A slide in the presentation that accompanied Rathbones’ preliminary results announcement for 2020 provides a fascinating insight to the size and segmentation of the UK wealth management market.
This has changed considerably over the past two decades as the role of the advisory sector and investment and wealth management platforms have assumed much greater prominence.
This happened in the wake of the Financial Conduct Authority’s (FCA's) retail distribution review, the advent of various pension “freedoms” and the remorseless advance of financial technology.
As a consequence the ubiquitous “independent financial advisor” (IFA), long regarded as the UK wealth management sector’s ugly duckling, has moved much nearer centre stage, not only as an important distribution channel for the rest of the sector’s products and services but as a competitor in its own right.
A number of former advisory firms also offer discretionary management services, for example.
Meanwhile “traditional” wealth management managers have either created their own wealth and financial planning arms or have started to acquire these through acquisition.
Rathbones’ slide attempts to size the various segments of what is now quite clearly an expanded wealth management universe as well as estimating its market share.
Utilising a variety of sources, including the PAM Directory, Rathbones estimates the size of the UK wealth management market at £1.6 trillion of assets in 2020 (or more probably the end of 2019).
“Financial networks and advisors” accounted for the biggest portion with £576 billion under management and administration, or 36 percent of the total.
These were followed by “private banks and global wealth managers” with £416 billion (25 percent); “independent wealth managers” with £368 billion (23 percent); “direct to consumer and robo advice” with £240 billion (15 percent); and “high street banks” with £16 billion and two percent.
Based on the information presented in the slide Rathbones estimates that it accounts for around 3.2 percent of the UK wealth management market and 13.7 percent of the “independent wealth management” sector.
Are the estimates accurate, however, both in terms of size and attribution?
The overall total of £1.6 trillion seems reasonable, give or take the odd £10 billion or so.
Compeer, a London-based research firm that focuses on wealth management estimated that private banks (which includes both domestic and international banks as well as retail banks), wealth managers and execution only (XO) stockbroking firms operating in the UK had just £1.05 trillion of assets under management and administration at the end of 2019.
Compeer’s database doesn’t cover the advisory sector per se. But Rathbones’ estimate of £576 billion doesn’t seem unreasonable.
Rathbones’ taxonomy may be a little more tendentious however, given the hybrid nature of many of the firms active in the UK.
This is exemplified by a similar slide produced by Rathbones for the presentation that accompanied its 2019 results where it employs a different classification.
The total size of the market in terms of assets under management and administration amounted to £1.7 trillion.
With £400 billion financial advisors accounted for the largest single portion (24 percent) followed by independent wealth managers with £390 billion (23 percent); global wealth managers with £230 billion (14 percent); “self directed” with £220 billion (13 percent); “vertically integrated firms” with £210 billion (12 percent); retail banks with £160 billion (9 percent); private banks with £80 billion (5 percent); and robo advisers <£5 billion.
Rathbones estimated that it accounted for 2.5 percent of the UK wealth management market overall and 11.5 percent of the independent wealth management segment.
One conclusion that can be made, notwithstanding classification problems, is that even with decades of “consolidation” the UK market is still very fragmented and encapsulates a plethora of operating models.
