Banks and other financial companies that are willing to stomach a few more quarters of volatility could find themselves well positioned to acquire wealth management companies or talent, according to analysts and industry executives.
Sean Cuniff, a research director of brokerage and wealth management for
Banks are not getting out of wealth management; no one is exiting wealth management right now, he said in an interview. Certainly, some independent shops that havent been that strong will be purchased or will merge. There is a flight to quality right now, both in terms of advisers and firms. The stronger wealth managers will get even stronger.
But before banks can think about expanding, they will need to work hard over the next several months to retain customers.
Cuniff said the next year will not be an easy one for wealth managers, which will be pressed to tighten risk management and cut expenses.
Wealth management companies likely will cut their technology spending by 5% to 6% over the next 12 months to offset asset losses, Cuniff said .
In the short term, I do expect asset levels to go down because of market activity, but long-term inflows will be strong and the wealth management industry will come out of this even stronger, he said.
Worldwide, six asset managers sold themselves in the third quarter, two more than in the third quarter of 2007, according to
Registered investment advisers are merging as well. According to
Cuniff said he expects some runoff as financial advisers working for large financial services companies that are being sold in part or in full, including
In the long run, he said, advisers who stick with banks will be able to increase their assets under management.
There is a real opportunity for advisers that work in the bank channel, because they have the opportunity to look at both sides of a clients balance sheet, both in terms of their assets and their liabilities, Cuniff said. Advisers that work for banks have a more complete picture than they have ever had before and a truly holistic view of the client.
He expects consolidation to continue in the wealth management business.
We think that there will be some robust competition to buy broker/dealers, specifically by banks looking to buy, and that indicates health in the wealth management industry, Cuniff said.
He said banks could use some of the funding they receive from the
Burton Greenwald, an analyst with BJ Greenwald Associates in Philadelphia, said, Banks like having a wealth management unit right now, because having a diversified revenue stream is important in difficult economic cycles.
But that doesnt mean that they are going to invest in their wealth business or make any major deals right now, Greenwald said. They arent going to be buying, but they aren't going to be selling right now, either.
Most banks and wealth providers are taking a foxhole approach,Greenwald said.
Tim Clift, chief investment officer at
FundQuest is retaining its established customers and, despite the financial crisis, signing up new ones. The Boston company has added 23 clients this year and expects to add more business over the next few months as smaller banks look to outsource certain wealth management services, said Jim Graves, its managing director of marketing.
Bob Peatman, FundQuests managing director of national sales, said: Right now, success is measured in low redemption rates. We are working hard to keep our clients and our advisers. It is hard to reclaim these people after they leave.