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Market for wealth management regains momentum in the wake of the crisis

Munich, August 19, 2011

  • New Roland Berger study on wealth management: Managed assets worldwide are now up nearly 14% on the 2008 volume – reaching EUR 27.6 trillion by end of 2010
  • 90% of managed assets held by clients in Europe, Asia and North America
  • Investors still have concerns about the stability of financial markets
  • Clients want exclusive advice, customized offers and greater transparency regarding risk groups and prices
  • Offshore banking still in demand
  • Technical solutions like e-banking should be more closely integrated into advisory services

In the wake of the economic and financial crisis there has been a strong resurgence in the wealth management market. But wealthy clients are now less willing to take risks, so the product mix has shifted toward lower-margin products. This is a difficult environment for providers, who face the challenge of simultaneously cutting costs and restoring earnings. Wealth managers seeking new business must offer clients exclusive and transparent advice to reflect the investor's personal values. These are the broad findings of a new Wealth Management Study conducted by Roland Berger Strategy Consultants. It is based on a survey of 180 clients worldwide.

"Wealth management has regained momentum far more quickly than expected," says Daniel Gresch, Partner and Head of Asset and Wealth Management Group at Roland Berger Strategy Consultancy. "Emerging from the severe slump during the financial crisis, we are seeing asset values under active wealth management recovering strongly worldwide."

Recovery of global wealth management market

The worldwide market for wealth management collapsed by 19% in 2008. But by the end of 2010 it had bounced back – up nearly 14% to EUR 27.6 trillion. Around 90% of this volume is accounted for by clients from North America, Asia and Europe. And it is these markets that are showing the strongest growth rates. By 2011 the European market had surged a hefty 17% above the 2008 position. The Asian market expanded over the same period by 14%, while the US market saw 12% growth.

Investors very cautious – Less demand for high-margin products

However, this growth, based on net capital inflows and exchange rate effects, cannot disguise certain structural weaknesses. Following such a huge financial crisis, clients are deploying their assets far more cautiously. The product mix has increasingly shifted in the direction of lower-margin products, such as exchange-traded funds (ETFs). "The focus is now on protecting and maintaining asset values," explains Daniel Gresch. "Clients are still very cool toward complex investment products after their negative experience in the crisis. They tend to choose products that guarantee a high degree of security."

This is why the cost-income ratio of 70% in the wealth management market is above the pre-crisis level, despite efforts to drive down costs. In 2007, the cost-income ratio stood at 63%. Providers now need to focus harder on raising their earnings while pushing ahead with cost reduction actions.

Clients demand exclusive advice

Wealth managers should go for high quality in their advisory services. First-rate advice is what clients want above all. "Providers should pay special attention to the international alignment of their portfolio and present their clients with tailored solutions. But this demands a precise knowledge of the individual needs and preferences of each client," says Dr. René Fischer, Principal at Roland Berger and co-author of this study. "The advice given must not simply be guided by the size of assets. It should also reflect the client's personal values."

For wealth managers, this means breaking with traditional, product-driven approaches and reexamining the entire advisory process. An increasingly important factor will be the ability to offer transparency with regard to risk classification and the real costs of individual investment products.

Offshore banking in strong demand

The reasons given by clients for choosing offshore banking options include first and foremost the high quality of investment advice, the political stability of the countries chosen and the international range of product portfolios. The survey found that tax advantages only play a secondary role here. Established financial hubs – especially Switzerland, Luxembourg and Liechtenstein – are still seen as trusted centers for wealth management.

Technological solutions on the increase

Wealth management clients not only appreciate high-quality, transparent advice but also want to benefit from the latest technologies. Wealthy clients increasingly use e-banking solutions that enable them to manage their assets any time and anywhere. "Providers should therefore be looking at ways to integrate reliable technologies into their advisory model and offer clients added value," notes Fischer.

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