Wealth Management and Private Banking in the United Kingdom 2006

[Laura Wood]

I enclose details of our latest UK Wealth Management and Private Banking Report.   
   
Stock markets are riding high at present. As the business performance of wealth managers is still linked to the markets, the wealth management sector is currently in a buoyant position, experiencing a double-digit increase in revenues in 2005 and still going strong in 2006. In fact, 50% of revenues produced by UK wealth managers in 2005 were based on an 'ad valorem' scale linked to portfolio values. While this means that wealth managers have enjoyed strong performance over recent years, it also means that the industry is subject to the volatility of the markets. Although increases in operating profit have also been recorded, managing this volatility is a key challenge for the industry; and this will be achieved by attempting to diversify earnings through offering a wider array of advice-based services in wealth structuring, financial planning, and banking services.   
   
This report is concerned with wealth management (rather than stockbroking) - that part of the industry that gives advice and investment management services to retail customers/clients   
   
For a complete index of this report click on:   
http://www.researchandmarkets.com/product/942a11/wealth_management_and_private_banking_in_the   
   
Report Index:   
   
Issues in the Market   
Introduction   
Wealth managers - defining the scope of this report   
Key nomenclature   
Definitions   
Additional notes   
Abbreviations   
   
Market in Brief   
Sizing the personal wealth management market and the private client sub-sector   
Figure 1: Number of clients and value of assets in the private client wealth management sub-sector, 2005   
Private banks account for most funds in the private client wealth management market   
Figure 2: Investment assets by firm type in the wealth management market (excluding XO stockbrokers), 2004-05   
The wealth management consumer base has grown rapidly over 2003-06   
Figure 3: Distribution of free (investible) assets among consumers, Sept 2003-Sept 2006   
The UK population is moving up the socio-economic scale   
Some 7% of adults have free assets of over £100,000   
Figure 4: Distribution of free (investible) assets among consumers, by investment group, September 2006   
Wealth managers experience increased levels of churn as clients switch   
Threat of retail banks and global private banks   
MiFID to replace ISD in 2007 facilitating the single market   
   
External Market Environment   
There are 3.1 million Affluent to HNW individuals in the UK   
Figure 5: Distribution of free (investible) assets among consumers, by investment group, September 2006   
The wealth management consumer base has grown rapidly over 2003-06   
Figure 6: Distribution of free (investible) assets among consumers, Sept 2003-Sept 2006   
The UK population is moving up the socio-economic scale   
Figure 7: Forecast socio-demographic composition of United Kingdom adult population, 2005-11   
Implications   
Personal disposable income is set to increase with less consumer spending   
Figure 8: PDI, savings and consumer expenditure, at current prices, 1989-2011   
Drivers of consumer confidence   
Figure 9: Central position of confidence in consumers' attitudes towards investment, 2006   
Market volatility   
Figure 10: FTSE 100 and the FTSE All Share indices, January 1996-October 2006   
Inflationary pressures   
Figure 11: Bank of England base rate, December 1990-December 2006   
Global risks   
International security   
Oil and natural gas   
Asset allocations have shifted to a more defensive position but 3/4 are in equities   
Figure 12: Asset allocation of IMA funds under management (unit trusts and OEICs), 2000-05   
Private clients have reduced their exposure to equities   
   
Internal Market Environment   
Open architecture - strategic partnerships to offer more choice   
Wealth managers experience increased levels of churn as clients switch   
New regulatory requirements will impact wealth managers   
MiFID to replace ISD in 2007 facilitating the single market   
IFAs - distributors or competitors?   
Globalisation, global families and trusts   
Threat of retail banks and global private banks   
Demand for greater advice increases as investment instruments (and asset classes) become more complex   
The increasingly savvy retail investor is venturing into CFDs and derivatives   
Figure 13: Number of trades on the LSE, by asset type, 1996-2005   
Implications   
New asset classes for private (retail) investors create a need for greater advice   
Implications   
   
Competitive Context   
Property is the key substitute asset class   
House prices have increased by 150% in the past decade   
Figure 14: UK nominal and real house prices, Q1 1975- Q2 2006   
The number of mortgages has decreased but the value of those loans has increased   
Figure 15: Gross mortgage lending for house purchases (not including remortgages), 1990-2006   
Buy-to-let market continues to boom   
Figure 16: Value and volume of buy-to-let mortgages in the UK, H1 1999-H1 2006   
   
Strengths and Weaknesses in the Market   
Figure 17: Strengths and weaknesses in the wealth management and private banking market, 2006   
Strengths   
Weaknesses   
   
Market Size and Forecast   
Market structure   
Figure 18: Structure and nomenclature of the wealth management and private banking sector   
The total retail investment market was worth £530 billion in 2005   
The retail investor market was re-energised in 2005, but is still a shadow of its former self   
Figure 19: Total IMA funds under management in the UK and retail net sales, 1996-2005   
Personal wealth management industry is worth £308 billion - 20% of all asset wealth   
Value of assets under management grew by 16% over 2004-05   
Figure 20: Assets under management in the personal wealth management market, 1999-2005   
The private client wealth management sub-sector controlled assets valued at £276 billion in 2005   
Private-client wealth management sub-sector has fewer clients but controls 90% of assets in the personal wealth management market   
Figure 21: Number of clients and value of assets in the private client wealth management sub-sector, 2005   
Many customers in the private client market have more than one portfolio of assets   
Figure 22: Portfolios in the wealth management market, by value of assets, 2005   
Private investors typically hold three quarters of their stock market-related assets in equities   
Figure 23: Assets managed in the UK by the personal wealth management industry, by asset class, 2005   
Asset allocation - holding direct securities is central to wealth management   
Figure 24: Value of assets under management by wealth managers and investment type, 2005   
Asset allocation preferences by type of wealth manager   
Figure 25: Percentage of assets under management by wealth managers and investment type, 2005   
   
Forecast   
Retail investment market will be worth £408.8 billion by 2011   
Figure 26: Forecast of total IMA funds under management in the UK, by value, 2005-11   
Assets under management in the personal wealth management market will increase to £395 billion in 2010   
Figure 27: Forecast of assets under management in the personal wealth management industry, 1999-2010   
The personal wealth management market will have 580,000 private clients in 2010   
Figure 28: Forecast of the number of clients in the private client wealth management sub-sector, 2005 and 2010   
The wealth of private clients will grow by 29.3% to 2010   
Figure 29: Forecast of the value of assets in the private client wealth management sub-sector, 2010   
Factors used in the forecast   
Forecast of the number of clients and value of assets in the private client wealth management sub-sector   
   
Market Share   
The wealth management market is fragmented   
Figure 30: Market shares of firms in the 'wealth manager' market, by client, 2005   
Structural trends - boutiques have the highest growth rate but very large firms are also doing well   
Figure 31: Rates of growth in total investment assets by size of firm, 2006   
Barclays is still the dominant private asset manager   
Figure 32: Top 20: Assets under management and market shares of each wealth manager, as of end-2005   
The top 21-40 private asset managers represent 18.4% of the market   
Figure 33: Top 21-40: Assets under management and market shares of each wealth manager, as of end-2005   
   
Companies and Products   
Barclays Wealth   
Brokerage   
Financial planning   
International banking   
Private banking   
Private (Premier) banking   
Wealth structuring   
Investment management   
Banking   
Credit solutions   
Client and family   
Coutts & Co   
UBS   
Lloyds TSB Private Banking   
Merrill Lynch   
Morgan Stanley   
Morgan Stanley Quilter   
HSBC Private Bank   
Brewin Dolphin Securities   
Rensburg Sheppards   
Other market participants   
Abbey   
HBOS   
The Royal Bank of Scotland Group (RBS)   
C. Hoare & Co.   
Special note on offshore operations   
Foreign private banks   
   
Brand Communication and Promotion   
Figure 34: Advertising spend among private banks October 2005 to September 2006   
   
Channels to Market   
Private banks account for most funds in the private client wealth management market   
Figure 35: Investment assets by firm type in the wealth management market (excluding XO stockbrokers), 2004-05   
Discretionary management is the key distribution channel for investment assets in the wealth management market   
Figure 36: Investment assets by level of advice/management in the wealth management market (excluding XO stockbrokers), 2004-05   
Understanding the way products and services are distributed   
Private banks offer a good base for cross-selling   
Private client investment managers trade on being investment experts   
Some stockbrokers may act as gatekeepers to private clients   
Intermediaries, and other advisors also have a role to play   
Networks of family and friends are also key distributors of information   
Independent financial advisers as gatekeepers   
Figure 37: Top twenty IFAs ranked by annual turnover, 2005   
Other professional services   
   
Consumer Financial Activity   
A quiet Christmas and New Year for providers   
Activity levels look set to drop sharply   
Figure 38: Savings, investment, borrowing and debt repayment - consumers' expected activity, June 2005-September 2006   
UK savings and spending climate   
Figure 39: UK savings and spending climate - indexed, January 2001-October 2006   
Subdued picture across all sub-groups   
Figure 40: Expected financial activity, by socio-demographic, income and working status groups, September 2006 and average for the last 19 quarters   
Only ISA and life business will hold up   
Figure 41: Leading financial activities planned in the next six months, September 2005-September 2006   
Property intentions may be hit by the rate rise   
Figure 42: Intended mortgage and property purchase activity, September 2004-September 2006   
Identifying main financial services providers   
Bank of Scotland and Halifax customers will be the busiest   
Figure 43: Activity levels of main financial services providers' customer bases, September 2006   
NatWest and Barclays customers are looking to repay debt   
Figure 44: Activity intentions and current household financial situation, by MFSP, September 2006   
   
The Consumer - Profiling the Wealth Segment   
Two thirds of respondents have less than £10,000 in free assets   
Figure 45: Investible assets of the overall sample, September 2006   
Implications and opportunities   
Some 7% of adults have free assets of over £100,000   
Figure 46: Distribution of free (investible) assets among consumers, by investment group, September 2006   
An estimated 2.2 million ABs avoided disclosing their wealth   
Figure 47: Consumers refusing to provide anwser to question on investible assets, by socio-economic group, September 2006   
Implications and opportunities   
People aged 55-64 are most likely to have built up substantial assets   
Figure 48: Investible assets of the overall sample, by gender, age and socio-economic group, September 2006   
Implications and opportunities   
Wealthiest consumers are most likely to come from the South   
Figure 49: Investible assets of the overall sample, by TV rion and age/socio-economic groups, September 2006   
Implications and opportunities   
ABC1 retired group has minimum levels of affluence   
Figure 50: Investible assets of the overall sample, by lifestage and our Special Groups, September 2006   
Quality newspapers are the key to the wealthy segment   
Figure 51: Investible assets of the overall sample, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, September 2006   
Implications and opportunities   
Profiling the wealth segment   
Figure 52: Profile of the target wealth market, by gender, age and socio-economic group, September 2003   
Implications and opportunities   
Some 22% of the wealthiest group live in the South   
Figure 53: Profile of the target wealth market, by TV rion and ACORN categories, September 2006   
   
The Consumer - Product Ownership and Use of Private Banking Services   
Savings accounts are owned by more than 50%   
Figure 54: Financial product ownership, September 2006   
Product ownership among the more wealthy   
Figure 55: Financial product ownership among the whole sample and those with investible assets in excess of £30,000, by investible asset band, September 2006   
implications and opportunities   
Younger wealthy consumers have embraced the BTL sector   
Figure 56: Product ownership of more affluent respondents (selected products), by gender, age and socio-economic group, September 2006   
Implications and opportunities   
SIPPs emerge as a real option   
Figure 57: Product ownership of more affluent respondents (selected products), by lifestage and our Special Groups, September 2006   
Implications and opportunities   
Tracking stocks and shares via the Internet   
Figure 58: Product ownership of more affluent respondents (selected products), by new technology users, newspaper readership, commercial TV viewing and TV region, September 2006   
Implications and opportunities   
IFAs are important for nearly half of wealthy consumers   
Figure 59: Services used for more complex financial matters, September 2006   
IFAs are the gatekeepers for providers of private client services   
Figure 60: Services used for more complex financial matters, by asset bands, September 2006   
Implications and opportunities   
Wealthy ABs rely on IFAs   
Figure 61: Services used for more complex financial matters, by gender, age and socio-economic group, September 2006   
Implications and opportunities   
Private banking has fairly broad appeal   
Figure 62: Services used for more complex financial matters, by lifestage and our Special Groups, September 2006   
Talk tax to those in Anglia/Midlands   
Figure 63: Services used for more complex financial matters, by new technology users, newspaper readership, commercial TV viewing and TV region, September 2006   
   
Pricing:   
   
Hard Copy : EUR 2250   
Electronic : EUR 2250   
   
Ordering - Three easy ways to place your order:   
   
1] Order online at http://www.researchandmarkets.com/product/942a11/wealth_management_and_private_banking_in_the   
   
2] Order by fax: Print an Order form from http://www.researchandmarkets.com/product/942a11/wealth_management_and_private_banking_in_the and Fax to +353 1 4100 980   
   
3] Order by mail: Print an Order form from http://www.researchandmarkets.com/product/942a11/wealth_management_and_private_banking_in_the and post to Research and Markets Ltd. Guinness Center, Taylors Lane, Dublin 8. Ireland.   
   
Thank you for your consideration.   
Best Regards,   
   
Laura Wood
   
Senior Manager
   
Research and Markets Ltd
   
laura.wood na researchandmarkets.com   
   
Subscribe: Click on http://www.researchandmarkets.com/register.asp You can subscribe free for regular details on new research in your sector.   
   
Please note you are currently subscribed as talk na linux.cz   
   
If you no longer wish to receive our market research updates, please reply to this message with Suppression Request as the subject line, or use the link below   
   
http://www.researchandmarkets.com/unsubscribe.asp?functionx=unsubscribe&email=talk@linux.cz