UK: Wealth Management Outlook 2024: Four Key Trends Shaping The Uk Market

INTRODUCTION

FOR MANY BUSINESS LEADERS IN WEALTH MANAGEMENT, DESCRIBING 2023 AS "CHALLENGING" FEELS LIKE AN UNDERSTATEMENT. JUST GETTING BUSINESS DONE FELT RELENTLESS, AS THE INDUSTRY GRAPPLED WITH COST PRESSURES, POOR MARKET PERFORMANCE, INCREASING CONSUMER EXPECTATIONS, GREATER FOCUS FROM SHAREHOLDERS ON RETURNS AND VALUE REALISATION, AND OF COURSE REGULATORY CHANGES.

WHILE THESE HEADWINDS HAVE EXACERBATED EXISTING STRAINS IN SOME BUSINESSES, THEY HAVE PROVIDED THE ADVICE SECTOR WITH THE OPPORTUNITY TO STEP BACK AND REALLY LOOK AT THEIR BUSINESSES MORE HOLISTICALLY – AND TAKE IN THE GOOD, THE BAD AND THE UGLY.

WILL 2024 BRING ANY RESPITE?
THE SHORT ANSWER IS NO

Some in the sector may be tempted to hope for a pause to address the implications of changes from last year. However, while there are indications that markets are stabilising, it's more likely that 2024 will see a similar pace of change, demanding even more tenacity from wealth managers. In addition to the headwinds faced in the past 12 months, wealth managers will need to contend with the implications of geopolitical changes as the world goes through 76 state elections, making this the biggest election year in history, according to The Economist.

THE (202)4 THINGS TO CONSIDER

THERE ARE ALWAYS COMPETING PRIORITIES, HOWEVER BASED ON OUR TEAM'S INDUSTRY AND ADVISORY EXPERIENCES, WE EXPECT THE FOLLOWING TRENDS TO INFLUENCE THE WEALTH SECTOR MOST SIGNIFICANTLY IN 2024.

01 CASH CONSUMER IS KING

While most wealth managers and financial planners will say that the consumer has always come first, evidence from some parts of the sector shows otherwise. The Financial Conduct Authority (FCA)'s introduction of the Consumer Duty last summer put consumer protection at the forefront of the agenda – and it's not going away

Consumers are influencing much more than the regulatory agenda. With more optionality – demonstrated by new advice firms entering the U.K. market, new wealth-tech providers offering "DIY" opportunities and the rise of financial influencers – the consumer is in a strong position to influence customer experience and fees. The "sticky" consumer profile seen previously will be challenged even more and value – in all its forms – will be key to client attraction and retention (see point 2 below).

It's not just the existing client banks which advisers need to address. With the FCA's advice boundary review, and the goal of making financial advice more accessible, businesses will need to deploy more mature client segmentation and proposition development.

Tweaking technology and generic propositions will not address these consumer changes. The "holistic" approach that many financial planners encourage their clients to adopt, should now be taken on by their businesses. Meeting these consumer demands will require a fundamental review of the business model for most, and a redesign for many.

WHAT WE'LL BE LOOKING OUT FOR IN PARTICULAR:

• TRUST: A MORE MATURE APPROACH TO PRODUCT POSITIONING COMBINED WITH IMPROVED TRANSPARENCY MAY LEAD TO A TANGIBLE AND POSITIVE IMPACT ON ENHANCING TRUST IN THE SECTOR (EVIDENCED BY INCREASED CLIENT LOYALTY TO THE BRAND AND ENHANCED BRAND VALUE).
• THE TRUE COST OF THE CONSUMER DUTY: ANECDOTAL EVIDENCE POINTS TO INCREASED COSTS ACROSS ADVICE BUSINESSES, HOWEVER THERE'LL BE MORE QUANTITATIVE EVIDENCE COLLECTED DURING THE YEAR WHICH WILL START TO QUANTIFY THE COST OF MEETING THE CONSUMER DUTY OUTCOMES.

O2 VALUE WILL WIN

Everyone wants to feel that they're getting value out of the products, services and businesses with which they engage. It's no different in the wealth sector.

Consumers want to know they are getting value for money. The focus on fees has been exacerbated by poor client servicing. As with most services, consumers are willing to pay, but only if they understand and feel the value. With poor market performance, some advisers have struggled to articulate the value proposition which in turn drives potential and existing consumers to look elsewhere.

Advisers want value out of the platforms and partners they work with. The pressure on platforms to perform will only increase; advisers want a better onboarding and engagement experience, advice firms want streamlined processes (for example, managed portfolio service (MPS) rebalancing), and regulators are increasingly demanding visibility around charges and more specifically, clarity with respect to interest on cash holdings.

Shareholders and potential buyers are also demanding more value. While the consolidation wave isn't over, acquisitions have clearly slowed down and the multiples seen in 2022 and early 2023 are on a downward trajectory. For the firms that adopted the bolt-on approach and have yet to deliver fully on their integration and value creation strategies, there will be increasing focus from both current shareholders and potential future investors.

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