Progress from the government and regulators on initiatives and policy is “critical” to facilitate the growth and competitiveness of the private banking and wealth management (PBWM) industry, according to a report from UK Finance and PIMFA.

Its report on harnessing the sector to deliver economic growth, which drew on data from UK Finance, KPMG, and PIMFA, identified four key areas of focus in the context of the government’s Financial Services Growth and Competitiveness Strategy.

Looking at the policy and regulatory environment, the report said there was an opportunity to simplify regulations to make them more consistent, predictable, and supportive.

Interviews with senior leaders from across the PBWM sector highlighted the benefits of moving towards a more proportionate, stable, and outcomes-based regulatory approach for greater alignment between the Financial Conduct Authority, Financial Ombudsman Service, and Financial Services Compensation Scheme, and to further promote the industry’s positive contribution.

The report noted that the sector was actively innovating to meet clients’ needs and harness new technologies, including artificial intelligence (AI), and there was “significant potential” for growth if further support was provided to manage compliance costs and strengthen firms’ investment capabilities

“The government can play a key role by supporting incentives that boost investment and broaden retail customer participation in financial markets,” the report added.

It also identified a strong opportunity to build confidence and long-term investing by providing more predictable and certain tax policies that prioritise retail participation, investment, and competitiveness.

“This would also better encourage long-term saving and wealth building, attract global capital, and support early-stage UK business growth,” according to the paper.

Finally, the report identified financial literacy as a key area of focus, arguing that improving financial literacy could unlock greater engagement with advice and better decision making.

“By acting in these areas, the government can further empower the PBWM sector to play a greater role in delivering investment, resilience and prosperity across the UK – driving productivity, boosting tax revenues, and enhancing the country’s competitiveness in a global financial landscape,” the report said.

“It is critical that the government and regulators continue to progress their recent and upcoming initiatives to facilitate the growth and competitiveness of the PBWM industry. But further action is needed. We hope the observations and recommendations raised in this paper are therefore useful in that context.”

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