The Sunday Times Rich List, published in May, heralded the fact that there are now more billionaires per square foot in London than there are in any other city in the world, 114 to be exact. Not only that, the annual survey revealed that the wealthy are now wealthier than ever, with Britain’s richest people* having a combined fortune of almost £520 billion. Their wealth has increased by a hefty 15% in the last year alone.
Good news you would have thought – wealth spreads wealth. However, a growing number of Britain’s middle class is not enjoying such fruitful times. Despite the UK economy finally regaining its pre-crisis strength, many households still feel worse off than before the downturn. Having being forced to rein in their spending when times were tough, many families continue to feel the pinch due to soaring living costs, and in many cases, wage cuts or freezes.
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And while at first sight it might appear affluent families are doing well – and they may own assets such as homes, cars, retirement plans or even boats, many still spend virtually all of their disposable income on living costs or repaying debt.
Even those affluent families who have done well in the last few years are facing other financial pressures. They are suffering from a low or zero interest rate environment, sky high inheritance tax (IHT), the 45% tax bracket, the possibility of the introduction of new council tax bands for homes worth over £2m, soaring living and housing costs, and now having to fork out for university fees in addition to school fees. And the list goes on. While many will have little sympathy, there is a definite rise of the ‘aggrieved affluent’.
Not only are they feeling aggrieved, but a significant number of the affluent are being abandoned. The Government expects them to fend for themselves and a number of private banks are restricting their services to the oligarchs, oil tycoons and digital entrepreneurs. Doors are being firmly closed in the faces of the UK’s ‘aggrieved affluent’, as gone are the days where the major private banks would court clients with half a million of liquid assets, safe in the knowledge that they would grow the relationship as their clients’ wealth grew. They are no longer prepared to put in the sort of lifetime of investment to grow the relationship with clients at the less wealthy end of the spectrum.
The regulatory environment has also been through a transformation since the global financial crisis to address important issues, protect consumers and enhance market integrity. Regulatory intervention in the sector has been essential but related costs have led some banks to feel that their cost to serve ratio is not worth it for customers below a certain level of assets – many banks have increased their minimum client entry levels to £500k plus, with some well-known names significantly higher.
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By GlobalDataHere at Duncan Lawrie Private Bank, we feel this is a shame, as private banking should be all about personal relationships, top quality service and being able to offer that holistic solution to clients and their children that cover their investment management, financial planning, tax planning and banking requirements under the one roof. We certainly won’t be abandoning our heartland customer base or giving them reasons to be aggrieved. In fact, we’d be delighted to hear from the ‘aggrieved affluent’ who feel abandoned and unloved by their current private bank or wealth manager.
*Britain’s richest people are wealthier than ever before, with a combined fortune of almost £520bn, according to the Sunday Times Rich List. The 26th annual Sunday Times Rich List profiles the 1,000 richest individuals and families in the UK and the wealthiest 250 in Ireland.
The total wealth of the richest 1,000 individuals, couples or families jumped 15% in a year, the survey said.
At least £85m is needed to make it onto the list, up from the £80m in 2008, before the economic crash.
Seth Cowburn is the head of Wealth Management at Duncan Lawrie Private Banking
