One of the key challenges for firms looking to build an onshore strategy is to determine just how onshore they should go. It is one thing to build a solid base in a capital city. It is quite another to connect that head office with teams across a country and embed the brand at a local level.
The UK is an interesting case in point. Coutts famously determined that 80 per cent of British wealth can be found outside of London and has built a strong regional franchise on this basis. Given this high level of regional affluence, it is surprising that only a small number of other firms have made a concerted regional commitment.
But, then again, there is wealth and there is “wealth”. The latest Sunday Times Rich List 2011 – which estimates the wealth of the top 1,000 ultra high net worth individuals (UHNWs) who make the UK their home – highlighted this point. All of the top 10 wealthiest individuals in the UK have chosen London as their primary residence. These wealthy individuals alone control over £83bn (E94bn), four times more than the top 10 of any other UK region. And, equally importantly, a significant number of these leading wealthy are not of UK origin, which plays into the hands of the larger, international wealth management brands.
In fact, when you look at the UK’s wealthiest, the 80:20 rule stands on its head. London and the Southeast account for 80 per cent of UHNW wealth and 60 per cent of the UHNW population. In total, there are 527 UHNW individuals living in London and the Southeast, compared to 323 in the regions.
Regional wealth is generally upper affluent, rather than seriously HNW, and it is more geographically spread out than in the capital. Thus, a regional strategy is an entirely different proposition from a centralised approach.
On the positive side, a committed regional strategy can assist an international brand to embed deeply into a local market. But, the regional wealthy are often suspicious of the long-term commitment of global players to the local market. A decision down the line to close an office or cut headcount is often retained in the local memory for many years.
There are also challenges associated with hiring locally. The niche skill set associated with high quality wealth management is rarely found outside of main financial centres. Plus, it is not unusual for a star culture to emerge in local markets, where good relationship managers quickly become big fish in these smaller ponds of wealth.
In fact, the decision to go local should be managed in much the same way as the decision to expand internationally. The commitment is likely to be significant in financial terms and it is critical that firms weigh up the size and composition of local wealth to determine if they can develop an appropriate proposition. The distribution options should also be considered carefully, not ruling out creative solutions such as partnerships or technology-driven options.
Inevitably, local knowledge will be vital, which marks a new frontier for many global players. The challenge should not be underestimated, however.
Sebastian Dovey is managing partner at wealth management think-tank Scorpio Partnership
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