The UK wealth management industry has been among the most resilient within financial services in recent years. No matter the market conditions, it continues to grow and set new records. Despite this success, it too often is behind the curve when it comes to embracing new technologies. But with step-increases in spending on IT, and more demand for digital services from high-net-worth investors, could that be about to change?
Background to the wealth management industry
UK wealth management firms and execution-only stockbrokers today manage and administer more than £1.5 trillion (US$2.03 trillion) of private client assets. In 2024 these firms generated £10.34 billion (US$13.97 billion) of revenue—a new record, and a year-on-year rise of £440 million (US$594 million).
However, with costs rising for too many firms, pre-tax profit margins have stalled or are slipping, meaning they are failing to achieve scalable results. For example, 22 percent of firms witnessed a reduction in pre-tax profit margin in 2024. More alarmingly, 39 percent of firms were either loss-making or had a pre-tax profit margin of less than 10 percent for their calendar year results.
We are also seeing substantial movement of assets between firms, as the stickability of end-investors reduces and they are more open to considering their options. Many are splitting their wealth across multiple providers. Evidence of this is that asset outflows among wealth management firms reached an all-time high of £122 billion (US$164.9 billion) in 2024. With inflows also at record levels, this shows a movement of assets between firms, rather than an exodus of assets from the industry.
The change in IT spend
As firms look to drive front office productivity, keep client satisfaction at high levels, and boost revenues sufficiently to inflate profit margins, one very noticeable area that they are spending more on is IT.
Looking at non-staff costs relating to IT (i.e. technology spend), the wealth management industry has nearly trebled its expenditure in the past 10 years, from £349 million (US$471.6 million) in 2014 to £909 million (US$1.2 billion) in 2024, with notable step increases since the pandemic. This is a catalyst for change in this industry. In 2024 this rise was as high as £175 million (US$236.5 million) compared to the previous year (a 24 percent year-on-year increase).
This rise is not just because the industry is growing. As a percentage of revenue, this spend has increased from 5.9 percent in 2014 to 8.8 percent in 2024, as firms increase their focus on technology: spending at a greater rate now to achieve a return on investment in years to come.
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Benefits of spending more on technology
So why are firms spending more on technology? One area in which firms can see an almost immediate impact is in the productivity levels within their front office. There is a clear positive correlation between better productivity scores and spending more on technology per front office professional.
For example, those firms spending the most have a greater capacity to take on more clients, with front office staff in the top technology spend bracket managing double the amount of private client assets compared to those in the lowest spend bracket.
Naturally, when front office staff are managing more assets, it translates into greater revenue generation. Again, there is a more than 100 percent improvement when comparing the highest to the lowest spenders, when reviewing average managed investment revenue per front office professional.
For those firms spending more than £75,000 (US$101 million) on non-staff related IT costs for every front office professional, the average difference between revenue and technology cost is as high as £691,000 (US$933,000) for each front office professional. This difference drops to £337,000 (US$455,000) when analysing those firms spending less than £40,000 (US$54,000) per front office professional.
What next for wealth managers?
There is already evidence that spending more on technology can have substantial benefits to performance for wealth management firms. It is therefore no surprise that when speaking with these firms, there is an overwhelming agreement that they will continue to invest greater amounts in technology for at least the next five years. It will not be long until we breach the £1 billion (US$1.35 billion) spend mark.
Although the hot conversation topic is the use of AI within wealth management, we are still waiting for the first wealth management firm that will be a trendsetter and fully utilise its capabilities. With the human touch nature of traditional wealth management services, some firms are more sceptical surrounding the use of AI and the positive impact it can have particularly in the front office. End investors, after all, will continue to seek the support of a human rather than a machine.
But, provided they can have their data aligned accordingly, we expect more firms to utilise AI to drive their back office efficiency, create greater automation in their report production processes, and enhance their customer relationship management (CRM) systems to understand more about existing and prospective clients. All these things can help drive business inflows for years to come.
Interested in reading the UK Toolkit 2025? You can read and download the report online here.
About BWC Benchmarking
BWC Benchmarking provides industry-leading data and insight into the operational performance and technology spend of UK wealth management firms, helping businesses benchmark their strategies and drive continuous improvement.
For more information, visit www.bwcbenchmarking.com.
About the UK Toolkit 2025
The UK Toolkit 2025 report examines the shape of wealth management in the UK today, and how industry participants are responding to the challenges and opportunities of this market. It features 14 articles contributed by a range of industry participants — including wealth managers, vendors, and consultants focused on financial services. It also showcases eight technology offerings relevant to the wealth management industry in the United Kingdom.
Our broader Toolkit Report Series covers thematic, geography and wealth manager segment-focused reports, each tasked with delving into the topics and supporting technologies of relevance to help wealth managers of all types better understand how they should bring technology into their business and in which areas.
Following this third report, focused on the UK, we are publishing:
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