Yesterday’s Budget, Labour’s first in 14 years, was described by the Chancellor as a budget of growth and stability. However, by raising tax receipts by £40bn by the end of 2028 there are implications to both employers and employees. We consider some of the impacts, opportunities and threats for wealth managers and retail investment firms.
Immediate product and technology impact:
Increases to Capital Gains Tax (‘CGT’) rates, the inclusion of pensions in the Inheritance Tax regime from 2027, and the loss of 50 percent relief for Alternative Investment Market (‘AIM’) listed stocks are likely the most material for all retail investment firms and will require review of policies and products that best support clients’ needs across their lifecycle. Especially prevalent will be a review of retirement products and the likely need for innovative solutions for clients.
From a technology perspective, any advice / wealth teams leveraging in-house cashflow tools will need to review the changes required to accommodate the tax banding.
Client-specific opportunities and threats:
- Private Clients: across all wealth demographics, the need for professional services remains high, with changes to portfolios likely due to reviews of unwrapped assets, and the removal of full relief from the AIM market.
- For retirement clients, there will be an increased need to focus on Estate Planning for individuals who seek to pass their assets on to the next generation.
- Small businesses and entrepreneurs: we anticipate an opportunity for wealth / advice firms as businesses re-shape financial plans due to the increased National Insurance (‘NI’) & CGT rates but could lead to a retention risk as they re-consider opportunities for wealth. Proactive engagement will be paramount for these clients.
Overall impacts to Financial Advice firms:
We anticipate a surge in demand for specialist activity across Estate Planning & Retirement planning. Advice firms should review and optimise their proposition for these services, leverage data to proactively market to existing clients, and provide a compelling offer to new clients to showcase the advantage of financial advice.
Overall impacts to Wealth & Investment Managers:
Outside of advice services, impacts to investment portfolios is a more complex picture. Risk appetites across products may change, inflows may be impacted by non-dom reforms, and asset allocation teams will be reviewing the changes to AIM and pension planning processes to identify any changes required. In the short term, this could lead to a run of changes to clients’ portfolios.
Conclusion:
This Budget does require action from wealth managers and advice firms. Immediate operational changes considering new rules will need to be managed along with the opportunity to engage with clients as they look for support in arranging their finances. Longer-term, structural trends in the UK paint an attractive picture for asset growth in the sector, although competitive dynamics will likely tighten, requiring innovative strategies and efficient operating models to win.
For further discussions on how these changes impact your business, or on broader change and transformation objectives, please contact us.
About the Authors
Jamie Forrester
Senior Partner
Jamie is a Senior Partner with expertise within Wealth & Private banking markets. Jamie leads complex engagements supporting CEO's and COO's deliver on their strategic ambitions.
Joe Harris
Director
Joe is a Director at Alpha FMC leading the Advice Technology propositions to support COO’s and CTO’s across technology strategy, operating model designs, transformation and innovation. Joe specialises across the Life, Pensions & Retail Investments markets, with expert knowledge of distribution and advice technologies.
James Wentworth Waites
Senior Manager
James is a Senior Manager with other thirteen years experience in Wealth Management & Private banking, with a key focus on strategy, operating model design and technology delivery.
Chiamaka Davids
Analyst
Chiamaka is an analyst with experience across wealth management, financial advice, and compliance / law recruitment.