Competition for the high net worth consumer in the United Kingdom, just like many other markets globally, is reaching fever pitch.
A protracted economic boom, record high stock prices and gravity defying property markets have combined to drive both the weight of assets held by Britain’s wealthy and also the number of affluent individuals to record levels.
What is interesting with the UK market however is investment and advisory firms that have traditionally relied on complicated tax based schemes to service clients through offshore services in places like Switzerland, the Channel Islands and Monaco are losing sway – oddly to the relatively boring Lloyds Bank and a burgeoning number of smaller high-end focused full service financial planning businesses.
Lloyds, which now has the lion’s share of the high net worth market in Britain with more than 11,000 private clients, worth just under £25 billion pounds, has been employing a strategy of identifying its business clients early and offering them a differentiated service.
In particular, Lloyds has been focusing on senior managers in the financial services, banking, mining and manufacturing industries as well as some small business owners.
A private client service means that you have a dedicated relationship manager, a different telephone contact service and website and almost unbelievably: a separate entrance into your high street bank, where you will receive tea and biscuits while you wait – something that is highly valued by clients.
But Lloyds isn’t likely to have it all its own way – the potential high net worth market in the UK is estimated to include more than 900,000 individuals, with a staggering combined £534 billion pounds of wealth that is believed to be growing at slightly less than 10% a year.
The new rich among these, especially those who are relatively recent migrants to the UK, are showing signs that they have no affection for either the high street banks or the venerable names of the city or the international banking world.
Instead the new rich are placing their trust in smaller more aggressive planning and advice-based businesses, which are targeting these individuals with offers of rich highly personalized service and a deep focus.
The interesting thing about these firms is that the change in the industry to a focus on making as many services available as possible to as many businesses as possible (primarily by the fund managers and the banks as they rush to flood the distribution channels with product) is that they are essentially building their competitors.
By making all of the products and services they sell available to planners, they have effectively empowered them to compete with them – handing off the relationship to financial planners in the hope that they will in turn develop into a low cost distribution strategy for them.
However, what it also means is that they are funding the development of a new wave of high net worth brands – which are able to deliver deep and complex services without bearing the cost of manufacturing the products.
The risk however the fund managers are taking is that they lose the high value relationships forever and are forced at some stage to buy back the relationships at greatly increased costs, once the advice businesses make a name for themselves.
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