UK private bank Duncan Lawrie coins the term "aggrieved affluent" to describe a population segment left bewildered and angry at low returns, rising taxes and higher minimums from wealth managers.

The sight of UK wealth management clients turned into “orphans” as firms hike asset minimums to stay profitable suggests scenes from the novels of Victor Hugo or Charles Dickens. But in some ways these “orphans” are not desperate and begging for alms. No – they are angry, but also bewildered.

That, at least, is the conclusion that Duncan Lawrie, the UK private bank, draws from what it sees is a problem of the “aggrieved affluent” – people who are no longer seen as profitable wealth management clients, and who must contend with a world of lousy returns on cash, rising fees and the ever-present threat of rising taxes.

In a note this week, Seth Cowburn, head of wealth management at the bank, noted how the recent annual Sunday Times Rich List, which came out in May this year, heralded the fact that there are now more billionaires per square foot in London than there are in any other city in the world, 114 to be exact. It also revealed that the wealthy are now wealthier than ever, with Britain’s richest people having a combined fortune of almost £520 billion ($867.3 billion). Their wealth has increased by 15 per cent in the last year alone.

But Cowburn argues that this seemingly benign state of affairs is not so benign for a large swathe of the population. “Despite the UK economy finally regaining its pre-crisis strength, many households still feel worse off than before the downturn. Having being forced to rein in their spending when times were tough, many families continue to feel the pinch due to soaring living costs, and in many cases, wage cuts or freezes,” he writes in a recent note.  

He continues: “And while at first sight it might appear affluent families are doing well – and they may own assets such as homes, cars, retirement plans or even boats, many still spend virtually all of their disposable income on living costs or repaying debt.”

Cowburn says that other financial pressures include a low- or zero-interest rate environment; high inheritance tax; the 45 per cent tax bracket [on income]; the possibility of the introduction of new council tax bands for homes worth over £2 million; soaring living and housing costs, and now having to fork out for university fees in addition to school fees.

“While many will have little sympathy, there is a definite rise of the ‘aggrieved affluent’,” he said. “Not only are they feeling aggrieved, but a significant number of the affluent are being abandoned. The government expects them to fend for themselves and a number of private banks are restricting their services to the oligarchs, oil tycoons and digital entrepreneurs. Doors are being firmly closed in the faces of the UK’s ‘aggrieved affluent’, as gone are the days where the major private banks would court clients with half a million of liquid assets, safe in the knowledge that they would grow the relationship as their clients’ wealth grew. They are no longer prepared to put in the sort of lifetime of investment to grow the relationship with clients at the less wealthy end of the spectrum,” he says.  

As he says, while some regulatory intervention to curb past excesses is unavoidable or inevitable, it has pushed up costs and meant banks and other firms feel some clients are no longer profitable. Hence the issue of raised minimums and the “orphan” issue.

And the kicker on the commentary is that Cowburn states that his firm “certainly won’t be abandoning our heartland customer base or giving them reason to be aggrieved”. It actually invites such “aggrieved” clients to get in touch. The issue, therefore, is how does a bank earn a living by serving such supposedly unprofitable people if a Barclays, or HSBC, or some other firm has decided they don’t make the cut, as they say in golf. It isn't the first time that Duncan Lawrie has got involved in a debate about how parts of the population are affecting by changing economic and social events. (For an example, click here.)

This publication will be speaking to Duncan Lawrie soon to find out how it can make a viable business out of such affluent clients. Stay tuned.