UK wealth industry offers ‘secular growth opportunity’; cyclical issues remain

The UK wealth industry offers a secular growth opportunity due to the increasing cost of being older for longer, although cyclical issues persist, according to Peel Hunt.

The investment bank’s asset and wealth management sector outlook noted that the wealth industry was large and growing, despite ‘modest’ recent progress.

It argued that the sector’s long-term growth opportunity was being periodically masked by short-term factors.

Some of the cyclical issues were reinforcing the secular ones, Peel Hunt said, with the upcoming Budget bringing the threat of higher taxes, which reinforces the need for and value of financial advice.

While the paper stated that this was not the only route to growth for a multi-faceted industry, it was a “compelling one”.

Peel Hunt also highlighted widespread growth in assets under advice (AUA) and customers, although this was being matched by greater competition and an ongoing market cost.

The firm noted that while much has been said about the ‘Great Wealth Transfer’, it warned there was a risk that the scale of opportunity could be overstated.

It emphasised that there were multiple points at which assets can be eroded during transfer, while care costs could have a significant impact on accumulated wealth before it becomes inheritance.

The outlook warned that the proportion of wealth that makes its way or remains within investable and advised pools was likely to be materially lower than the headline figure of £5.5trn-£7trn suggested.

“Over the medium to long term, it is easy to envisage high single-digit to low double-digit annual growth in the overall wealth market, we believe, supported by underlying asset growth and structural growth factors,” Peel Hunt stated.

“Fundscape projects a 7 per cent overall industry CAGR over the next five years to 2030 under its ‘realistic’ scenario, underpinned by double-digit growth rates in the advice and D2C platforms and defined contribution workplace sub-segments.”

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