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Survey shows profit gap in wealth sector

Half the clients of UK wealth management firms hold balances below the

minimum stated size required by the service provider, says a report from

the Boston Consulting Group.

Regardless of the size of desired minimum balance, the management

consultancy says it is likely that at least 50 per cent of the accounts

considered to be in the wealth management bracket are undersized.

The study, Richer Prospects in Wealth Management Global Wealth 2001, says

many investment advisers targeting the high-net-worth market may either

have clients with too little or too much money to match their business

models.

The findings may be especially relevant for the UK market as a number of

players such as Abbey National, Barclays, HSBC Merrill Lynch and IFA

Lighthouse have all recently entered or have plans to enter the HNW market.

BCG says in the UK, there are two million investors who would classify as

HNW clients. Collectively, they hold £1.7 trillion in assets and

generate £23bn in revenue for wealth management firms.

BCG says it is can be difficult to truly define what a high-net-worth

investor as banks often set their thresholds at different levels.

The study also shows the wealth management industry is highly fragmented,

with the top 20 players in the market holding just over 12 per cent of the

total wealth assets. The study suggests this means there is considerable

opportunity for consolidating market share through mergers or alliances.

Boston Consulting Group vice president Andrew Dyer says: “There is a

popular belief that wealth management is a very attractive business with

high returns. But our experience with clients and our research suggest that

many competitors are not nearly as profitable as they should be.”

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