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A golden age for wealth management? We ask four readers
by Anna Dumas on Jul 10, 2014 at 14:28
At the end of last month KPMG suggested we are entering a golden age as regulatory confusion clears. We ask four wealth managers what they think.
Simon Brett, CIO, Parmenion, Bristol
‘It is an exciting time for the wealth management sector. The new pension flexibility will also bring about seismic transformations. The greatest opportunity comes from offering innovation in client service. And the key to this is technology. Within the wealth management sector, the power of technology to overhaul the way in which advice is delivered has yet to make its mark.
‘Clients value the reassurance of regulated financial advice. It gives them the confidence to invest and the composure to stay with the plan. We believe more and more people will seek advice, and will start with expectation they can research where to look online. Investors using direct platforms already combine DIY investing with some advice but only about 25% are happy doing things that way. They want advice to address the big picture.'
Parmenion has just launched software that empowers advisers to make face-to-face advice cost effective, to close the advice gap and reach new customers at scale. The simplified advice process takes platform technology out of the adviser’s back office and places it at the cutting-edge of the advice process.
Peter Botham, CIO Brown Shipley, Manchester
‘With profit margins at almost every wealth manager in the UK under pressure, the term “golden age” would not readily be used by everybody in this business. The ever-rising costs of meeting regulatory requirements and the need to improve systems and client delivery have ensured “consolidation” has become a key feature of the industry, as firms of all sizes look to get ever larger in order to spread fixed costs over a wider revenue base.
‘For the customer this is perhaps a golden age, as they undoubtedly get a better service at a cheaper price, assuming they can afford to pay. But there is unquestionably the potential for sizeable increases in business for wealth managers, partly assisted by the changing legislation and regulation that are simultaneously driving up costs. The recent relaxation of annuity rules will lead to increased use of Sipps, the increase in annual ISA allowances will provide a longer-term steady growth in client assets and the eviction of small clients by many large clearing banks provides huge scope for wealth managers who can tap into the platforms that are beginning to dominate mass market fund flows.’
Paul Abberley, CIO, Charles Stanley, London
‘It might instead be seen as a particularly difficult era for clients of our industry. Each demographic segment has its own challenges around savings and investment, at a time when old certainties about the long-term performance of markets have been shaken. The dependability of equities over the long term is questioned and the long bull market in fixed income is surely over, with a possible reckoning ahead. Meanwhile, all markets float higher on a sea of liquidity, with a sometimes tenuous connection with underlying economics. Unfortunately, this has coincided with an erosion of trust in the broader financial services industry, especially regarding value for money and alignment of interests, against the backdrop of banks’ withdrawal from many traditional areas of activity. There is a clear opportunity for wealth and asset management firms to build that trust and deliver creative, yet realistic, solutions to these investment challenges. Those that can help clients navigate these waters successfully can look forward to a shared golden era. But it must be earned; it will not fall into their laps.’
John Macmahon, director, Gore Browne Investment Management, Salisbury
‘While it’s easy to see how the KPMG report might be viewed as an over-optimistic vision, it could prove to be not too far from reality – at least, as far as the increasing power of asset managers over banks is concerned.
‘Whether a substantial migration of banks’ clients and professionals into our industry will increase or decrease the “regulatory fog” largely depends on the business models that investment management firms use. Clearly, conflicts of interest are high on the FCA’s radar, but removing these can only help to ensure better outcomes for consumers. Potential conflicts arising out of in-house funds and commission-generated revenue are being addressed, and it’s likely others will be identified. KPMG argues for the outsourcing of the related custody and banking services to a third party, a separation that should help prevent shadow-banking becoming “the next battleground”.
‘The increased transparency should enable clients and regulators to judge the quality and value-for-money of the investment management proposition.’