The wealth management industry in the UK plays an increasingly important role in the domestic economy and requires the kind of trade association to make its voice heard in the corridors of power, a new study says.
The wealth management industry accounts for roughly 1 per cent of the UK’s GDP and employs 12.5 per cent of the financial services community in the country, according to new research by Scorpio Partnership. The study also found that the industry manages assets of nearly £2.2 trillion ($3.45 trillion) affecting almost one out of ten of the population.
But despite being a sizable component of arguably the UK’s most successful industry, the high net worth segment lacks a unified trade association like the ones seen in retail banking, insurance and investment management.
The Scorpio study divides the high net worth industry in the UK into ten sub-industries in two categories: first, the companies that manage wealth, consisting of HNW private banks, mass affluent private banks, private client investment managers and wealth management IFAs; and second, service providers, including insurance, platforms, trustees, lawyers, accountants and ancillary services.
“From a client perspective, you have to deal with at least three professionals in the UK for managing wealth: an IFA, a fund manager and an accountant,” Sebastian Dovey, managing partner at Scorpio, told WealthBriefing. “You probably also have a lawyer and someone in insurance. The issues of each of these professional sectors are often very common but historically they have not thought holistically.
“The silo approach is problematic for policy-makers and the regulator and others; where can they get an answer that speaks for the whole industry?” Dovey said.
It is arguably equally important in the other direction, as wealth management has faced challenges such as rule changes to non-domiciliary status, trusts and personal taxation of high net worth individuals. Among regulatory challenges have been the Retail Distribution Review reforms of financial advice, due to take effect in 2013, and the US FATCA law that increases compliance requirements on US expats. The wealth management sector in the UK is also a significant employer and directly employs 124,000 professionals, according to Scorpio.
A crowded field
It is far from straightforward, however, to achieve more consolidation with a raft of trade associations representing different segments of the market. But Dovey believes that the various industry bodies now appear to be much more in concert, and emphasises that the Association of Private Client Investment Managers and Stockbrokers (APCIMS), the British Bankers’ Association, the Society of Trust and Estate Practitioners (STEP) and the City UK were all aware of the study and intend to use it in their activities with their members.
“I am optimistic that the industry will move in that direction, and take a more strategic, all-party view,” Dovey said. “We had a meeting a couple of weeks ago with all the industry bodies and some CEOs from private banks and IFAs as well as partners from law firms, fund managers and family offices, and they are all aware of the need for a common strategy. Time will tell how this will develop.”
Other steps have already been taken towards the creation of a clearer voice to put over views to policy-makers. Last November, this publication exclusively revealed that STEP launched a private banking and wealth management group as part of a campaign to raise awareness of the sector’s importance. It will initially focus on UK affairs although in due course it could expand.
Another UK-based body representing some parts of the wealth management sector is New City Initiative, which was founded several years ago by Daniel Pinto, managing partner of Stanhope Capital, the private investment office. NCI has about 25 member firms, such as Fleming Family & Partners, Lord North Street, Sand Aire, Vestra Wealth, Veritas, Stonehage, Odey and Asset Management.