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LAUNCH OF THE 2013 GLOBAL PRIVATE BANKING BENCHMARK

The Scorpio Partnership Global Private Banking Benchmark 2013 indicates strong rebound among 209 global wealth management players; UBS takes ranking top spot as a “champions league” of firms emerge

WEALTH MANAGEMENT INDUSTRY SURGES WITH NET NEW MONEY AND SOLID ASSETS UNDER MANAGEMENT RESULTS

LONDON – Scorpio Partnership’s annual Private Banking Benchmark reveals that net new money (NNM) rebounded across the industry, suggesting signs of a return of client confidence in global wealth managers. The firms which had the most success were the world’s 20 largest players – the mega wealth managers – who are setting themselves apart from the pack in a “champions league” of competitors. But while the future looks good in certain areas, all firms are still having to work hard to maintain profit margins and the industry cannot afford complacency.

The Global Private Banking Benchmark is now widely considered the litmus test for the industry’s state of health in business model terms. Tracking more than 200 financial institutions for 12 years now, the Benchmark has seen the rises and falls and heartaches of the industry. In this latest assessment examining year-end financial data of all banks, across the board, wealth managers witnessed acceleration of new inflows; on average firms posted a percentage change in net new money of 23.7% over the 12 month period under review.

This sharp uptick is a turnaround for the private banking industry which has struggled to attract convincing levels of new client assets since the financial crisis. According to the latest report released today, private banks have bounced back from the nadir of 2011, during which the average percentage change in new money had fallen to -27.9%.

During the same period under review, asset under management (AUM) growth was strong with an average percentage change among wealth managers of 8.7% from 2011. With this growth, the wealth management industry now manages a total of USD18.5 trillion, up from USD16.7 trillion in the previous year. The growth was fuelled by strong industry NNM as well as strong performance in the markets leading to a rise overall AUM.

However, while there is strong news on inflows, this top line success did not translate directly to the bottom line. Pre-tax profits were solid across the industry, but the average percentage change on profits was 5.3% for 2012, compared to 12.3% for 2011. Cost management is a key factor here. The wealth management industry’s operating costs are continuing to creep up. The industry needs to focus on working out its efficiency points and optimising them. The analysis of the data shows there are still signs of weakness in the model for many operators.

Figure 1: Key performance indicators for the international wealth management industry

Key Performance Indicator Average percentage change
2012 2011
Assets under management (AUM) 8.7% 0.70%
Net new money 23.7% -27.9%
Income 2.3% -3.2%
Expenses 2.0% 3.2%
Ordinary profits 5.3% 12.3%
Average gross margin on AUM 116.0bps 115.6bps

 

THE GLOBAL TOP 20 – THE WORLD’S MEGA-WEALTH MANAGERS

Our latest Benchmark finds that the top 20 operators – which we have called the mega-wealth managers – experienced a 10.9% growth in their AUM. Collectively, these players manage 76% of the total industry AUM which underscores their status as the mega-operators. The AUM growth compares to 8.7% across the industry as a whole. NNM played a part, but the strength of their investment management performance was also a major factor. The evolution of the top 20 wealth managers over the past five years is become marked in the separation of this pack with the rest of the market – so much so that there now appears to be an emergence of a “champions league” of firms that through the factor of their scale and market coverage are more likely to attract business.

At the top of the roster this year, Switzerland’s UBS reclaimed poll position in AUM terms. The result was partly facilitated by its robust AUM growth of 9.7%. Bank of America slipped into second place with more modest growth of 5.9%. Among other notable shifts, Spain’s Santander also returned into the top 20 for the first time since 2010. Its 66.2% reported growth in AUM was brought about by a decision to buy out minority shareholders in Banesto and Banif and fully absorb the local banks into the Santander organisation.

Figure 2: Top 20 Global private banks by assets under management

Ranking Institution AUM (USD bn) Growth 2012 Reporting currency Ranking move
1 UBS 1,705.0 9.7% CHF +1
2 Bank of America* 1,673.5 5.9% USD -1
3 Wells Fargo* 1,400.0 7.7% USD
4 Morgan Stanley 1,308.00 7.3% USD
5 Credit Suisse 854.6 6.9% CHF
6 Royal Bank of Canada 628.5 9.6% CAD
7 HSBC 398.0 5.6% USD
8 Deutsche Bank 387.3 11.1% EUR
9 BNP Paribas 346.9 9.7% EUR
10 Pictet** 322.2 22.9% CHF +1
11 JPMorgan 318.0 9.3% USD -1
12 Citi Private Bank 250.00 20.2% USD +1
13 Goldman Sachs 240.00 5.7% USD -1
14 ABN AMRO 212.7 12.0% EUR
15 Barclays 201.4 10.3% GBP
16 Julius Bär 200.8 12.3% CHF
17 Northern Trust 197.7 13.8% USD
18 BNY Mellon 179.0 6.6% USD
19 Lombard Odier** 175.5 16.0% CHF +1
20 Santander 172.7 66.2% USD +3

 

*Figures for Bank of America include its Global Wealth Management division, which includes Merrill Lynch Global Wealth Management, US Trust, Bank of America Private Wealth Management and its Retirement Services business. Wells Fargo has also included Retirement Services within its data.

**The results for Pictet relate to the 15-month period from 31 December 2011 – 31 March 2013. All other firms quoted provided figures for the 12-month period to 31 December 2012.

The dominance of the global top 20 reflects the consumer demand for a single wealth management proposition. According to research undertaken in 2013 of 4,400 millionaires worldwide for the Global HNW Insights Survey 2013 by Capgemini, RBC Wealth Management and Scorpio Partnership, 41.4% of clients expressed a strong preference for working with a single wealth manager, compared to just 14.4% who prefer multiple providers. The global insight is suggesting clearly that clients are looking for firms which can provide broad product and service capabilities, as well as international exposure.

In spite of numerous challenges – both economic and regulatory – we have seen the confirmation of a new champions’ league of global wealth managers. Collectively, these businesses have a role in managing three quarters of all HNW wealth. They are beginning to demonstrate very distinct mega-player characteristics which the rest of the competition will have to work out how to challenge,” says Sebastian Dovey, managing partner of Scorpio Partnership.

The global insight of thousands of consumers undertaken by us this year*** shows the strength of the brands in winning new assets, the strength of the client experience in keeping that business and, most recently, the increased desire to streamline the number of financial relationships a client has. This all bodes well for firms tuned into customer need. This is raising the bar on competition,” he added.

GLOBAL OPERATORS ARE PURSUING EMERGING WEALTH VIGOROUSLY

Aside from the traditional KPIs measured, this year’s report examined the regional break down of AUM at leading firms. The aim was to determine the true strategic focus of the industry. Exclusive data from a selection of firms collectively managing USD1.1 trillion shows the global breakdown of booked assets to be 28% in Latin America, 21% in the Asia Pacific markets and 2% in the Middle East and Africa. This takes the total of assets currently booked in emerging markets has tipped to 51%.

The international footprint of these firms demonstrates the extent to which wealth creation and wealth management have shifted to the emerging markets in recent years. It also demonstrates that international private banks have achieved some success in re-evaluating their proposition and attracting assets from developing markets.

The global wealth management firms that provided data on the regional breakdown of their assets under management have their respective headquarters in Northern Europe, Southern Europe, North America, Latin America and Asia Pacific. The combined total of their globally booked assets therefore provides a snapshot of the breakdown of global assets under management among international wealth managers.

The data from these firms also highlights that re-orienting a wealth management business in order to access growth in emerging markets is a complex challenge. International expansion is a long-term commitment and wealth managers must focus on how to translate their services to meet local needs if they wish to convert emerging market assets into a stable revenue stream,” says Catherine Tillotson, managing partner of Scorpio Partnership.

scorpio 2

 

For more information please contact:

Sebastian Dovey

Managing Partner

Scorpio Partnership

T: +44 20 7811 0120

E: seb@scorpiopartnership.com

 

Catherine Tillotson

Managing Partner

Scorpio Partnership

T: +44 20 7811 0120

E: cath@scorpiopartnership.com

To download the full report please call us or visit www.scorpiopartnership.com

Notes to the editors:

  1. Scorpio Partnership is a London-based strategy and research specialist on the global wealth management industry and codifying the HNW client journey. In addition to its industry benchmarking, Scorpio Partnership’s unparalleled insight into the market is based on over 20,000 interviews with millionaires and billionaires and 10,000 professional advisors across 35 global wealth centres.  The firm has now undertaken enterprise wide client journey insight programs for 40% of the world’s largest private banking institutions. Recently, Scorpio Partnership won the 2013 award for Thought Leadership in Asia for its insight work in the region (WealthBriefing).
  2. The Scorpio Partnership Private Banking Benchmark is the leading analysis of the international wealth management market from strategists Scorpio Partnership. The report includes data based on results from 209 private banks around the world with total assets under management of USD14.8 trillion. The report is compiled by an experienced team of consultants and analysts who are constantly engaged with the international private banking market.The report includes more than 2,000 data points on the private banking industry’s key performance indicators:
  • Regional analysis
  • Business model analysis
  • Assets under management
  • Market share
  • Net new money
  • Income breakdown
  • Expenses breakdown
  • Cost-income ratios
  • Gross margins
  1. Now in its twelfth year, the 2013 report also features exclusive new insight, including:
  • Performance comparison of pure play and diversified business models across a number of KPIs
  • Regional analysis of AUM across a representative sample of banks with combined AUM of USD1.1 trillion
  • Comprehensive analysis of income and expenses

The Private Banking Benchmark 2013 is therefore essential reading for private banking management, private banking strategy teams and financial analysts as well as service providers to the private banking market including asset managers, investment banks, trust companies and specialist professionals such as lawyers, accountants and consultants.

  1. The Private Banking Benchmark 2013 collects data from a representative sample of wealth management institutions around the world from which to develop industry key performance indicators. To ensure consistency in the analysis, we seek data relating to the firm’s actively managed high-net-worth private client assets, including discretionary portfolio management, advisory portfolio management, securities or brokerage accounts, own mutual funds, term deposits, fiduciary deposits, savings accounts and managed trust assets. More specifically, we aim to identify data relating to private clients who hold more than USD1 million (or the local currency equivalent) in actively managed assets with the firm. We note that not all firms conform to this reporting methodology. In Figure 2: Top 20 Global private banks by assets under management, we have footnoted institutions that deviate notably from this protocol. For further details on the reporting guidelines and the data reported for individual firms, please contact us directly.

The report is available for purchase at a cost starting at GBP2,500 from Scorpio Partnership. For more information please visit our website www.scorpiopartnership.com.

What volume of HNW assets changed hands through wealth management mergers and acquisitions in 2013?