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In an era of stringent regulations, the UK’s wealth management industry is at a pivotal juncture, with the Financial Conduct Authority’s Consumer Duty setting a new bar for investor relations.
Savanta’s latest surveys of 25 of the UK’s leading wealth managers and 500 millionaire investors provides a snapshot of the sector’s evolution and its implications for investors.
Our findings reveal a landscape of transformation. Three-quarters of the wealth managers surveyed acknowledge the regulation has had a positive impact on client experiences. Firms in the industry are taking strides to align with the rules and improve client outcomes.
In the main, they have focused on how they engage with their clients. Firms provide more and better training and guidance, such as developing communications toolkits for advisers.
Many have become more flexible in what they offer to make investment options more tailored to client needs. Others have linked performance objectives to client outcomes and built customer feedback into their communications.
Our data suggests millionaire investors are seeing positives. Very few wealthy UK investors consider their products are inflexible to their needs (3 per cent) or that their investments aren’t suitable for their goals or risk appetite (2 per cent).
There has also been significant action on communication to ensure that clients truly understand what they’re investing in and how it’s performing.
However, according to the investors, there is still work to be done. Only 84 per cent of UK millionaires believe they receive effective and clear communication that they can easily understand. This is despite one in three wealth managers redesigning valuation reports and providing more resources to clients.
Wealth managers have made great efforts to simplify and clarify their fees in recent years and only 3 per cent of surveyed clients believe it’s unclear how much they pay for the services received.
But giving clients value in how the products achieve their outcomes is a key element of the Consumer Duty. Many investors will be pleased that one in three wealth managers have reduced their fees. However, one in 20 UK millionaires don’t think their main wealth manager provides good value for money. And a further 15 per cent are unsure whether this is the case.
From all our work with wealth managers and investors over the years, we know this is strongly affected by investment performance and the past couple of years has been a challenging period in the markets. But some wealth managers can clearly do more to communicate effectively how markets are affecting their portfolios and justifying their action (or inaction) in adjusting positions.
Wealth managers need to continue their efforts to help clients understand clearly how their investments are working and the rationale for decisions. This is a significant opportunity for wealth managers; clients should welcome the FCA’s latest regulation and continue to see improvements in the service and outcomes they receive.
Savanta surveyed 25 of the UKs leading wealth managers and 500 high net worth individuals with at least £1mn in investable assets on Savanta’s MillionaireVue quarterly omnibus in late May and early June 2024.
David Barks is a senior director in the wealth team at Savanta, a global market research agency
https://www.ft.com/content/4bc09653-5451-42de-a821-e3fbb0fb67d4
