A report by SEI shows how a tough competitive environment in UK wealth management confronts firms with some difficult choices.

Wealth managers are struggling to stand out and catch the eye of clients as competition intensifies, with many of them seeing more mergers and acquisitions as necessary to build scale, while there will be more outsourcing of certain functions to protect tight margins, according to a report by SEI, published today.

The US-headquartered firm issued a research report, UK Wealth Management At A Crossroads, sponsored by the SEI Wealth Platform. The reports is based on interviews with C-suite executives from 12 of the top 50 UK wealth management firms with more than £500 billion ($650 billlion) of assets under management. 

The study reveals wealth managers are facing mounting pressure to provide a distinct proposition as they all vie for the same pot of money. For example, the use by HNW individuals of more than one firm to manage money is increasing, turning the screws on firms in a competitive environment, the report said. 

SEI said its report shows that majority of those interviewed see M&A playing an important role in their growth strategies, suggesting that rising market values and organic growth hasn't been enough to drive company growth. According to one CEO, “Scale is important, especially when faced with pressure on fees or an identified need to invest in new technology. The bigger firms can withstand the buffeting.”

Brett Williams, managing director, SEI Wealth PlatformSM, UK Private Banking, said: “Our latest research provides a snapshot of the challenges and opportunities facing wealth managers in 2017 and beyond. Firms are responding to the impact of change in different ways, and it is clear that many have important decisions to make when seeking to balance their business priorities in the months and years ahead.”

“Client expectations have evolved and increased so significantly, that firms need to adapt their business models in order to meet them, while at the same time keeping costs down and seizing opportunities for growth. If firms are able to control their cost bases, deliver high-quality products and services, and do so as efficiently as possible, then they have a fighting chance of sustaining a profitable business in an ever-changing environment,” he added.

The SEI Wealth Platform is an outsourcing solution for wealth managers; it provides infrastructure, operations, and administrative support. SEI provides investment processing, investment management and operations, working with a range of financial services groups.