The UK is a wealthy country punching above its weight in terms of the number of wealthy individuals and their wealth compared to its total population. But that wealth is increasingly concentrated at the top. Research from The Equality Trust identified a pattern of the rich getting richer. It said that in 2022, the wealthiest fifth of the population held 36% of the UK’s total wealth - their income also grew by 7.8% that year. It also said that in 2023, the richest 50 families in the UK hold more wealth than half of the UK population, comprising 33.5 million people. If that growth rate continues, it said, the value of wealth held by the wealthiest 200 families will be more than the gross domestic product (GDP) of the entire UK.

In the UK, the number of millionaires fell by 440,000 to 2.6 million in 2022, according to UBS. The mass affluent, with around £50,000 to £5 million of investable assets, account for some £3.8 trillion as of the end of 2022. They account for about 67% of UK investable wealth between 2022 and 2026.

Royal London estimates that there are approximately 13.1 million individuals in the mass affluent market in the UK, including 3.7 million who are currently non-advised but are open to receiving financial advice.

It is no surprise then that the UK also has a sizeable advisory market catering to the mass affluent segment, numbering almost 28,000, according to the FCA. However, the bad news is that there are not enough advisers to go around, with the average adviser age being in the mid-50s - and therefore closer to the end of their career than the beginning.

This will force a war for talent as firms compete to attract and retain the best people. It is also giving rise to a series of mergers and acquisitions as advisers sell up and retire.

That said, in Sterling terms, approximately £1.2 trillion of client assets are already managed by the advisory community, according to LEK. And although overall assets under management (AUM) in the UK fell in 2022 by 9.9% to £1.58 trillion, 2023’s numbers are expected to be much better as economic uncertainty dissipates and inflation steadies, so says EY.

Either way, 67% of total AUM, the proportion held by the mass affluent, is well worth chasing and thus this segment is an obvious opportunity - not just for the traditional advisory community but also for other forms of wealth managers to leverage technology to reduce the cost to serve and to come down the value chain to cater to this segment. There is also a clear case for appealing to the younger generation. Indeed, with the 'Great Wealth Transfer', a 66% increase in annual intergenerational wealth transfers will occur, rising from £69 billion to £115 billion from 2017 to 2027. Some £5.5 trillion will pass between generations within the next 30 years, according to the Kings Court Trust.

Investment preferences
Economic confidence and a high-interest rate environment have knocked confidence. This is particularly the case within the previously booming private markets where investors once flocked to take advantage of better returns and escape often lacklustre mainstream investments.

Indeed, the UK has the second-largest private equity market relative to its GDP in Europe, according to PwC, and is a sought-after destination for international private equity investment flows.

Five out of 10 leading private equity firms in Europe are located in London, according to Statista. PwC, meanwhile, says that that 81% of its survey respondents thought the UK was a good place for private equity and that the UK is the second biggest centre for buyouts in Europe, with its 21% of all deals done in Europe taking place in the UK, and accounting for 24% of Europe's overall buyout value.

ESG and sustainability investments have also taken a knock due to poor returns and their integration into ‘everyday’ considerations when selecting an investment. According to EY, however, “asset managers retain a strong focus on sustainability in 2023, with new SDR regulation set to improve investor confidence and reduce the risks of greenwashing.” Digital assets, meanwhile, seem to be slowly emerging from recent volatility and were worth US$1 trillion in 2022, according to KPMG. It also says that 10% of adults in the UK held digital assets in 2022, and “if the crypto market collapsed, it would be equivalent to the size of Germany’s economy - the largest economy in the EU - being completely wiped out.”

The good news is that once the Financial Services and Markets Bill (FSMB) is passed, authorities will have much better oversight powers and be able to clarify things. This will no doubt act as a boost and, in an innovative financial centre like London, will no doubt give rise to a lot of activity around this area as a whole.

That will be of interest to the wealthy investment community - particularly the younger generation, who are much more tech-savvy and digital native. It will also likely appeal to the emerging mass affluent once it becomes a little better tested and stable within the markets.

All in all, the figures point to a wealth management community with plenty of opportunity and the likelihood of bearing fruit for those able to provide exemplary service at the right time and place to the right client base - as ever, the devil is in the detail!

Interested in reading the full report? You can read this edition of the UK WealthTech Landscape Report online here.