|
|
|
|
|
|
Benchmark Study: Market Concerns Could End Wealth Management Party
This entry was posted on 6/21/2007 10:38 AM and is filed under wealth marketing.
Source: Press Release, Scorpio Partnership
June 20, 2007, LONDON — The global wealth management industry has continued to surf the wave of prosperity, delivering a 14% median increase in assets under management in base currency terms, according to the Private Banking Benchmark 2007 from leading consultancy Scorpio Partnership.
This asset growth, driven by the global equity markets and net new money, has combined with improved efficiencies to fuel an impressive median growth of 24% in operating profits across the industry.
A market downturn would lower fee income in wealth
management, however, which could in turn cause clients to shun their
banks because their high correlation with markets might make them look
unsafe, Scorpio said.
Sebastian Dovey, managing partner at Scorpio Partnership, said: "The pace of growth has been sustained in 2006 in terms of both assets and profits, and for organizations of all shapes and sizes. However, this global dynamism masks a contrasting landscape within the industry. There is a feeling that there is easy money to make at the moment, but our research shows that long-term successes are only built on sensible strategies, successful hires and, most crucially, a constant focus on clients."
There is some uncertainty about how long the party is going to last, however. "One of the long-term indicators of success for a private bank is the capacity to attract investments from new and existing clients. However, there is a strong correlation between assets under management and global market indices, and this will eventually test the stickiness of these assets. If the asset management capability of a private bank is so closely correlated to the indices, then when the markets eventually turn south, clients will not necessarily see private banks as the safest option," cautioned Ted Wilson, consultant at Scorpio Partnership.
The Benchmark 2007 highlights that there is still a lot of room for improvement and differentiation in all segments of the industry. Wealth managers constantly face new challenges and they address them with varying degrees of success, which can be measured by certain key performance indicators (KPIs).
These KPIs are developed further in the Benchmark 2007 this year. They include the cost-income ratio, the gross margin on managed assets, the average assets per relationship, regional distribution of assets, and the number of clients per staff member. For example, cost-income ratios—with a 2006 industry median of 63%—have been improving constantly. There are, however, dramatic variations in the actual numbers, from less than 40% for the most efficient private banks, to more than 90% for the least efficient banks.
Other KPIs in the Benchmark, especially those linked to staff and clients, also vary considerably from bank to
bank, and give a measure of the diversity of business models in the wealth management industry.
Looking specifically at assets under management, the trillion-dollar league is limited to three members: Switzerland's
UBS the world's largest player with $1.6 trillion in assets, followed
by Citigroup with $1.4 trillion and Merrill Lynch and Co. Inc. with
$1.2 trillion. Scorpio uses its own methodology for these calculations, which Merrill Lynch disputes, claiming assets under management are $1.6 trillion.
The top-3 players were followed by Credit
Suisse Group , JP Morgan Chase & Co. , Morgan Stanley , HSBC
Holdings Plc , Deutsche Bank AG , Wachovia Corp. and Pictet, a
tradition-steeped privately owned Swiss bank.
The Private Banking Benchmark 2007 is Scorpio Partnership's sixth study
of the international private banking and high net worth wealth
management industry. This year it covers a record 180 private banking
entities, managing a total of $10.8 trillion of assets. The Benchmark
is a unique study of both the global wealth management market as well
as the performance and characteristics of individual wealth managers.
Numerous banks have started or expanded their wealth management
business, a sector that is estimated to sit on more than $30 trillion
in client assets worldwide and is one of the fastest growing financial
industries.
Scorpio's
ranking is widely used in the industry, although the data are not
public, offering a rate independent benchmark for size in the often
secretive world of private banking.
The survey, which included
180 banks, showed the high degree of industry fragmentation, with the
top three players holding market shares of 4.5 percent, 4.0 percent and
3.3 percent, respectively. The top-10 players together held only 20
percent of the market.
The Scorpio
Partnership top 10 largest wealth managers
|
Institution |
AuM 2006 (USD) |
Change (reporting currency) |
Change (USD) |
Reporting Currency |
| 1 |
UBS |
$1,608 |
13.1% |
22.0% |
CHF |
| 2 |
Citigroup |
$1,438 |
9.8% |
9.8% |
USD |
| 3 |
Merrill Lynch |
$1,209 |
10.4% |
10.4% |
USD |
| 4 |
Credit Suisse |
$642 |
13.1% |
21.9% |
CHF |
| 5 |
JP Morgan |
$465 |
10.7% |
10.7% |
USD |
| 6 |
Morgan Stanley |
$450 |
20.0% |
20.7% |
USD |
| 7 |
HSBC |
$408 |
17.2% |
17.2% |
USD |
| 8 |
Deutsche Bank |
$249 |
16.0% |
29.2% |
EUR |
| 9 |
Wachovia |
$206 |
19.8% |
19.8% |
USD |
| 10 |
Pictet |
$192 |
30.5% |
40.7% |
CHF |
Notes:
Assets under management figures are for the high net worth wealth management
divisions of these institutions.
The Scorpio Partnership leading wealth manager market shares
|
Institution |
AuM 2006 (USD) |
Potential
Market Share |
2007 Benchmark Market Share |
Reporting Currency |
| 1 |
UBS |
$1,608 |
4.5% |
14.8% |
CHF |
| 2 |
Citigroup |
$1,438 |
4.0% |
13.3% |
USD |
| 3 |
Merrill Lynch |
$1,209 |
3.3% |
11.2% |
USD |
| 4 |
Credit Suisse |
$642 |
1.8% |
5.9% |
CHF |
| 5 |
JP Morgan |
$465 |
1.3% |
4.3% |
USD |
| 6 |
Morgan Stanley |
$450 |
1.2% |
4.2% |
USD |
| 7 |
HSBC |
$408 |
1.1% |
3.8% |
USD |
| 8 |
Deutsche Bank |
$249 |
0.7% |
2.3% |
EUR |
| 9 |
Wachovia |
$206 |
0.6% |
1.9% |
USD |
| 10 |
Pictet |
$192 |
0.5% |
1.8% |
CHF |
|
Top 10 |
$6,869 |
19.0% |
63.4% |
- |
|
Total Benchmark |
$10,840 |
30.0% |
100.0% |
- |
Note: Potential market size is estimated based on Cap Gemini World Wealth Report 2006 and Scorpio analysis.
|
|
|
|
|
|
 |
|
