Critical success factors for the UK wealth management space include launching a robo-advice proposition, expanding a regional presence beyond London and maintaining a pro-active approach to regulation, according to GlobalData Financial Services.
In the case of a robo-proposition, a new report, Wealth in the UK: Competitive Dynamics 2017, which is available from GlobalData Financial Services, explains that launching digital platforms will allow incumbents to address growing competition from existing robo-advice services.
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The report says demand for automated advice is on the rise, and delaying robo capabilities will result in losing current clients when they decide to explore automated investment advice.
While the south of the UK remains an area for established firms to focus on strengthening their presence, GlobalData says expansion to the north will allow competitors to tap into the unmet needs of prospective clients and achieve first-mover advantage.
Furthermore since compliance requires significant expenses and affects the profitability of a business, the report says UK firms should engage with the FCA’s initiatives to stay ahead of regulatory requirements – not least to avoid hefty fees.
Overall, the total AuM of the top 20 wealth managers in the UK grew by 19.2% year-on-year between 2015 and 2016. Over the same period, the total value of liquid assets held by the affluent population in the UK increased by 9.1%. This indicates that the top layers continue to grow their share of the UK market, with St James’s Place, Coutts and Barclays maintaining their ranks as the top three players for the third year in a row.
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By GlobalDataIn terms of business strategy, GlobalData says these are varied among the top wealth management firms. For example, St James’s Place, Tilney Group and Kleinwort Benson have employed expansion strategies in terms of proposition and acquisitions, while Coutts and Barclays are focusing on their UK operations instead of exploring international opportunities.
Speaking at the Private Banker International London Conference 2017, Dena Brumpton, CEO of Barclays Wealth & Investments UK, said the next generation of wealthy clients will demand an immediate, transparent, technologically friendly and unique service and that achieving those four goals is going to be challenging. She added: “Young or old, the buying behaviour of our client base is changing”.
UK REGULATORY SANDBOX
Although the regulatory burden continues to grow in the UK wealth management market – for example, with the introduction of MiFID II and the upcoming GDPR regulation – GlobalData notes that the UK regulator is closely working with the industry to support innovation.
For example, in 2016, the FCA established a regulatory sandbox whereby companies can test products and business models in an environment that enables the FCA to observe their activities in the light of current regulation without compromising consumer protection. The regulatory sandbox is part of Project Innovate, an initiative launched in 2014 to promote competition in the interest of consumers.
Not only has Brexit and the UK’s relationship with the rest of Europe brought uncertainty to the market, but an increase in regulation has encouraged firms to shift their focus from acquisition to compliance. Nevertheless, the UK wealth management market experienced some M&A activity in the fourth quarter of 2016 and throughout 2017.
The most notable moves have involved established players strengthening their services via acquisitions to capture greater market share, or expand the company’s offering. A key example was Standard Life’s merger with Aberdeen Asset Management.
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| SELECTED WEALTH MANAGER ACQUISITIONS: JANUARY–OCTOBER 2017 | ||
| month | wealth manager | details |
| January | Quilter Cheviot | Acquired Attivo Investment Management, adding £300m ($415m) in AuM. |
| January | Aegon | Acquired Cofunds from Legal & General for £140m to enhance the features and technology of its advisor platform. |
| January | Bellpenny | Acquired EFG Independent Financial Advisers, adding over £670m of funds under management. |
| March | Standard Life | Aberdeen Asset Management agreed to an all-share merger with Standard Life to create Europe’s second-largest active asset manager, with £660bn in AuM. The merger took place in August. |
| April | Old Mutual Wealth | Acquired Infiniti Financial Planning, which offers advice to 700 households. |
| May | Old Mutual Wealth | Acquired Maestro Financial Services, adding over £120m in AuA. |
| May | Brewin Dolphin | Acquired Duncan Lawrie’s UK private client investment management business. |
| June | BlackRock | Acquired a stake in Scalable Capital, marking the company’s entry into the European robo-advice market. |
| June | Old Mutual Wealth | Completed the acquisition of Caerus Capital Group, adding more than £4bn in AuA. |
| August | Tilney Group | Acquired the assets of Midas Investment Management, which supports £162m of client assets. |
| August | Vontobel | Agreed to acquire Notenstein La Roche Private Bank’s Eastern European portfolio, adding CHF2bn ($2.08bn) in AuM. |
| September | Canaccord Genuity | Completed the acquisition of Hargreave Hale, creating a combined business with £23bn in AuM and AuA. |
