CONCERTED PUSH TO WIN NEW ASSETS IN FAVOURABLE MARKETS PAYS DIVIDENDS FOR GLOBAL WEALTH MANAGEMENT; TOP 25 FIRMS NOW MANAGE USD16.2 TRILLION OF HNW ASSETS
LONDON – Assets Under Management (AUM) at the top 25 global wealth management operators grew 17.0% on average this year, finds Scorpio Partnership’s 2018 Global Private Banking Benchmark. This means the top 25 operators now collectively manage USD16.2 trillion.
Just as a rising tide raises all boats, wealth managers were able to capitalize on favourable market conditions in 2017 as a core driver of growth. The FTSE All-World Index advanced nearly 22% during the year and global economic growth was estimated to have reached 3%, an uptick from 2.4% in 2016.
However, there were also positive indicators that firms achieved greater success in drawing additional assets from new and existing clients in 2017. On average, the contribution of Net New Money to AUM, which was flat in 2016, rose to 4.3% in 2017 for those firms who declared this data.
Figure 1: Top 25 private banks worldwide by assets under management (AUM)
Source: Scorpio Partnership Global Private Banking Benchmark 2018. All results rounded.
“Conditions have been exceptionally positive for global wealth management in the last 12 months, but wealth firms must also be given credit for starting to find new revenue” says Caroline Burkart, Director at Scorpio Partnership. “Our client engagement assessments throughout 2017 have indicated that client sentiment is on the up which is inevitable when markets are good.
Wealth firms should put processes in place now to measure and respond to customer feedback, so that when the next market downturn occurs, they have the insight they need to continue delivering a compelling client experience. A handful of wealth firms are starting to publish their client satisfaction data, highlighting that this is creeping up the agenda as a complementary measure to financial performance.”
Asia’s wealth managers achieved the most significant gains this year, with average AUM growth of 15.2% (in base reporting currency), compared to 7.5% among European operators and 13.8% among firms based in the Americas. Many wealth managers present in Asia continued to increase their focus in this region in 2017. In several emerging markets, strategic acquisitions contributed to inorganic growth in AUM.
Most notably, Bank of China – a new entrant to the top 25 table last year – stood out by reporting double-digit growth for a second consecutive year. The firm attributed its success to effective marketing, customer developed client profiles and proposition enhancements.
WEALTH MANAGER’S EFFICIENCY AT PRE-CRISIS YEARS AS COST INCOME RATIOS FALL BELOW 70%
Costs are on the rise for top wealth management firms again, growing 8.1% over the course of the year. Investments in technology continued to be a key driver of expenses, with many firms looking to improve both front office functionality and client experience but also back office infrastructure and operations. In spite of these increases, income grew at a faster rate in 2017, rising 13.9% on average. As a result, profits rose over 25% and cost-income ratios fell below 70% for the first time since 2007.
“2017 has been the second year of great refocusing with many operators looking to increase exposure in existing markets of operation and divesting assets in non-core markets,” explained Caroline Burkart. “Cost-cutting drives have clearly been effective when firms have efficiency of scale, however, our conversations with many smaller firms indicate that they may still be struggling to balance the cost income equation.”
Figure 2: Key performance indicators for the Top 25 wealth management industry players
Source: Scorpio Partnership Global Private Banking Benchmark 2018.
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