Lehman, which has filed for bankruptcy after talks to buy it failed over the weekend, is the latest investment banking casualty from the credit crunch. Earlier this year, Bear Stearns, which suffered heavy losses via some of its hedge funds, was bought by JPMorgan.

The demise of Lehman will accelerate moves by wealth managers to distance themselves from investment banking to reassure clients that their money is safe, industry figures said.

Already, Switzerland’s UBS has decided to make its wealth management group more autonomous from its investment bank to calm client worries, although analysts said it should still consider making the wealth unit entirely separate through a listing on the stock market. Since the credit crisis erupted, UBS, one of the biggest wealth players in the industry, has lost clients and advisors to rivals.

The bankruptcy of Lehman will only reinforce the wisdom of UBS's move, said Michael Maslinski, director of consultancy Maslinski & Co.

Although Lehman did not have a significant wealth management business, the firm’s bankruptcy - due to its market exposure to weak property markets - demonstrates that wealth managers must keep a broad distance from investment banking in future, Mr Maslinski said.

“These events clearly reinforce the message that investment banking and wealth management have to be very clearly separated. The implications for the industry as a whole are enormous,” Mr Maslinski said.

“The very term, 'investment banking', is now seen as so bad that you will see it disappear altogether. Their activities have discredited it in the eyes of many people. The tide is now turning very fast. I believe investment banking is going to have to be reinvented as a genuinely client-led activity,” Mr Maslinski said.

One issue that will concern wealth managers is whether structured products sold by Lehman Brothers to private bank clients will prove to be worthless or only hold a fraction of their original value, according to a senior economist at a UK private bank, who asked not to be named.

“That is the next thing that clients need to be aware of,” the economist told WealthBriefing.

“Ultimately, most of the assets held under a wealth management operation don’t have much in the way of counterparty risk but you do suffer this risk with some of the products that a private bank might use,” the economist added.