96 per cent of wealthy investors believe they know whether their portfolio performed well. 84 per cent of wealth managers failed to beat a simple passive benchmark. That’s not a knowledge gap. That’s a confidence trick.

If you’re a senior professional, you sit through an annual performance review. Your results are measured against agreed targets. Nobody tells you ‘good year’ and leaves it at that. You’d want the numbers.

Yet that’s the standard most investors accept from their wealth managers. When Y TREE surveyed 250 high-net-worth individuals, 96 per cent were confident they knew whether their portfolio had performed well. But Y TREE’s Plugged into Wealth Management 2026 report tells a different story: 84 per cent of wealth managers underperformed against a risk-equivalent benchmark in 2025.

How can so many feel confident about something the numbers say isn’t happening? Partly because they aren’t measuring what they think they’re measuring. 22 per cent judge performance based on what their adviser told them. Another 21 per cent benchmark against inflation. Very few compare returns to what they should have earned, net of fees, for the risk they were taking. Wealth management underperformance is real. The confidence isn’t.

Why your memory is an unreliable scorecard

Part of the answer lies in how investors remember their own results. A 2021 study found that investor memory is positively biased in two ways. First, distortion: people recall their returns as better than they were, inflating winners and softening losses. Second, selective forgetting: losing investments are less likely to come to mind at all. Both biases independently predicted overconfidence (Walters, Fernbach, Fox & Sloman, 2021).

Your internal track record, in other words, is unreliable. You’re not consulting the data. You’re consulting the edited highlights.

And when the industry’s reporting practices lean on vague reassurances rather than risk-adjusted benchmarks, they don’t correct the bias. They reinforce it. The comfortable feeling that things went well goes unchallenged, because the right numbers are rarely presented.

Wealth management underperformance: three years of data, one consistent pattern

So what do the right numbers show? In 2025, Y TREE analysed more than 550 portfolios across 110 providers. But the real story is the three-year trend. The pattern is persistent.

In 2023, 92 per cent fell short, by an average of 6.2 per cent. In 2024, 88 per cent lagged, by 4.1 per cent. In 2025, the figure was 84 per cent, with an average gap of 4.3 per cent.

Credit where it’s due: that trend is improving. But 84 per cent is still damning, especially across three years of strong global equity returns.

“Stock and bond selection, the core activity wealth managers are paid to do, reduced returns by 3.4 per cent on average. Bad luck doesn’t explain it.”

What’s most telling is where the losses came from. Stock and bond selection, the core activity wealth managers are paid to do, reduced returns by 3.4 per cent on average. That isolates manager decisions from broader market movements. Bad luck doesn’t explain it. This is what clients are paying for.

The pattern held across every risk level, too. Cautious portfolios lagged. Aggressive portfolios lagged. Taking more risk didn’t improve the odds.

A note on how Y TREE measures this. Their benchmark is an investible, risk-equivalent, globally diversified fund, measured net of fees. Think of it as a nutrition label for your portfolio: it shows what you should have received given the risk in your holdings, not a comparison to the FTSE 100. It measures whether your manager added or destroyed value relative to a straightforward, cost-efficient alternative that is available to buy in the market today.

This isn’t an outlier

Y TREE’s findings might look dramatic in isolation. They’re not. They sit within a global evidence base stretching back decades.

The SPIVA Europe Scorecard Year-End 2025, published by S&P Dow Jones Indices, found that 75 per cent of GBP-denominated Global Equity funds underperformed over one year. Over 10 years, 97 per cent. For UK Large- and Mid-Cap Equity funds, 89 per cent fell short in 2025; over a decade, 95 per cent.

And the few who do outperform? They almost never keep it up. The SPIVA Europe Persistence Scorecard Year-End 2024 shows that of UK equity funds in the top half, just 3 per cent were still there after five consecutive years. For the top quartile, the figure was zero.

None of this should surprise anyone familiar with William Sharpe’s arithmetic of active management: before costs, the average actively managed pound must match the average passively managed pound. After costs, it must be less. Pure mathematics (Sharpe, 1991).

In the US, Morningstar’s Mind the Gap 2025 research adds a further wrinkle. Investors’ own timing decisions cost them roughly 1.2 percentage points a year over the decade to December 2024, around 15 per cent of total returns forgone. Manager underperformance is only part of the problem.

What underperformance actually costs

Basis points sound abstract. Years of your life don’t.

Y TREE’s report puts the cost of wealth management underperformance in terms any high-earning professional understands. At three per cent annual drag over a decade, a £10m portfolio could fall £4.67m behind where it should have been, the equivalent of roughly 8.5 additional working years.

The chart below tells the same story from a different angle. Even at a lower drag of two per cent, a £5.4m portfolio forfeits £6m over 20 years — more than the original investment.

Set that against BlackRock’s long-term assumption for global equities: six to seven per cent per year. If your wealth manager is trailing by four to five per cent, they’re giving back most of your expected returns. You’re taking the risk. Someone else is keeping the reward.

Think back to that annual performance review. A managing director or senior partner who discovered a supplier eroding value at this rate wouldn’t schedule a follow-up meeting. They’d replace the team. Yet when it comes to their own wealth, that professional rigour vanishes. One in four investors in Y TREE’s survey have never changed their wealth manager.

If you think of yourself as the CFO of your own financial life, the question writes itself. Are you holding your wealth manager to the same standard you’d hold any other supplier?

“You’re taking the risk. Someone else is keeping the reward.”

The review your wealth manager never gave you

The wealth management industry has, for years, operated the equivalent of an annual review with no targets. Your manager tells you it was a good year. Your memory agrees. And the reporting you receive is rarely designed to challenge either assumption.

What Y TREE’s data has done is supply the benchmark that was missing. Wealth management underperformance isn’t an anomaly; it’s a persistent pattern backed by decades of independent research. The psychology explains why it goes unnoticed: your memory flatters your record, and the industry’s reporting lets it.

So, do you want to see how your wealth manager has performed against a risk-adjusted benchmark? Y TREE can show you. The only thing more expensive than finding out is not finding out.

Resources

Y TREE. (2026). Plugged into Wealth Management 2026. Y TREE.

Walters, D.J., Fernbach, P.M., Fox, C.R. & Sloman, S.A. (2021). Investor memory of past performance is positively biased and predicts overconfidence. Proceedings of the National Academy of Sciences, 118(36), e2026680118.

S&P Dow Jones Indices. (2026). SPIVA Europe Scorecard Year-End 2025. S&P Dow Jones Indices LLC.

S&P Dow Jones Indices. (2025). SPIVA Europe Persistence Scorecard Year-End 2024. S&P Dow Jones Indices LLC.

Sharpe, W.F. (1991). The arithmetic of active management. Financial Analysts Journal, 47(1), 7–9.

Morningstar. (2025). Mind the Gap 2025. Morningstar Research Services.

Robin Powell is a freelance journalist, author and financial consumer advocate. He’s the Editor of The Evidence-Based Investor.