The market turmoil of 2022 hurt UK wealth managers. The blow was cushioned by customers continuing to pay into their SIPPs, ISA’s and investment accounts, despite heavy market falls and huge economic uncertainty. Some managers showed resilience, but not all.
There’s no hiding from the fact that the market turmoil of 2022 hurt UK wealth managers. The median fall in Assets under Administration or Management (AUA/AUM) of a London-listed group of wealth managers and platforms was -6.4%. This has a direct impact on revenue, as fee income is mostly linked to the value of AUA/AUM.
Note: The above peer group would usually include Tatton Asset Management and Mattioli Woods, but these two companies do not report AUA/AUM data as at 31 Dec, and because timing differences will affect comparatives, they have been omitted from this analysis. PensionBee meanwhile, which IPO’d in April 2021, is certainly a smaller and earlier-stage company compared to the others in the above chart, and an outlier in terms of growth rate as it rapidly adds new customers, but it does compete directly with a number of the above companies and is a growing presence in the pensions market and has therefore been included in this peer comparison.]
Net inflows hold up
However, all of the above wealth managers and platforms managed to cushion the blow of market falls by continuing to attract new investments from customers, at a median rate of +4.2% (net inflows as a % of opening AUA/AUM).
Simplistically, this means that customers continued to pay into their SIPPs, ISA’s and investment accounts, despite heavy market falls during the year and amidst an environment of huge economic uncertainty.
This ability to maintain positive flows stands in contrast to pure-play asset managers, many of which experienced outflows during 2022.
This difference in fortunes is primarily because pure-play asset managers typically run funds forming parts of portfolios, not entire portfolios as most wealth managers do. So an investor making an asset class switch would often mean a loss of assets for an asset manager. Obvious examples of this can be seen where asset managers have a concentration of assets in an out-of-favour asset class (Ashmore: emerging market bonds; Polar: technology stocks; Premier Miton; UK small-cap stocks).
That same asset class switch would probably not be a loss of assets for a wealth manager, just a switch between funds within a customer’s wealth account.
Resilience not a given
However, even though wealth managers’ net inflows remained positive in 2022, the levels of these net inflows were certainly down on 2021.
At an aggregate level, given the vastly different market environments between 2021 (a powerful bull market) and 2022 (a bear market coupled with widespread economic uncertainty) the fall in inflows doesn’t look too dramatic. The median net inflow rate inflow in 2021 was +6.5%, compared to +4.2% in 2022. In absolute value terms, the total annual net inflows of this peer group fell from £33bn in 2021 to £22bn in 2022.
But aggregate values mask the differing fortunes of these wealth managers and platforms. While Brooks Macdonald managed to increase its net inflows, and St James’s Place and PensionBee experienced only small declines in net inflows (-11% and -10%), others experienced more dramatic falls (Rathbones: -85%; Quilter: -55%; AJ Bell: -48%; Hargreaves Lansdown: -38%).
In future posts I’ll be digging in to the reasons behind these differing fortunes, and the impact the above performance has had on financial results.
I’ll also be doing a similar exercise on asset managers (not all have reported 31/12/22 AUM numbers at the time this post was written).
Keep a look out for these posts or subscribe below to get notified when a new blog post is published.