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The great RDR polarisation effect
by James Phillipps on Oct 31, 2013 at 09:51
The wealth management sector is expected to become increasingly polarised as a direct result of the retail distribution review (RDR).
A growing number of industry insiders expect large companies to dominate the mass affluent market, while the ultra-high net worth (UHNW) end of the spectrum is served by a ballooning number of boutiques.
‘The RDR is playing into the hands of the big players in the affluent market,’ said Peter Hall, chief executive of Bestinvest.
‘What you need to succeed in this market is scale, a strong and trusted brand and high standards of expertise and professionalism. The issue of scale is particularly important in terms of wealth managers being able to negotiate better deals with fund managers and platforms, having quality research and compliance functions.’
Hall is surprised there has not been more consolidation given the benefits of scale. Although this polarisation trend is already under way, he expects it to gather momentum as the dust settles post RDR.
Certainly the results posted by the larger wealth managers this year indicates the strong are getting stronger. Rathbones reported last week that its assets under management (AUM) are up 15.6% since the start of the year, while the likes of Charles Stanley, Brewin Dolphin and Brooks Macdonald have all recorded rising AUM and double-digit revenue growth this year.
Bestinvest and Charles Stanley in particular have been active in targeting clients in the sub-£300,000 range, with the former relaunching its online investment service and the latter launching Charles Stanley Direct. Both propositions are less resource-intensive.
At the opposite end of the scale in the UHNW market, the growth in the number of smaller firms servicing this market has arguably been more eye-catching than the rise in online services in the mass affluent area.
Heather Maizels has worked on both sides, having spent 19 years at Barclays before joining Victoria Private Office as managing director two years ago. She believes more and more boutiques will be set up as the trend gathers pace.
Changing needs of clients
In her view, the business she built at the bank was right for its time, but the changing needs of UHNW clients is driving the rise of boutiques.
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