Private Banking & Wealth Management
2009 Top 10 for Brokerage & Wealth Management:
Business Drivers, Strategic Responses, IT Priorities
Single-Family Office: The Ultra-High-Net-Worth Wealth
Management Laboratory and concepts for Japan
Private Banking: Volume 2 —
As i a / P a c i f i c B a n k in g Ad v i s o r y S e r v i c e
Glob a l C a p i t a l Ma r k e t s Ad v i s o r y S e r v i c e
Software Solution Vendor Analysis
Strategic Update on the Buy-Side Order Management
The client lifecycle in Wealth Management: Are Marketers Missing the Trick?
Technology
Cloud Computing: The next leap to innovation.
Risk and Reward
Dec. 21 Commentary
Hitting the bottom line
The secondary shockwave of the
global credit crunch is now about to hit the private banking sector.
Based on our analysis of the business models in private banking the
dips in cost-income ratios in 2008-2009 will truly hit the bottom line
for many in 2010. Many banks have seen a 25 per cent rise or more in
their cost-income ratios with little correction.
Put simply, the
cost of running the wealth management business will look unattractive
to many group boards and although many economies now appear to be on
the rebound, ability to repair the significant drop in asset levels
will take more time that many stakeholders have the patience for.
This is not to state that all the private banking and wealth
management businesses are about to hit the wall (although some will).
However, many will still not be generating the return on investment
that banking groups will be needing. Some of these will be folded into
the retail wealth arms (this is already happening in the US and makes
good business sense) but others will hold out, believing that launching
a new ultra high net worth solution is the answer.
Arguably, it
is all about market timing. The savvy group stakeholders will consider
they can sell a positive story to the market if they tidy up their
wealth businesses and show a marginal uptick in AuM or, better still,
profits which may cover over some of the more systemic issues the
business models are facing. We expect the cadence of disposals both
large and small to increase next year.
The business models likely
to be most impacted in terms of sales are both the multi-regional
private banking businesses and the very boutique onshore private client
asset management solutions. The former are proving to many executives
that there are too many moving parts to manage efficiently, while the
latter will have been unable to attract a critical mass of assets to
sustain their cost base.
A final reason for the further decline
in multiples for the private banking business is the deepening insight
into the validity of the segmentation assumptions of the banks on the
block. Increasing insight into the bank’s commercial traction with
clients, at a revenue level based on improving management information
systems and comparables with other segments of the financial community,
are increasingly showing the higher segments of the wealth management
arena (the eight figure market and above) are much less commercially
attractive in terms of margin or scale.
