Good evening Stockopedians.
I was reading the £1m portfolio thread tonight and it moved me to repost an article we wrote at the back end of last year about the state of wealth management in the UK.
As a long time watcher (and active participant) of this particular industry segment, we have watched the continued erosion of service, standards and performance with alarm. A combination of compliance, consolidation and greed (plus of course more available information and lots of cheap and efficient self service platforms) has hollowed out a once well respected industry.
Without further ado, a repost of this article. Comments as always welcomed.
The story of UK Wealth Management has been one of huge consolidation over the past thirty years. An industry, once fragmented into regional and local specialists, has reduced to a handful of national behemoths. Brewin Dolphin, listed on the London Stock Exchange in 1994, has consolidated under its roof once familiar regional names such as Bell Lawrie, Wise Speke, Hill Osborne, Popes, and more recently Duncan Lawrie. According to latest figures, Brewin Dolphin now controls close to £50bn, about the same as Rathbone Brothers, and half that of St James’s Place.
Such developments have, of course, been lauded by these companies’ shareholders; wealth managers have a relatively fixed cost structure, meaning that incremental increases in revenue from additional assets under management (AUM) flow pretty much straight to the bottom line. Management, incentivised by increasing their employer’s share price, have done extremely well (along with their shareholders).
There are two noticeable developments which have accompanied this consolidation.
- Regulation and compliance have multiplied exponentially. As various market setbacks have hit the pockets of investors, regulators have in turn heaped more and more obligations on wealth managers. These of course come at a considerable cost and to counteract this, managers have sought to streamline their businesses.
- Instead of managing client portfolios on an individual basis, managers have been forced to build portfolios from an approved list of funds. Once again, this makes sense to both management and shareholders; following stock markets and engaging in proper research is a time consuming affair and if centralised, managers have more time (theoretically) to service their clients but more importantly to gather new assets.
It is the gathering of assets that has been incentivised, not the performance of client portfolios.…
