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A financial business with high margins and little capital, tailwinds for structural growth and a regulator eager to encourage expansion? It is no surprise that British banks are keen to grow in the wealth management sector. The only problem is that everyone has had the same idea.
Barclays, Lloyds, NatWest and JPMorgan hope that managing the money of the rich can be a key part of their growth in the UK. Even fast-growing fintech Revolut is looking to develop private banking and wealth management services.
The banks are not alone. Asset managers, insurers and private equity firms have been trying to get in, and Mergers and acquisitions activity has arisen. According to EY, more than £9bn of wealth and asset management deals were publicly announced in the UK in 2024, up from £2.1bn in 2023. Long-established specialists such as St James’s Place hardly take notice. expired: its shares have recovered 50 percent. percent in the past six months as new CEO Mark FitzPatrick seeks turn the business around after some difficult years.
Most firms are particularly interested in the so-called “wealthy masses” – customers with between £75,000 and a few million in investable assets. They are more profitable than the average retail bank customer, but they are not as needy and expensive to serve as the really wealthy customers of private banks.
A recent update from Barclays highlights this appeal. Your private banking and wealth management The division delivered a return on tangible equity of 29.5 per cent in the first nine months of 2024, more than double the overall group’s return of 12.3 per cent.
Every company entering this space has an explanation for why it is well positioned for growth. Banks say they have a captive audience of existing customers; fintech companies believe that they are more innovative and flexible; asset managers tout their investment expertise; and private equity firms hope to attract smaller players.
The arguments are sound, in theory. The potential size of the market is large (Lloyds estimates that the wealthy masses own around £1 trillion in investable assets), but Britons have historically underinvested and been reluctant to pay for financial advice. M&G said in September it would combine its life and wealth insurance arms after years of losses. Lloyds and Schroders launched a joint venture in 2019 with plans to manage £25bn of assets within five years. Five years later, the assets have barely budged.
New large markets are often accompanied by the “big market delusion,” in which executives overestimate their chances of capturing market shares and investors attribute companies with an implicit collective market share of greater than 100 percent. This is a warning worth heeding for UK wealth management. The massive, prosperous market might be big, but not big enough for everyone to win.