The UK has maintained its position as the second largest global wealth management centre, if measured in terms of assets under management and administration (AMA), according to the Deloitte International Wealth Management Centre Ranking 2018.
The report says that the UK’s wealth management sector particularly benefits from London and its standing as a global financial centre.
“It is noteworthy that assets levels have so far not fallen in the aftermath of the Brexit decision,” the report adds.
The report goes on to describe what Deloitte believes are the key features of the UK wealth management sector.
“The market is dominated mainly by private banking divisions of universal banks, complemented by independent wealth managers and (something more advanced than in other centres) online stockbrokers offering execution, custody, and research services through digital portals,” the report says.
It adds that there is a “broad diversity of international clients, high levels of competition and transparency, a relatively large number of self-directed investors, low levels of client loyalty, and a strong link between retail and private banking services.”
The report compares the UK as one six jurisdictions (the others being Switzerland, USA, Singapore, Hong Kong and Luxembourg) on four revenue drivers and four cost drivers.
The first revenue driver is price sensitivity. This is defined by the report as being “determined by the transparency of pricing and discount models, offering breadth and depth, switching costs and client loyalty towards their private bank or relationship manager".
On this metric the UK is rated medium when compared to its peers, as was the USA and Luxembourg. Hong Kong and Singapore were rated as low and Switzerland as high.
The second revenue driver is level of competition. This takes into account “the number and differentiation of competitors” as well competition from adjacent sectors (such as retail banking or asset management) and the “significance of new market entrants (e.g. FinTech companies).
The report deems the UK to have high levels of competition. Of the six jurisdictions being ranked only Hong Kong and Singapore were also deemed to have high levels of competition. The USA and Switzerland rated medium, while Luxembourg was said to be low.
Mandate penetration is the third revenue driver, which considers the “average penetration of discretionary and advisory mandates.” Here the UK was deemed to be medium. Only Switzerland rated high in this metric. Hong Kong and Singapore were low and the US and Luxembourg were medium.
The final revenue driver was the average asset allocation of client assets. Here the UK, along with Switzerland and the USA, were rated as high. Luxembourg was low and Hong Kong and Singapore were medium.
Turning to the cost drivers, the first of these is level of regulation. This, the report says, is a “qualitative assessment of scope and complexity of regulatory requirements” and the “assertiveness of local regulators.” The UK was deemed to be medium on this metric, as was Switzerland, Hong Kong and Luxembourg. Singapore was deemed to be high and the USA low.
The second cost driver was personnel staff, measure on the average salary of relationship managers, direct assistant staff and overall banking staff. The UK was one of two jurisdictions where this was considered by Deloitte to be low, the other being Hong Kong. Singapore and Luxembourg were medium while the in USA and Switzerland this was considered to be high.
Occupancy costs were looked at next, measured by the average occupancy and lease costs in prime locations. Here the UK, along with Singapore, was ranked as medium. Only Luxembourg was judged to be low, with the Switzerland, the USA and Hong Kong all facing high costs in this area.
Overall price level was the final cost driver that the six jurisdictions were compared on. This was measured on “overall purchasing power parity and inflation levels”. Here the UK, as well as Hong Kong and Luxembourg, were medium. The USA came in as low, with Switzerland and Singapore rated as high.