Ouliana Smith, Head of Content at WealthInsight
Growing market volatility and reduced profit margins have forced private banks to target client segments providing the largest profits. However, some private banks and wealth mangers have also been targeting individuals with the potential to move into a higher wealth bracket, and that may be the recipe for long-term success and relevancy.
The emerging affluent in the UK are young, mobile and technologically literate. They may not have much liquid assets currently but to cater to their requirements, banks need to provide easily accessible products and services as well as nifty online facilities. These emerging affluent young adults provide ample opportunity for wealth management firms to offer online investment services and cater to a new client base as they move up the wealth ladder as opposed to making quick profits.
The emerging affluent differ from the mass affluent population, which is a lucrative client base. While the emerging affluent clients may still be struggling to get on private banks’ radar, latest data from Verdict Financial’s Global Wealth Markets Analytics shows that 24% of UK adults can be considered mass affluent holding £2.5trn in liquid assets such as deposits, bonds and equities.
Liquid assets held by mass affluent grew by 25.9% between 2012 and 2016, and account for 57.3% of UK’s liquid assets. In comparison, the UK’s high net worth (HNW) population that holds £1.4 trn in liquid assets, representing 32.5% of total liquid assets held by individuals in the UK.
Demographically, most of the mass affluent population is reaching retirement age and have a somewhat conservative and risk-averse approach to their money. They have a tendency to save for retirement and their children’s education.
Online investment services targeting the emerging affluent individuals, however, allow customers to keep track of financial flows and take advantage of clear pricing strategies, which are typically lower than the traditional private banking services.
As a greater number of wealth management firms come up with new strategies to woo potential clients and seek to meet the anticipated demand for online investments, it is the affluent young consumers that stand to benefit the most.
Adult population and liquid assets in the UK (2012-2016)
2012 2016 Growth
Mass affluent individuals, 000s 10388 12066 16.2%
Liquid assets, £bn 1,973 2,483 25.9%
HNW individuals, 000s 274 320 17.1%
Liquid assets, £bn 1,072 1,408 31.3%
Non affluent individuals, 000s 38,105 37,973 -0.3%
Liquid assets, £bn 369 440 19.4%
Source: Verdict Financial's Global Wealth Markets