks – these are firms that are licensed deposit takers, which have substantial investment management divisions operating in the UK. These include subsidiaries or branches of some foreign banks together with the private banking divisions of major UK retail banks and smaller niche players. (Note: ComPeer’s research covers 30 private banks.)

In addition, ComPeer’s research covers 20 execution-only stockbrokers. These firms offer telephone and online dealing, providing execution and custody services. They often cover a full range of instruments and their proposition is based around efficient and low-cost execution.

Abbreviations
APE	Annual premium equivalent (100% regular premiums + 10% single premiums)	
AMC	Annual management charge	
AUM	Assets under management	
CPI	Consumer price index	
CRD IV	Capital Requirements Directive IV	
D2C	Direct to consumer	
DIY	Do-it-yourself	
EPP	Executive pension plan	
ETC	Exchange-traded commodity	
ETF	Exchange-traded fund	
EU	European Union	
FCA	Financial Conduct Authority	
FTSE	Financial Times Stock Exchange	
GDP	Gross domestic product	
HNW	High net worth	
IFA	Independent financial adviser	
IMA	Investment Management Association	
ISA	Individual savings account	
LIBOR	London Interbank Offered Rate	
MiFID	Market in Financial Instruments Directive	
NMR	Nielsen Media Research. For further information, please contact nmr.communication@nielsenmedia.co.uk	
NS&I	National Savings & Investments	
OEIC	Open-ended investment company	
PTR	Portfolio turnover rate	
RBS	The Royal Bank of Scotland	
RDR	Retail Distribution Review	
REIT	Real estate investment trust	
SIPP	Self-invested personal pension	
SSAS	Small self-administered scheme	
SWOT	Strengths, weaknesses, opportunities, threats	
TER	Total expense ratio	

Key sources
Crown copyright material is reproduced with the permission of the Controller of HMSO and the Queen’s Printer for Scotland.

Market size data is reproduced with the permission of ComPeer, which provides competitor benchmarking, industry insights and bespoke research services for the wealth management sector. For further information please contact ComPeer Limited on +44 (0)20 7648 4848 or visit their website at compeer.co.uk. Address: 8 Laurence Pountney Hill, London EC4R 0BE.

PAM UK data is reproduced with the permission of PAM Insight Ltd, a provider of news, analysis and data in the international wealth management market. For further information please contact PAM Insight Ltd on +44 (0)20 7674 0400 or visit their website at pamonline.com. Address: PAM Insight Ltd, 50 Broadway, St James’s Park, London SW1H 0RG.