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A high-margin, capital-light financial business with structural growth tailwinds and a regulator keen to encourage expansion? It’s no wonder Britain’s banks are keen to grow in the wealth management sector. The only problem is everybody has had the same idea.
Barclays, Lloyds, NatWest, and JPMorgan are all hoping that managing rich people’s money can be a key part of their UK growth. Even Revolut, the fast-growing fintech, is looking to build wealth management and private banking services.
The banks aren’t alone. Asset managers, insurers and private equity firms have all been trying to muscle in, and M&A activity has surged. More than £9bn worth of UK wealth and asset management deals were publicly announced in 2024, according to EY, up from £2.1bn in 2023. Long-standing specialists such as St James’s Place are hardly giving up — its shares have rallied 50 per cent over the past six months as new chief executive Mark FitzPatrick looks to turn the business around after a rough few years.
Most firms are particularly keen on the so-called “mass affluent” — customers with between £75,000 and a few million in investable assets. They are more profitable than the average retail bank customer, but are not as needy and expensive to serve as the seriously wealthy clients of private banks.
A recent update from Barclays highlights the appeal. Its private banking and wealth management division earned a return on tangible equity of 29.5 per cent in the first nine months of 2024, more than double the broader group’s return of 12.3 per cent.
Every firm entering the space has an explanation for why it is well-positioned to grow. The banks say they have a captive audience of existing customers; fintechs think they’re more innovative and flexible; asset managers tout their investment expertise; and private equity firms hope to roll up smaller players.
The arguments are sound, in theory. The potential market size is large — Lloyds estimates that the mass affluent hold about £1tn in investable assets — but Brits have historically underinvested and been reluctant to pay for financial advice. M&G said in September it would combine its wealth and life insurance arms after years of losses. Lloyds and Schroders launched a joint venture in 2019 with plans to have £25bn in assets under management within five years. Five years on, assets have barely budged.
Large new markets often come with the “big market delusion” — whereby executives overestimate their chances of capturing chunks of the market, and investors attribute to companies a collective implied market share greater than 100 per cent. That is a warning worth bearing in mind for UK wealth management. The mass affluent market could be big, but it isn’t big enough for everyone to win.
https://www.ft.com/content/8f497591-5238-41aa-8f39-18f3a913e9f0
