Wealth Management in the UK 2009

The country's serious economic issues are having a major effect on the UK's onshore wealthy population, potentially causing them to lose faith in their wealth managers. To keep clients, wealth managers need to know what this lucrative customer wants from them, in terms of products, services and interaction.

Report Highlights
UK HNWs are displaying typically defensive behavior in the face of the economic instability, and have lifted their proportion of assets held in cash and near cash from 15% in 2008 to 28% in 2009. Within the ranks of the HNWs there are, however, a significant number looking to position for the recovery.

British wealth managers see increased face to face contact as key to increasing share of wallet; ironically they are currently among the worst in Europe at keeping in touch with clients, and this is something that they must address.

The dramatic fall of the RBS group has damaged its collection of prized private banking operations in the UK. RBS needs to focus on strengthening the client-banker relationship at the current time. Meanwhile, RBS's competitors should be using this opportunity to plunder RBS's treasures: its clients and relationship managers.
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Table of Contents 4
Table of tables 5
Special feature: RBS'S VULNERABLE WEALTH MANAGEMENT SERVICE 6
RBS's wealth management service is looking weak on a number of fronts and competitors would do well to exploit this 6
RBS has a significant wealth management operation in the UK 6
RBS has undergone a dramatic slide and has needed to be bailed out by the UK government 6
RBS's wealth management operations are being affected by these changes 7
RBS's brand and perception of financial stability have taken a knock, putting even more of an emphasis on service quality 7
RBS's wealth management offering is rated by its peers as slightly above average, but is nothing special 9
RBS has been relatively successful at keeping clients from defecting, but not at keeping relationship managers from defecting 11
There are plenty of weaknesses that RBS needs to address and that competitors should be exploiting 13
Key implications for RBS: concentrate on clients and relationship managers 14
Key implications for RBS's competitors: it is open season on RBS's clients and relationship managers 14
The UK's wealth 16
The years of heady growth and prosperity have come to a dramatic end in Britain 16
Redundancies, pay freezes and reduced bonuses have become the order of the day 17
For business owners it has become much more difficult to generate wealth 18
Property prices in the UK have undergone sharp falls 19
The stock market has been the centre of much selling activity 20
UK investors continue to play it safe with their wealth 21
Deposits have attracted a lot of money of late 21
Wealth data in 2009 22
The UK High Net Worth investor 23
UK HNWs have displayed typically defensive behavior but are starting to return to the riskier asset classes 23
UK investors have moved en masse into cash, but they are already moving money into equities in anticipation of a recovery 23
Wealth management service implication: provide clients with regular market commentary, and advise them when and where to invest in order to participate in the recovery 25
Innovative example from the UK: Hargreaves Lansdown takes positions and communicates them well 25
Over the next two years, fixed income, real estate and alternative investments will become more important in HNWs' portfolios 26
Wealth management service implication: capital protected products offer clients protection with upside potential 27
Innovative example from Europe: new capital protected product allows investors to lock in profits 28
The key product winners in two years' time will be closed ended real estate funds and corporate bonds 28
Wealth management service implication: help investors to position themselves for the inevitable recovery in property 30
Innovative example from Singapore: SG Private Banking creates global centre of expertise for real estate products 30
British HNWs may not be particularly knowledgeable on investments but they are demanding when it comes to service 31
HNWs exhibit lower than average knowledge of products and market conditions 31
Wealth management service implication: educating clients about investment matters makes sense on a number of fronts 33
Innovative example from Switzerland: UBS is investing in educating its clients 33
UK HNWs are demanding when it comes to their wealth management service 34
Wealth management service implication: wealth managers need to get up close and personal with their clients at this time 36
The current market declines have impacted on different clients in different ways 36
Clients' investment demands are changing but not in a uniform way 36
Wealth management service implication: one size will not fit all HNWs 38
Innovative example from the UK: Deutsche Bank launches more exchange traded funds in London 38
The UK wealth manager's view 40
Wealth managers disagree about what HNWs will be demanding in two years' time but agree about which areas to focus resources on 40
Several fundamental products and services will be in demand from HNWs in the next two years 40
There are a few common areas where wealth managers will be focusing resources in two years' time 42
While personal relationships are still key in HNWs' choice of wealth managers, clients are focusing much more on the financial stability of providers 45
Financial stability is very important to HNWs in Britain 45
British wealth managers see personal relationships as their biggest strengths, and brand, image and reputation as their biggest weaknesses 47
Customer contact is important both in terms of increasing share of wallet and improving client retention 49
Increased face to face contact is the key to increasing share of wallet 49
Wealth managers that do not make errors will be very successful at retaining HNWs 51
UK wealth managers are not talking to their clients with the same frequency as their European counterparts 53
British clients are being contacted by phone less frequently than in other countries 53
UK wealth managers are the worst in Europe at meeting their clients face to face 55
The performance of their overall portfolio is what HNWs most want to talk about when they speak to their wealth manager 56
UK wealth managers generally feel that competitors owned by nationalized or part-nationalized banks will become less competitive 58
Wealth managers are not particularly positive about the prospects for nationalized or part-nationalized banks 58
Wealth managers believe that nationalized and part-nationalized providers are not seen as more sound by clients, and will face a number of problems going forward 60
Appendix 62
The drivers of growth in the wealthy population 62
Income growth (combined with inflation, changes in GDP by sector, household savings rates and debt levels) 62
Investment returns (market capitalization, interest rates and bond yields) 62
The following measures are not, in themselves, drivers of wealthy population growth 62
Market capitalization 62
GDP 62
The following measures are not drivers of wealthy population growth except under very restricted circumstances 62
Primary residence value growth 62
Inheritance 63
Methodology 63
Wealth Management Market Leaders Survey 2009 63
Global Wealth Model 63
The UK sub model 63
Global sub model (for all other countries) 63
Forecasting methodology 64
Continuous refinement to the understanding of liquid wealth distribution 64
Datamonitor's wealth numbers compared with other wealth numbers 64
Bibliography 65
Definitions 66
Western Europe 66
Further reading 66
Ask the analyst 66
Datamonitor consulting 66
Disclaimer 66
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Table 1: Wealth managers' view about the strengths and weaknesses of RBS's wealth management services 9
Table 2: Wealth managers' view about the strengths and weaknesses of RBS's wealth management services 11
Table 3: Wealth managers' view about the strengths and weaknesses of RBS's wealth management services 13
Table 4: RBS is looking very vulnerable as a business 13
Table 5: What proportion of your HNWs' portfolios is allocated to the following five asset classes? 24
Table 6: HNWs' portfolio allocation now versus in 2 years' time 27
Table 7: HNWs' portfolio allocation by product area now, versus in two years' time 30
Table 8: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high) 33
Table 9: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high) 35
Table 10: What are HNWs demanding today? 38
Table 11: In two years' time, how much demand do you expect from HNWs for the following product areas? 42
Table 12: What product areas will your wealth management service focus most resources on in the next two years? 44
Table 13: What will determine HNWs' choice of wealth management service over the next two years? 47
Table 14: What are your company's biggest strengths and weaknesses today? 49
Table 15: What is the most effective means of increasing share of wallet today? 51
Table 16: What is the best way to retain clients today? 53
Table 17: On average, how often do your relationship managers speak by phone to each HNW client? 54
Table 18: On average, how often do your relationship managers speak in person to each HNW client? 56
Table 19: When speaking with clients, what do they most want to talk about today? 57
Table 20: To what extent do you agree with the following? (1 = strongly disagree, 2 = somewhat disagree, 3 = somewhat agree, 4 = strongly agree) 59
Table 21: To what extent do you agree with the following? (1 = strongly disagree, 2 = somewhat disagree, 3 = somewhat agree, 4 = strongly agree) 61
Figure 1: The luster has disappeared from RBS's brand, image and reputation, but it still offers above average service quality 9
Figure 2: RBS is slightly above average for products, about average in advisory service and below average for technology 10
Figure 3: RBS is not good at keeping its relationship managers from defecting 12
Figure 4: The labor market has been hit by higher unemployment and lower average real wages 17
Figure 5: The AIM market illustrates how hard things are for British entrepreneurs looking to create or realize wealth 19
Figure 6: The British property bubble has popped, and many predict further falls in value 20
Figure 7: The FTSE has been hit hard, but not as badly as other European markets 21
Figure 8: Britons have pruned back their holdings in bonds, shares and mutual funds 22
Figure 9: The majority of HNW wealth in the UK is invested in the 'equities' asset category, with this accounting for 30% of all investments 24
Figure 10: Investors will return to the out of favor asset classes in the next two years 27
Figure 11: In 2011, investors will have less of their portfolios in equities 29
Figure 12: HNW investors in the UK have a lower market and product knowledge than their European counterparts 32
Figure 13: Personal relationships and personal contact are still paramount in retaining HNWs 35
Figure 14: In the UK, HNW investors' greatest demand is for discretionary asset management services 37
Figure 15: In two years' time, the greatest demand amongst HNW investors in the UK will be for discretionary asset management with 25% of HNW investors demanding this category of product 41
Figure 16: Wealth managers in the UK will be focusing most of their resources on discretionary asset management in two years' time 43
Figure 17: HNW investors in the UK are most influenced by personal relationships with clients in their choice of wealth manager 46
Figure 18: The greatest strength of wealth managers in the UK is their personal relationships with clients 48
Figure 19: The best way for wealth managers in the UK to increase share of wallet is by increasing face to face contact 50
Figure 20: The best way for wealth managers in the UK to retain HNW investors is to make no/less errors 52
Figure 21: In the UK, wealth management relationship managers speak to clients by phone approximately once a month 54
Figure 22: Wealth management relationship managers speak in person to clients approximately once each half year 55
Figure 23: The majority of clients in the UK want to speak to their wealth manager about the performance of their overall portfolio 57
Figure 24: Wealth managers in the UK think that boutique wealth managers will have the best opportunities in the next few years 59
Figure 25: Nationalization and part-nationalization has lead to negative perceptions of wealth managers 60
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