The FCA’s Consumer Duty continues to reshape the wealth management landscape, especially for bespoke portfolio services. But consumers – and financial advisers – are also drivers of change. With inflation eroding real returns, wealth managers face mounting pressure to prove their value for money.
Value-for-money scrutiny has increasingly prompted wealth managers to shift many of their clients towards lower priced model portfolios away from traditional discretionary bespoke services. Low-cost passive solutions and even cash products have become increasingly attractive alternatives, with larger wealth managers previously wedded to active management launching solutions comprising passive funds to meet demand.
The consumer and regulatory challenges to margins have encouraged wealth managers to drive operational efficiencies and modernise the client experience with more and better use of technology.
These trends have also contributed to continuing M&A activity, especially among the top 30 firms. Several relatively new entrants have swiftly climbed up the ranks through PE backing and challenged the established players.
With the top ten firms controlling over 60% of AUM, the market remains highly concentrated. But there’s room for more mergers and takeovers while more than 130 smaller managers compete for the remaining 40% and wealth managers also regard financial planning firms as targets.
The ongoing transformation of the sector underscores the need for firms to balance innovation, efficiency, and competitive pricing while maintaining the high standards demanded by regulatory bodies and increasingly discerning clients.
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