Pivotal Moments for Wealth Managers
The UKs fast growing £600 Billion investment platform industry is facing some of the biggest challenges on multiple fronts in the form of regulatory compliance and keeping pace with technology change.
The tidal wave of funds under management is set to grow exponentially and with high profit margins at around 66%, the incentives are high, exemplified by market leader Hargreaves Lansdown has lifted its assets under management from £20 billion to £60 billion in 5 years. Enormous mergers like Standard Aberdeen will see AUM increasing to over £670bn. These will create economies of scale and a differentiator on price but if they haven’t got control of operations or regulation, getting bigger isn’t going to help. All the while smaller companies will need to find something different clients are willing to pay for.
Competition is continually rising in the UK with new entrants like Vanguard, intending to “democratise” the investment market for all, and Wealth Simple, the Canadian Roboadvosiry firm is entering the UK this year.
The sector is growing rapidly, with competitive conditions and technology innovation driving market forces that should drive down prices. What does this mean for the consumer? With very high profits margins questions are being raised over the return on investment, and suspicions are increasing over the savings made through re-platforming being passed onto customers. The FCA is turning their attention to the Platforms sector seeking reassurances that the consumer is seeing value for their investment.
Wealth managers are in fact facing a pivotal moment in their life cycle with what seems a moment of critical mass. A recent study called UK Wealth Management draws on interviews with execs at 12 of the 50 biggest UK wealth management firms, which combined have over £500 billion in assets under management (AUM). The report found that firms are struggling to stand out as competition intensifies and regulation leads to complex client needs. It also warned that failing to invest in technology will pose a major threat to wealth managers in a ‘robo-advice world’. The report concluded that wealth managers are facing mounting pressure to provide a distinct proposition as they all compete for the prize.
According to Brett Williams, Managing Director of SEI, outsourcing could be the answer. “If you outsource, you take that away, and that’s across all levels, because the bigger guys just have bigger problems. Wealth managers will need to outsource and make acquisitions if they want to survive, a message we hear consistently from our closest customers in the domain.”
The challenges of completion, regulatory and technology change are at a tipping point and there will be some losers along the way. We have already witnessed platform providers failing to deliver to its Customers effectively, and this number is likely to increase. Very interesting times indeed.
As wealth managers and platforms outousrce the need to drive change, platform businesses and wealth managers alike will need to rely on both strong in house recruitment teams and specialist consultancies to deliver exceptional people to drive change in an ever-changing and challenging environment.
Streamline is fortunate to partner with a number of Wealth Platform businesses that are experiencing a significant amount of growth and change. Whether for a specific re-platforming project, an upgrade, or as part of continual growth plans, it is exciting for us to play a pivotal role in sourcing and placing fantastic individuals that can genuinely enact change for his/her employer and clients.