Trends and Analysis

Submitted by David Ross on 01/03/2011

Investment management for UK based High-Net-Worth Individuals (HNWIs) is in a period of flux. The age old private banking model of a client implicitly trusting of their adviser is broken. Clients are no longer happy to receive a fresh leather bound cheque book each year and to see their money grow from afar. An era of renewed localism and closer client/manager relationships appears to be dawning. Expert wealth managers offering holistic financial planning and portfolio management seem to have struck a chord with more acutely financially aware investors post credit crisis and are beginning to build market share.

A report from Capgemini suggests that the financial crisis fundamentally shifted attitudes of HNW individuals toward wealth management with investors wanting to take a more hands-on role in their finances. Many lost substantially in the banking crisis and laid the blame squarely at the feet of their Private Bankers - many of whom were found wanting in terms of specialist financial knowledge. Capgemini’s report also suggests that many will expect their custodians to report more regularly, consistently and coherently.

This trend is also running concurrently with another, perhaps more portentous, movement. Smaller, specialist wealth managers are keen to capitalise on the new wealthy in markets worldwide and are opening up offices in fertile new pastures, from Scotland to tax havens such as Monaco and emerging economies like Dubai. They are attempting to bring their localist touch to an increasingly financially fastidious global investor community.

Edinburgh is perhaps the archetype of this expansionist trend. Veterans Kleinwort Benson and Quilter have both unveiled new offices, in late 2009 and January 2011 respectively. Cazenove Capital also purchased Edinburgh-based Thornhill in late-2009 to gain exposure to the market. Local factors have undoubtedly played their part in the Scottish capital - the financial crisis left a somewhat depleted local market, further weakened by the recent semi-implosion of RBS-owned Adam & Co. These factors undoubtedly served to entice bigger southern players to try and muscle in on the resurgently buoyant marketplace. However it seems that behavioural and demographic trends are perhaps the most potent factor pushing this expansion.

Wealth managers, excluding the vast investment management arms of the big banks who already have a significant global footprint, are also looking abroad for expansion. Killik & Co identified a burgeoning Middle Eastern HNWI population hungry for holistic, personalised wealth management and set up a successful office in Dubai in 2007. Coutts & Co also expanded its Monaco based team in 2009, ostensibly in response to growing demand from Russia’s new wealthy that had set up shop in the billionaires’ playground.

In 2009 Asia Pacific’s population of HNWIs increased 25.8% - it is now as large as Europe’s HNWI population – net wealth of those Asia Pacific HNWIs increased yet more rapidly, to US$ 9.7 trillion. The vast international private banks have already piled into the area in force; however the more individualist, heterogeneous service offered by traditional wealth managers may strike the same chord with disgruntled investors, a lot of whom lost big in the financial crisis. It will not be long before the irresistible lure of the Asia Pacific honey pot begins to draw UK wealth managers even further afield.