“So, they is some people who suddenly get loads of money who become very tasteless. How has you two managed to avoid that?” While David and Victoria Beckham might not have been able to assist TV comedian Ali G on the question of taste, they have certainly benefited from considerable financial advice.
Now, so many more of us have become nouveau riche that the term is redundant. Last year, every week saw the creation of 10 millionaires with over £20m in assets, according to the Sunday Times' Rich List.
According to the Inland Revenue, this country's richest 10 per cent hold 50 per cent of private assets and the top 1 per cent hold 19 per cent.
Research carried out by investment bank Fox-Pitt Kelton shows assets under private wealth management are set to grow by 11 per cent in the coming year.
The report says: “While slowdowns in economies and market confidence concerns may hamper any natural growth, we anticipate the underlying demand for wealth management products will continue to see strong growth driven by changing demographics and increasing personal wealth.”
Coutts bank has long offered bespoke services to those with liquid assets in excess of half-a-million pounds. The excessively rich could even consider setting up their own unit trust but they would be advised to have a minimum of £7m to £10m.
But this does not cover the so-called mass affluent or new affluent.
Research carried out by Abbey National shows one in 12 of the UK population has £50,000 or more in liquid assets. The wealth management market is being increasingly courted, albeit with clients who do not quite reach the rarefied financial heights of the Coutts customer.
The high-street banks have been busy launching their own wealth management services. Barclays offers its Premier Banking service and Abbey National recently launched Inscape, which it describes as offering “wealth management for the privileged many”. HSBC and Lloyds TSB are set to follow suit.
Credit Suisse Financial Services is also targeting this area with its exclusively internet-based Global Investor Portfolio. All these services offer financial advice and portfolio management for clients who have in the region of £50,000 to invest.
While the boundaries between wealth management and private banking can easily become blurred, so can the advice offered by providers operating in the market. Whereas wealth management has investment advice and tax-efficiency as its focal point, private banking takes daily banking requirements as its starting point.
The wealth management services offered by the banks act, in effect, as tied agents and the investment advice offered will be generic rather than truly independent or comprehensive.
Many are crowding in on the act and flattering IFAs by imitating the services they offer. The banks would not be investing the amounts they are in this sector if they did not consider it to be a lucrative growth area.
Nevertheless, the banks have been stung with a low take-up – Abbey National was surely embarrassed by reports that its newly launched Inscape has only managed to sign up 37 customers by December.
The mass affluent targeted by the banks are also ideal candidates for the IFA. These are people who have wealth which is derived from a variety of areas.
First, the property booms of the 1980s and 1990s helped to increase personal wealth for some. The various privatisations and demutualisations will have further contributed to the creation of these mass affluent.
Changes in pension provision and the growing number of occupational and personal plans have added to the complexity of an individual's finances.
Tax-efficient investment through Peps, Tessas and now Isas is also part of this financial landscape, in which citizens are forced increasingly to become self-sufficient rather than rely on the state for assistance.
IFAs are better placed than any others to bring all these strands together and tap into this market. In addition, to the ready-made expertise that the banks are attempting to imitate, IFAs can offer their traditional qualities, most important of which is the ability to offer comprehensive and independent advice.
Holistic financial thinking is very much in fashion. Current accounts are transforming themselves into all-encompassing financial vehicles – a trend even being replicated by flexible mortgages.
What are the areas IFAs would have to address in advising the mass affluent? In addition to the traditional bread-and-butter areas such as pensions and investment, consideration of sums to be put in trust for children and grandchildren, inheritance tax and will-writing advice, mortgage repayment and general tax-efficiency will all be part of the integrated service.
Charges will be split into an initial portfolio fee and an annual management fee. IFAs can maximise their own efficiency by using the various wealth management packages available from a variety of software providers.