client assets are managed by 10 investment managers, including
Coutts, UBS, Barclays and Rathbones, amid significant progress in
offering more professional investment advice, according to new
estimates.
The absolute leader in discretionary account management is Coutts,
with £14.6 billion ($29.4 billion) of assets under management in
this category. Next is UBS, which has impressively built up its UK
wealth position where it has £13.3 billion of discretionary
business (see table).
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For the advisory business, the leader with a dominating position is
Barclays and its private client broker Gerrard, with £23.9 billion.
Brewin Dolphin is the next-ranked with £11.1 billion.
This data has been compiled by Katrina Preston, analyst in London
for Landesbanki Securities, an arm of the Iceland banking
group.
Discretionary client accounts – which are traditionally more
profitable for banks – saw a 26 percent increase in terms of assets
under management in the year to October 2007. This reversed a trend
of discretionary assets growing more slowly than those of advisory
and execution-only clients in the previous three years.
“We believe this reversal also reflects the growing popularity of
self-invested personal pensions [SIPPs], which would be classified
as discretionary management,” says Preston. Anecdotal evidence
suggests that SIPPs currently account for 10 to 15 percent of new
business won by wealth managers.
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By GlobalDataIn the meantime, the number of high net worth individuals has
increased at a tempo matching that of UK household wealth in the
past year, showing a gain of 7 percent to £3.8 trillion, according
to estimates.
This high net worth population is estimated at between 485,000 and
505,000 individuals, of which some 300,000 employ an investment
manager. The mass affluent market comprises some 2.2 million
individuals, most of whom are served by independent financial
advisers (IFAs) and fund supermarkets rather than by wealth
managers.
The potential personal asset pool from which the wealth management
industry can seek to make a living “appears largely untapped”,
Preston says.
She adds: “This illustrates that there remain ample opportunities
for wealth managers that provide a relationship-driven service,
offering genuine investment advice rather than selling investment
products.”
The wealth management industry, displaying more rapid growth than
actual expansion in numbers of high net worth individuals, grew
discretionary and advisory assets under management by 15 percent to
£345 billion up to last October. That compares with £300 billion in
the same period of 2006.
Fee margins have remained stable at 99 basis points across the
industry, while operating margins have expanded from an average of
18 percent to 24 percent over the past year, Landesbanki data
shows.
Its research attributes this growth to a number of positives,
including growing personal wealth. At the same time, there have
been four clear trends in private client business seen in the past
year – increasing attention to real estate as an investment class,
a reversal in the growing exposure to other alternative asset
classes, greater interest in emerging markets and increasing use of
third-party collectives.
During 2006, property unit trusts attracted £3.5 billion of net
inflows, making real estate the best-selling asset class and
accounting for 53 percent of net sales in the three most popular
retail investment sectors, according to the Investment Management
Association.
Says Preston: “We view the improving diversification of private
clients’ portfolios as a positive structural trend. Not only does
it reduce wealth managers’ traditional dependence on healthy equity
markets to attract new clients and retain existing ones, it also
presents significant opportunities to differentiate the product
offering.”
“This trend will provide smaller firms with an opportunity to
expand in niche areas where larger groups may find the current size
of the market unattractive,” she suggests.
Indeed, while the advisory industry is dominated by the top 10
players, smaller wealth managers have made a “noticeable comeback”
over the past year, particularly those companies managing between
£1 billion and £5 billion.
In addition, “significant progress” has been shown in
professionalising the service offering, helping wealth managers
attract a growing number of more profitable investment management
clients, she says. Some 125 companies overall currently compete for
private client business in the UK.
While the investment mood has turned bearish, Preston remains
fundamentally optimistic. After a prolonged bull market, the
outlook is now opaque, she notes. Nonetheless, “we believe the
quoted (private client) sector is well prepared for a period of
market turbulence while the long-term investment case for the
industry remains firmly intact”.
