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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Ankur Gupta, Head Marketing & Communications