Wealth in the UK: HNW Investors; Understanding HNW investors and wealth management strategies.

Wealth in the UK: HNW Investors; Understanding HNW investors and wealth management strategies.

Code: VF-VF0044CI | Published: Apr-2016 | Pages: 44 | Verdict Financial
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The UK wealth management industry has a long history, and this is reflected in the profile of the countrys high net worth (HNW) clients. The majority originate from the financial services industry and are sophisticated enough to deal with their financial affairs. However, to save time they opt for discretionary asset management services, as UK wealth managers maintain their reputation as trusted professionals. Investment portfolios are built around traditional asset classes such as equities and bonds, but alternatives are gaining importance. On the other hand, recent legal changes may cause a shift in demand for certain services, creating opportunities not only for existing competitors but for potential new entrants.

Key Findings
- Entrepreneurs account for 50% of the UKs HNW population, but earned income and inheritance are also importance sources of wealth.

- The majority of HNW expats residing in the UK come from France, Germany, and the US. The expat population is likely to be affected by the governments changes to taxation of the non-domiciled.

- Discretionary management is strongly preferred by UK HNW clients, who hire professional wealth managers in order to save time. Demand for execution-only platforms is very limited.

- Equities and bonds are major components of UK HNW investors well-diversified portfolios. No significant changes to asset management strategies are forecast, although wealth managers should prepare their clients portfolios for shifts in the Bank of Englands monetary policy.

Synopsis
Verdict Financials "Wealth in the UK: HNW Investors" report analyzes the investing preferences and portfolio allocation of UK HNW investors. The report is based on our proprietary Global Wealth Managers Survey.

Specifically the report:

- Profiles the average UK HNW investor in terms of the source of their wealth and age, as well as analyzing the expat opportunity in the UK.

- Analyzes which wealth management mandates are preferred among UK HNW investors and how demand will develop looking forward.

- Examines the allocation of UK HNW investors portfolios into different asset classes and how this allocation is expected to develop in the future.

- Analyzes product and service demand among UK HNW investors

Reasons To Buy
- Develop and enhance your client targeting strategies using our data on HNW profiles and source of wealth.

- Give your marketing strategies the edge required and capture new clients using insights from our data on HNW investors drivers for seeking investment advice vs self-directing.

- Tailor your investment product portfolio to match the current and future demand for different asset classes among HNW individuals.

- Develop your service proposition to match the service and product demand expressed by UK HNW investors and react proactively to the forecasted change in demand.

Table of Contents

EXECUTIVE SUMMARY
The UKs HNW clients believe in traditional wealth management
Key findings
Critical success factors
PROFILING THE UK HNW INVESTOR
The source of UK HNW wealth is dominated by entrepreneurs
A diversified market still requires a focus on entrepreneurs and business owners
Many HNW individuals have built their fortunes through financial services
UK wealth managers should be targeting expats
Expats account for 6.8% of the UK HNW population
The vast majority of HNW expats originate from France, Germany, and the US
HNW expats invest in the UK as they do not plan to return to their home countries
Increased capital requirements for investor visas have impacted the flow of HNW individuals from outside the EEA
The tax regime changes should be considered by wealth managers targeting expats
HNW INVESTMENT STYLE PREFERENCES
UK HNW individuals have professionals manage their wealth
Lack of time triggers UK HNW investors to use wealth managers services
Over three quarters of UK HNW wealth is held in discretionary mandates
Demand for advisory and execution-only services is limited
The asset management competitive landscape is unlikely to change
Demand for execution-only services will increase only slightly
Self-directed HNW investors look for independence
UNDERSTANDING ASSET ALLOCATION TRENDS AMONG UK HNW INVESTORS
UK HNW investors see the point in long-term equity investments
Equities dominate HNW portfolios and this is unlikely to change
Equities account for 58% of the average HNW portfolio
After equities, bonds are the second most important component of UK HNW portfolios
Deposits are less important for HNW portfolios in the UK compared to Western Europe
Property investment is underweight in UK HNW portfolios
Commodities play a marginal role in UK HNW portfolios
8% of assets in HNW portfolios is invested in alternatives
HNW PRODUCT AND SERVICE DEMAND
Planning services provision is essential for UK wealth managers
Changing regulations motivate UK HNW individuals to seek advice
Demand for planning services will continue to grow
The complex UK tax system boosts demand for tax advice
Over 90% of UK wealth managers record strong demand for tax planning
Changes in stamp duty land tax will increase demand for investment property advice
APPENDIX
Abbreviations and acronyms
Definitions
Affluent
Mass affluent
HNW
Liquid assets
Methodology
Verdict Financials 2015 Global Wealth Managers Survey
Verdict Financials 2014 Global Wealth Managers Survey
Bibliography
Further reading
About Verdict Financial
Disclaimer

List of Tables


Table 1: The UKs top industries by average annual income (Pound), 2015

List of Figures


Figure 1: First-generation entrepreneurs and family business owners account for half of the UK HNW population
Figure 2: Financial services is the most significant driver of UK HNW wealth
Figure 3: The vast majority of UK HNW expats have been in the country for over three years
Figure 4: 75% of UK HNW expats come from France, Germany, and the US
Figure 5: HNW expats living in the UK want to stay in control of their investments
Figure 6: UK HNW investors do not have enough time to manage their money on their own
Figure 7: 78% of HNW assets are managed in discretionary mandates
Figure 8: Wealth managers experience weak demand for advisory and execution-only mandates
Figure 9: UK wealth managers do not predict much change in demand for investment management services
Figure 10: HNW investors self-direct to retain control over some of their portfolio
Figure 11: UK HNW portfolios are dominated by equities
Figure 12: Compared to Western Europe, UK investors allocate more assets to equity funds
Figure 13: UK HNW investors think about diversification when investing in equities
Figure 14: UK HNW investors prefer bond funds to direct debt securities holdings
Figure 15: Risk-averse HNW investors opt for bonds
Figure 16: UK HNW portfolios contain a smaller share of deposits than in Western Europe
Figure 17: UK HNW investors will increase their allocations in deposits
Figure 18: UK HNW clients are not fond of property investments
Figure 19: Wealth managers do not expect demand for investment property to change
Figure 20: Similarly to Western Europe, in the UK only 1% of portfolios is allocated to commodities
Figure 21: Most UK wealth managers predict no change in demand for commodities
Figure 22: 8% of HNW investments is allocated to alternatives
Figure 23: Over the next year demand for alternatives will increase slightly
Figure 24: Demand for inheritance advice is lower than for other planning services in the UK
Figure 25: A significant increase in demand for all planning services is forecast
Figure 26: Demand for tax planning is stronger in the UK than in Western Europe
Figure 27: UK HNW individuals will show increasing demand for investment property advice
Barclays
Coutts
Kleinwort Benson
MASECO Private Wealth
RBS

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