More than 70 per cent of UK private banks and wealth managers are expecting to see asset growth of between 15 to 20 per cent during the next...

More than 70 per cent of UK private banks and wealth managers are expecting to see asset growth of between 15 to 20 per cent during the next three years, according to a new report.

This growth, according to RSM Robson Rhodes, the authors of the report, is largely on the back of the following factors:

• Continuing slow recovery of equity and bond markets;
• The wealthy getting wealthier;
• New business from inheritors, salaried executives and business owners; and
• Banked and self-investing clients switching to wealth management services.

More that two-thirds (67 per cent) of those surveyed reported that their range of services had widened to meet the needs of increasingly savvy clients, who require more tailored products and services. These include outsourced fund management, hedge funds (fund provision and a wider choice) and structured products. However, despite respondents’ views that a wide range of products is a crucial factor in improving client retention, nearly one firm in three has not extended its service ranges.

Another shift is the growing focus on offering non-tied products (as opposed to tied to a particular financial firm). Open product architecture is offered by 61 per cent of firms, an increase from 38 per cent in 2002. But RSM Robson Rhodes said that this places an onus on firms to be confident of the performance and operational qualities of third-party products, as the risk of damage to reputation and to individual client relationships is vastly increased.

The findings also appear to show that a lack of investment discipline continues to damage the industry, with 41 per cent of respondents believing this to be so. The typical concern raised was that too many investment advisors’ greatest competency is equity investment, which skews the advice offered to high net worth individuals. This continued focus on product sale rather than service highlights that some firms still have a way to go and lack customer-focused investment values.

As firms seek to rein in costs, outsourcing has become increasingly used within the industry. However, outsourcing is also used to enable the firms to gain access to specialist skills. As firms have become more comfortable with outsourcing their back office (79 per cent of respondents now do so) they are less worried about the potential risks and are seeking to use it to outsource other aspects of their business. Fifty-seven per cent of respondents stated that they now outsource their middle office and, surprisingly, 21 per cent outsource their front office.

Other findings included:

• The threat that a client may ‘walk’ if a client relationship officer moves on is no longer seen as a significant threat. Many firms are adopting a team approach to relationship management to anchor relationships with the firm rather than with the individual;
• CROs only spend 61 per cent of their time on client-facing activities. Despite the importance of focusing their time on client-facing activities, 22 per cent of their time is spent on compliance and administration; however, firms are investing more in training their CROs, particularly in softer skills (an average increase of 35 per cent);
• Seventy per cent of respondents said face-to-face interviews were the preferred means for clients to contact their client relationship officers, although clients only want to meet up when they have something specific to discuss.

“The cautious return of investor confidence provides improved opportunities for private banking and wealth management firms,” said Mark von Bergen, a partner at RSM Robson Rhodes. “However, to benefit from this growth, firms will need to ensure that they are customer-focused, offering the right products and service ranges and connecting with clients in the most appropriate way.”

He added: “This must be managed in tandem with improved operational factors such as maximising the use of CROs’ time, ensuring that compliance and regulatory needs are met and savings from outsourcing can be realised.”