The Wealth Management market – defying the Brexit downturn?
by Heat Recruitment
Wealth management, according to PWC, is “at the heart of the UK’s financial services”. With an increasing amount of technology available, both AI and fintech based efficiencies are on the rise. For the UK’s wealth management industry in particular, this translates to a total asset value of £6.9 trillion for the 2015/16 financial year – the largest asset management centre in Europe, and globally, second only to the US.
Despite this pedigree, the UK’s wealth management sector was predicted to suffer at the hands of Brexit. In April of this year the Financial Times, perhaps prematurely, declared that “Brexit is going to be a mess for UK wealth management”, with specialists highlighting increasing difficulties in operating overseas. Six months later, the publication ran with the headline, “UBS Wealth Management: UK picture ‘not as bleak as many think.” Indeed, the banking giant increased its growth forecasts for the UK by 0.4% – now sitting at 1.1% by 2018.
Whilst undoubtedly posing a strong challenge for the sector, the fluidity and flexibility of those in the industry mean that it is far from insurmountable. Dean Turner, UBS Wealth Management UK economist, confirmed that “Regardless of a [Brexit] agreement in principle, we would not be surprised to see contingency plans acted on to some extent. Yet even if we do see this movement, it should not be significant enough to bring about a cliff-edge moment for the economy.”
Further bucking the negative predictions, Investec recently confirmed an inflow into its wealth and management arms – £3.6bn. In addition, the wealth & investment specialist boosted its pre-tax profit “by 14.7% to £49.5m.” This rise in particular was attributed to “higher funds under management”.
Indeed, research from PWC confirmed that many fund managers already have operations outside of the UK – with many others having “outposts” in other EU countries. In practice, whilst decreasing efficiency and operational effectiveness, this strategy does indeed effectively mitigate risk. So where, then, can this loss be recouped?
Many now believe that wealth management and finance specialists have been too “lax” in their adoption of new technologies – particularly around fintech. 75% of asset and wealth managers view fintech’s impact as “adapt[ing] to changing customer needs”. Despite this, just 45% of AWMs believe that they place fintech at the heart of their strategies today. In boosting efficiencies, advanced technologies now have the potential to bring the industry up to speed.
Fintech is set to shake up the wealth management industry – with the associated increase to efficiencies effectively replacing any lost revenues from Brexit uncertainty. Robo-advice, big data and collaborative practices all present an opportunity for wealth managers to increase the effectiveness of their service offering – adopting a portion of the increased workload brought on by future regulatory issues.
According to a Thompson Reuters roundtable of industry specialists, this improved efficiency will “free advisors to focus on building customer relationships and providing optichannel advice – when, where and how customers want it.’
Despite the press, Brexit in its current form has yet to deliver the debilitating effects that were predicted earlier this year for the wealth management industry. Firms, due to foresight, decentralised infrastructure, and increasing demand, are (as ever) well placed to weather future risk and market uncertainty – remaining profitable for years to come.
Today’s political landscape can have long-reaching effects – particularly for wealth managers. Success in this industry now, as ever, comes from effective preparation and risk mitigation. To this end, we’ve developed our Ultimate Guide to Paraplanner Jobs. Are you looking for a career change? Get in touch with our dedicated wealth management team.
By Mike Garrett