According to
the Study, ‘Wealth in
UK, Sizing the market opportunity 2017’,
two prominent trends witnessed in UK wealth markets. First, the population is
aging. This means more people, overall, are entering retirement, a time when
people shift from accumulating assets to de-cumulating them. Roughly half the
population is currently investing in private pension wealth schemes Second, Low
interest rates have made wealth accumulation exceedingly difficult, and thus
have raised the degree of skepticism with which many investors regard financial
advisors. Many middle-aged people are still foolishly planning their
retirements based on finding high returns in a 3 percent world.
There is no
typical wealthy individual: Some are self-made entrepreneurs, many are
directors in services firms and FTSE 100 companies, and a few are wealthy
individuals living in the U.K. for tax and business reasons. In all of these
cases, their focus is invariably the creation and preservation of capital.
Wealth in
United Kingdom has witnessed a growing trend in the recent years. Researchers
currently suggest that growth in the UK shall be muted after a strong growth in
2016. Rising offshore wealth in UK can be attributed to a critical factor of
rising net investible assets especially with HNWs. The Isle of Man and Ireland
have been reported to be the prime booking zones for UK offshore business owing
particularly to inefficient taxation system which is currently operational in
the United Kingdom. In the non HNW segment, campaigns to spread awareness about
offshore investment conducted by HM revenue and costumes were seen as the major
driver for increasing international investment.
The UK
wealth pyramid can be divided into three segments. The lowest segment has the
highest population and controls the least wealth. The focus of these households
is debt reduction, maintaining their cash flow, and securing their homes for
the future. The second segment which controls reasonable wealth in UK are
trying to build capital through high income and savings, with much of their
wealth tied up in the real estate of their primary homes. The top most segment
includes the HNWs whose focus is to accumulate not just domestic but also
international assets.
Although the
wealth tied up in home ownership has declined over the past years yet the
country is still a land of homeowners. Homeownership has been critical to
rebuilding wealth, since property is the only leveraged investment available to
most households. Meanwhile, investment property has grown at a very fast pace
since 2008 and is an important holding of affluent households with significant
liquid wealth.
After real
estate, the largest asset class and one of the fastest growing are securities.
Securities in the U.K. include onshore and offshore investment bonds, unwrapped
investments (such as open-ended investment companies, unit trusts,
exchange-traded funds, private equity holdings, and individual shares), stocks
and shares individual savings accounts (ISAs), and life assurance products.
Age has also
been one of the major differentiating zones in the UK wealth market. People in
the younger group are about to enter their peak earning years and have
relatively less accumulated wealth. They need a better financial education to
ground them in sturdy, lifelong investment habits. Those in the older group are
more educated and wealthy, but their earning potential is declining and they
are primarily focused on preserving capital.
It is clear
that there are major factors driving the outlook of this market such as age,
income, and risk appetite. Huge middle income groups which still follow the
practice of investment by their gut could be a key segment for wealth
management firms to tap upon.
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Ken Research
Ankur Gupta, Head Marketing & Communications
0124-4230204
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