IFAs Control £591bn of Britain’s wealth

So runs the Citywire headline (Alex Steger on Jan 26, 2012 at 14:39)

This research is brought to us by Scorpio Partners; a research organisation whose website declares

A decade of experience in the wealth industry has left us with a clear contention: the wealthy are being let down. Many businesses court them, few understand them, fewer still are valued by them. Until now.

I suspect that most generators aren’t losing too much sleep about all this and certainly aren’t going to consider the research of Scorpio partners as their means of redemption; if they are being let down, it is because they are being told to hoard their money and not put it to good use. By “good use” I mean purposeful use, investments in things that bring genuine happiness to both the investor and those invested in. Wealth brings its own responsibilities.

“Control” of this wealth is a very important issue not just for the owners of the wealth but those who benefit from its use and responsible investment  is at the core of all fiduciary management.  Here is Alex Steger’s excellent article. Read it as if it was your wealth being talked about!

IFAs are a crucial part of the UK’s wealth management industry, controlling over a quarter of the assets it holds and employing just over a fifth of its workers, according to new research.

The research, by consultants Scorpio Partnership, showed that of the £2.2 trillion of assets managed by advisers, private banks, high street banks, and private client investment managers, IFAs advised on £591 billion.

This was second only, by sector, to private banks, which managed £886 billion, with high street banks responsible for £501 billion, and private client investment managers handling £217 billion.

The survey also showed that financial advisers servicing clients with between £100,000 and £1 million of assets typically enjoyed gross profit margins of up to 35%.

The UK wealth management industry employs 124,000 people, with the IFA sector accounting for the second most of any sector, with 22,611.

Only private banks employed more people than the IFA sector with 22,700. High street banks employed 20,000, and private client investment managers 17,900. Life companies employed 5,800 people and platforms 4,237.

The survey showed the UK’s wealth management industry generated 1% of GDP, employing 12.5% of financial services workers, and influencing the wealth of nearly 9% of the UK population.

Andrew Fisher, Towry chief executive, said the aim of the research had been to show the importance of wealth management to the UK economy.

‘The industry needs to communicate in concert. This initiative is aimed at determining the core value of the wealth management industry and clearly shows the important worth of wealth – both personal and corporate – to the wider future story for the UK economy,’ he said.

Andrew Fisher is a very influential man. He is one of the most influential IFAs in the UK and as he points out , IFAs control a very large amount of wealth. However, his arguments are circular. The value of the wealth management industry is not judged by the amount of wealth that industry generates for itself but by the value of the management of that wealth to the national interest.

The various tax shelters offered to wealthy people are not there to ensure that IFAs continue to generate 1% of Britain’s GDP but to ensure that the wealth they managed is directed towards worthwhile projects.

Rather like horse trainers who value themselves for their winners and forget that the horses are owned and their fees paid by enthusiasts, IFAs can be in danger of forgetting that the money they manage was generated by someone’s hard work and their endeavours are first  for their clients and not for the linings of their pockets.

I noticed a number of comments around this article (which can be read at ). They were from IFAs who managed their client’s money. These IFAs were embarrassed by the word “control” and in differing ways self-deprecating about their work.

From the limited experience  I have of having wealth managed, I reckon that I would rather engage with an adviser who put my interests first and talked to me of the value of my wealth in terms of what it could do for my and others happiness, than an adviser whose primary concern was to assert his own sense of importance.

So long as the “wealth industry” continues to parade it’s profitability rather than its utility and promote wealth management over wealth generation, it will, for all its boasting, get short shrift from people like me.