Wealth Management industry finishes the year on a high

The fourth quarter was a positive end to the calendar year for both execution only stockbrokers and wealth managers, where there was growth in assets, revenues and trades. Encouragingly, the 7.0% growth in investment assets surpassed the 4.7% market growth as measured by the FTSE APCIMS Balanced Index, with net inflows of assets from both existing and new clients.

The growth in assets has driven investment management fees up by 6.4% compared to the previous quarter. The investment management fees earned in Q4 2010 was higher than any other quarter for wealth managers in the past five years. The only revenue stream to reduce quarter on quarter was financial planning income. However, at only 3% of total revenue, its reduction had little impact on overall revenue growth.

With market volatility low relative to the previous two years, it may be expected that trade activity would have calmed. However, this has not been the case and volumes remain high. Riding on the back of these high volumes are execution only stockbrokers, who once again delivered very good results. With a pre-tax profit margin back above 30% and quarterly revenue of £118m (higher than any other recorded quarter, with the exception of Q1 2000), it continues to be an excellent business model.