Wealth management super league 2008

This report looks at organizational scale in the private wealth management market. It examines the forces behind the emergence of large scale international private banks and compares and contrasts the strategic development of five of the world's largest players. It profiles the key players and discusses their current strategies and progress.

Report Highlights
This year has brought significant changes so the wealth management landscape with several of the largest players in 2007 ether combining forces this year, or dropping out of the ranking altogether. Major players have also not been able to escape the economic turbulence that has engulfed 2008.

One of the most profound recent changes to the industry has been the completion of the purchase of Merrill Lynch by Bank of America. One of the real jewels in Merrill Lynch's crown is its wealth management business, with an enviable track record in terms of consistency, profitability and internationalization.

Strategic opportunities for wealth managers in challenging times include a better quality of service to aid customer retention. Increasing share of wallet opportunities will enhance the institution's market position in a downturn, while customer acquisition opportunities in a downturn need to revolve around boosting the company profile.
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Overview 1
Catalyst 1
Summary 1
Methodology 2
Executive Summary 3
The wealth management industry has been buffeted by 2008's economic turbulence 3
UBS remains the largest wealth manager for now 3
UBS: battling to remain the number one wealth manager 3
Credit Suisse is not as big as UBS, but it scores well against a number of key measures 4
Morgan Stanley's wealth management service has achieved better results than the rest of the bank 4
Bank of America: gearing up for the big swallow of Merrill Lynch 5
Citigroup has performed well in the good times, but is being tested at the moment 5
STRATEGIC OPPORTUNITIES FOR WEALTH MANAGERS IN CHALLENGING TIMES 5
TABLE OF CONTENTS 7
Table of figures 8
Table of tables 9
MARKET LANDSCAPE: TURBULENT TIMES IN THE WEALTH MANAGEMENT INDUSTRY 10
There have been significant changes among the top global wealth managers 10
Assets under management of the super league has grown since 2005 but by widely varying rates 10
Santander has seen phenomenal growth in its AUM as a result of organic growth and acquisitions 10
HSBC and Citigroup have also seen strong growth over the last three years, although far below that of Santander 10
The wealth management super league has experienced mixed fortunes in financial performance over 2007 and 2008 14
In terms of AUM, UBS is in a league all of its own, but its growth rate between 2005 and 2008 was weaker than most others 14
HSBC has seen the greatest assets under management compound annual growth in 2007, but growth stagnated in 2008e 15
The smaller wealth managers achieve better cost-income ratios than the bigger players 16
UBS has not fared well in terms of its cost-income ratio in 2007 and 2008 16
Revenues have declined, costs have risen and profitability has fallen for most wealth managers over 2008 18
Citigroup managed to contain its costs better than others over 2008 18
The scale of UBS appears to have little effect on the bank's overall efficiency 19
Bank of America Premier Investments' profitability fell by nearly two thirds between 2007 and 2008 20
HSBC enjoyed a small rise in profitability in 2008 21
Client relationship productivity measures differ markedly across the super league 22
Credit Suisse leads the way in terms of AUM per client relationship manager, although UBS International and Switzerland is not far behind 22
Credit Suisse also has the highest revenue and profit per client relationship manager 23
UBS topped the league in terms of how much new business their RMs brought in on average during 2007 25
CASE STUDIES: PROFILES OF THE TOP FIVE WEALTH MANAGERS 27
UBS: battling to remain the number one wealth manager 27
Financial turmoil in 2008 saw large withdrawals from the wealth management division of UBS and ultimately the break-up of the universal bank model 27
The UBS model covers the full gamut of a personal wealth management service 27
UBS Wealth Management has an aggressive attitude towards growth, particularly in the APAC region 28
UBS will have to battle to restore its reputation as the number one bank 28
Credit Suisse: still forging ahead with its expansion plans 28
Credit Suisse is not as big as UBS, but it scores well against a number of key measures 28
Credit Suisse is following a well-rounded strategy to achieve its goal of becoming the premier global private bank 29
Credit Suisse remains committed to the integrated banking model 32
Credit Suisse private banking has weathered the global storm comparatively well, and the bank remains committed to its growth 32
Morgan Stanley's wealth management service has achieved better results than the rest of the bank, but not without cost 32
Morgan Stanley Global Wealth Management Group reported flat profits 32
Morgan Stanley is focusing on growing wealth management 33
Bank of America: gearing up for the big swallow of Merrill Lynch 33
BofA has yet to show its hand for the combined wealth management business 34
There are real concerns about the risk of culture clashes as a result of the combination 34
Citigroup has performed well in the good times, but is being tested at the moment 35
Citigroup had a number of good years leading up to 2008 35
Citigroup has been growing a global empire 36
Citigroup Global Wealth Management was tested by market conditions during 2008 37
The year has seen the departure of the head of Citigroup's Global Wealth Management 38
Being part of Citigroup has been a good and bad thing for Global Wealth Management 38
STRATEGIC OPPORTUNITIES FOR WEALTH MANAGERS IN CHALLENGING TIMES 40
There are several ways for wealth managers to profit in this new environment 40
Customer retention is of critical importance to wealth managers in a downturn 40
Wealth managers need to offer an improved quality of service to their existing clientele 40
Wealth managers need to work to lift the brand, image and reputation of the firm for its existing customers 42
Increasing share of wallet opportunities will enhance the institution's market position in a downturn and therefore strengthen its position for recovery 44
Leverage CRM systems to identify opportunities for cross-selling products 44
'Accentuate the positive, eliminate the negative': wealth managers should assist clients to prepare for the eventual recovery 46
Customer acquisition opportunities in a downturn need to revolve around boosting the company profile 46
Actively recruit good relationship managers from competitors 46
Leverage CRM systems to identify new wealth management clients 48
The media can be used to raise the public profiles of both individuals and the financial institution 49
APPENDIX 50
Definitions 50
Definitions 50
Bank of America 50
Citigroup 50
Credit Suisse Private Banking 50
HSBC Private Banking Holdings 50
Morgan Stanley Private Wealth Management 50
Smith Barney Private Client Group 50
UBS Wealth Management 50
Methodology 51
Further reading 51
Bibliography 51
Ask the analyst 52
Datamonitor consulting 52
Disclaimer 52
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Table 1: UBS leads the super league as a global enterprise in terms of AUM, 2005-08e 12
Table 2: Assets under management growth and current size for top ten wealth managers, ranked by level of AUM 14
Table 3: Cost-income ratios of wealth management firms, 2005-08e 17
Table 4: Operating expenses for the five biggest global wealth managers by AUM, 2005-08e 19
Table 5: Operating revenues for the five biggest global wealth managers by AUM, 2003-08e 20
Table 6: Profit before tax for wealth management firms, 2005-08e 22
Table 7: AUM per client relationship manager ($ million per RM), 2007 23
Table 8: Revenue and profit per client relationship manager ($ million per RM), 2007 25
Table 9: Net inflows per client relationship manager, ($ million per RM), 2007 26
Table 10: Citigroup has enjoyed strong growth internationally, albeit from a small base 36
Table 11: Citigroup Global Wealth Management has been tested recently 38
Table 12: Percentage of wealth managers citing various key influences on successful client retention 42
Table 13: Percentage of wealth managers citing various key influences on clients' selection of providers 43
Table 14: Percentage of wealth managers citing various key influences on increasing clients' share of wallet 45
Table 15: Percentage of wealth managers citing ""following key staff"" as one of the major reasons for clients leaving a wealth management service 48
Figure 1: UBS had the greatest AUM and one of the largest falls in absolute growth over 2008, while HSBC stands out as having the highest growth between 2005 and 2008, compounded annually 4
Figure 2: UBS leads the super league as a global enterprise in terms of AUM, 2008e 11
Figure 3: UBS had the greatest AUM and one of the largest estimated falls in absolute growth over 2008, while HSBC stands out as having the highest estimated growth between 2005-08, compounded annually 13
Figure 4: HSBC promotes the comprehensiveness of its range of services to wealthy clients 15
Figure 5: UBS's estimated cost-income ratio for 2008 was over 100% in its US operation 17
Figure 6: Operating expenses for the five biggest global wealth managers by AUM, 2005-08e 18
Figure 7: Operating revenues for the five biggest global wealth managers by AUM, 2003-08e 20
Figure 8: 2008 brought strong reversals in profit before tax for wealth management firms 21
Figure 9: Credit Suisse has the most AUM per client relationship manager ($ million per RM), 2007 23
Figure 10: Credit Suisse has the highest revenue and profit per client relationship manager ($ million per RM), 2007 24
Figure 11: UBS RMs had the highest new wealth management business productivity in 2007 26
Figure 12: Credit Suisse's strategy addresses the key value drivers in the wealth management business 30
Figure 13: Credit Suisse has been active around the world 31
Figure 14: Asia is now a material contributor to Citigroup's Global Wealth Management 37
Figure 15: Key drivers of successful customer retention according to European and APAC wealth managers 41
Figure 16: Key influences on clients' selection of providers according to European and APAC wealth managers 43
Figure 17: Key influences on increasing share of wallet according to European and APAC wealth managers 45
Figure 18: Wealth managers citing ""Following key staff to other organizations"" as one of the most likely reasons for clients to leave a wealth management service 47
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