HNW funds under management in the UK's high net worth individuals has exceeded £350 bn for the first time according to research by strategy consultants Market-Dynamics Research & Consulting (MDRC), a 6.6 per cent growth rate compared with last year. The study also suggests that the big wealth players are getting bigger (17 per cent of private wealth managers now manage 80 per cent of the market) and that little new money is flowing into the UK wealth management sector. As competition intensifies for market share funds are simply moving between providers and for the smaller players merger or acquisition may be the only strategic option. Over 76 per cent of the total £351.7 billion of funds under management are held in discretionary portfolio management (DPM) services. Of this, 87 per cent is held by private client wealth managers and private banks. Less profitable advisory management fell to less than a quarter of the total market (£81.4 bn) as clients moved away from transaction fee structures. The UK’s top ten wealth managers were found by the research to be (alphabetically): Barclays; Coutts; Gerrard; HSBC Private Bank (UK); Kleinwort Benson Private Bank; Lloyds TSB Private Banking; Merrill Lynch Private Clients; NatWest Private Banking; Rathbones; and Smith & Williamson Investment Management. Independent financial advisers (IFAs) specialising in the £1 million wealth segment, Bloomsbury Financial, Fiscal Engineers and John Scott & Partners were also mentioned as having success in the last 12 months. The research emphasises the degree of market concentration, a trend that it sees accelerating as the better, more competitive firms grow at the expense of the smaller, less efficient and undifferentiated firms many of which still only offer traditional "long-only" investment models to their clients, rather than providing a wider wealth management and financial planning service. The study also confirms that the largest operations are also potentially the most profitable. The average gross margin generated by the largest 28 firms is estimated at over 160 basis points. Those in the bottom quartile are estimated at generating gross margin of less than 100 basis points on average. Revenue advantage is often diminished by relatively inefficient structures and processes of the larger operators. The average operating cost/income ratio is 78 per cent, and although there is little variation across the industry the best of the larger firms have ratios below 70 per cent.