A loss of confidence among wealthy clients and a lack of efficiency in banking business models has hit the global wealth management industry. The good news is that there is $10 trillion in high-net-worth bankable assets that haven’t been tapped, according to Scorpio Partnership’s 2010 Global Private Banking study, which was released Thursday.
“Capturing these assets is the real answer for industry recovery,” the study, which tracked 230 wealth management institutions, reported.
The wealth management industry now has $16.5 trillion in assets under management, up from $14.5 trillion in 2008. Yet Scorpio reports that the real high-net-worth market opportunity is set at $26 trillion, signaling that the global industry currently manages 63.5% of the real market.
Profitability has dropped by a median of 35% from 2008, according to the study. And cost/income ratios have risen to an average 78.2%, up from 72.4% in 2008. In addition, net new money data shows a median inflow across all institutions of $900 million for the 2009, a decline of 60% from 2008.
“The wealth management engine is still misfiring for many. On the one hand the asset management machine is working and this is shoring up numbers. While, for virtually all banks, in terms of attracting new business it has been a case of Net No Money,” said Sebastian Dovey, managing partner, in a press release. “Significantly, our global HNW data shows there are strong signs of wealth creation even in these complex markets and yet new clients are still holding back from opening accounts with the industry.”
Meanwhile, wealth is still concentrated among the top wealth managers, with the top 10 now collectively managing $8.733 trillion in high net worth assets, 64% of the total industry of fee-based managed assets today.
Bank of America [BAC] is still the top wealth manager, followed by UBS. Despite its well-known tax scandals last year, UBS was a strong performer compared to its peers and seems relatively healthy, Scorpio reported. Morgan Stanley moved up four slots after buying the Smith Barney business from Citibank, followed by Wells Fargo, Credit Suisse, JP Morgan and Royal Bank of Canada, a new entry on the list. To be in the top 20 ranking by assets under management a private bank must now have over $135 billion of assets under fee-based management.
“The premier league of wealth managers have virtually all benefited from strong asset management performance during the past financial year with most in the top 20 posting double digit asset growth,” said Stephen Wall, director at Scorpio Partnership, in a press release. “Banks outside the top 100 are starting to show signs of prolonged suffering as net new money and real profits are in decline.”