INTRODUCTION
They say time flies when you're having fun, however as we pass the mid-year point in 2024 it's unlikely most wealth management leaders would describe the first half as "fun". The period has been one of continued cost pressure, regulatory change, and more recently, political and policy changes (with their associated implications), for U.K. wealth firms.
Now is as good a time as any to look back at our last wealth management 2024 outlook paper and reflect on the four trends we suggested would most significantly influence the sector this year.
CASH CONSUMER IS KING
It's fair to say that the full impact of regulatory changes is yet to be felt, and market sentiment suggests there's more change in store for the rest of the year. As Consumer Duty continues to focus business leaders on fee transparency and ensuring clients are being treated fairly, the regulator's review of ongoing advice services is highlighting the need for a "clean up" of fee schedules and client servicing approach across the sector.
Revising fees is only one (elusive) piece in the puzzle, particularly for networks and consolidators which often manage hundreds of fee schedules. Detailed fee analysis, potential recalibration, and transparent communication with clients are critical to effectively demonstrate that they are being treated fairly
WHAT LEADERS ARE TALKING TO US ABOUT:
- REGULATION "PIPELINE": Understanding the impact the upcoming regulatory changes, including anti-greenwashing and governance of private markets, will have on their businesses' propositions.
- CAPACITY: Reviewing businesses' risk and compliance capabilities required to meet regulatory obligations while managing associated cost pressures.
- DIGITAL STRATEGY: Finding new ways to serve clients cost effectively – especially the next generation of wealth holders – as they continue to demand digital experiences that work seamlessly to deliver on their objectives.
VALUE WILL WIN
Fairness is just one aspect. Clients want to know they are getting value for money out of their wealth managers and advisers. Similarly, advisers want value from their platforms and partners, and shareholders want to see value realisation.
From the shareholder perspective, particularly that of private equity firms, this value expectation has yet to be met. Amid sluggish M&A and IPO markets, holding periods are being extended, pushing funds to extract further value from the wealth management businesses before exiting.
The previously strong market performance, which drove an increase in assets under management (AUM) and was often relied upon as an indicator of value, has now left some firms exposed.
Although it's too early to say what the average multiples will be, it's clear that some of the heady valuation multiples seen in the previous two years are being challenged.
WHAT LEADERS ARE TALKING TO US ABOUT:
- COST OPTIMISATION: Assessing the cost to serve clients (across different segments) and identifying levers to optimise cost.
- VALUE CREATION THROUGH PERSONALISATION: Developing more targeted and commercially viable propositions that speak to a more diverse, multigenerational clientele. This will ultimately lead to "stickier" client-adviser relationships.
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