The Wealth Management Super League

This Strategic Insight Report assesses the issue of organizational scale in the private wealth management market. It looks at 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
Political and economic liberalization means that the markets available for entry at present is larger than ever before, forcing the top tier of wealth managers to expand to maintain their "global" status. Rapid development of the BRIC economies, creating a significant class of wealthy individuals, makes these markets highly attractive. UBS Wealth Management continues to be the clear leader among global wealth managers in terms of assets under management, with over double the AuM of its nearest rival, Credit Suisse Private Banking. With EUR880.8bn under management, UBS WM alone holds 34% of the total value of assets under management for the entire top ten in the super league. Some of the top players in the wealth management super league are undergoing or have recently experienced major changes in their organization, either as part of wider transformations of the parent bank or in the private banking unit. In some ways, significant overhauls that affect the private bank can be beneficial but also present challenges.


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Datamonitor View 1
CATALYST 1
SUMMARY 1
Market Background 2
The wealth management competitive landscape has become diversified and more aggressive in recent years 2
Alternative investments and technological advances have opened up new opportunities and challenges for the biggest wealth managers 2
New markets have opened up, driving both geographic diversification and competition for a crucial foothold 2
Mergers and acquisitions continue to force wealth managers to define themselves either as super league contenders or niche boutiques 2
Global players have extended their reach and scaled up even further in recent years 3
European regulation has opened up the possibility of a European single market in the foreseeable future 3
The battle for a foothold in emerging markets encourages massive investment and rapid growth 3
Strong market performance continues to drive expansion 3
UBS remains the clear leader of the wealth management super league 3
Three wealth managers have pulled away from the pack to form their own "ultra super league" in terms of AUM 4
Wealth manager Case Studies 5
The top five wealth managers are reviewed across a range of criteria 5
In a financial performance comparison, the larger scale operations generate larger profits, but are not the best performers in terms of pure efficiency 5
HSBC Private Bank has seen the greatest assets under management compound annual growth since 2003 5
UBS Wealth Management saw AuM grow most between 2005 and 2006 in absolute terms 6
An analysis of revenues, costs and profits reveals that the smallest wealth manager in the top five manages the best cost-income ratio 6
UBS: Still leading the way 10
UBS appears unstoppable in its plans to dominate wealth management globally 10
UBS Wealth Management has an aggressive attitude towards growth but also maintains organic expansion 11
The bank is adept at leveraging the whole banking network to achieve its aims 11
Although recently the bank's home market has been less of a priority, it refocused on the Swiss market in 2006 11
The Asian market is key to UBS Wealth Management, and it is a leader and innovator in the region 12
Credit Suisse: Making little headway in the battle with UBS 12
Organic growth is the corporate focus although a strong capital base means acquisitions are also possible 12
Realignment of business focus is moving more of Credit Suisse Private Banking's operations to emerging markets 13
Integration and leveraging cross business resources is central to Credit Suisse's new strategic direction 13
Cutting edge product development has remained high on Credit Suisse Private Banking's agenda 13
Staff retention has been a significant problem for Credit Suisse Private Banking in recent years 14
Goldman Sachs: The dark horse of wealth management 14
Goldman Sachs' rise in the wealth management world has been fast but generally well designed 14
The Goldman Sachs brand has helped to give the private client business a strong head start 14
Being a "new" business means the bank has been able to construct a private client service that best fits its needs and those of its target client base 15
An aggressive approach to global expansion is underlined by large scale investment in emerging markets 15
A sophisticated product range has been necessary to attract the top tier of wealthy individuals 15
Smith Barney: Leveraging Citigroup's global strength 16
Increasingly close ties to Citigroup have helped Smith Barney to prosper 16
Smith Barney is evolving in line with trends in the wealth management market 16
Ongoing changes have significantly affected Smith Barney and are likely to affect the bank going forward 17
In some cases upheaval has been costly for the firm 17
HSBC: Becoming the world's local private bank 17
HSBC Private Bank aspires to follow in its parent bank's global footsteps 18
"Joined-up banking" offers tangible benefits to HSBC Private Bank through the parent network 18
The development of market leading products is a key strategy for organic growth 19
The pursuit of more specific client segments within developed markets ensures ongoing innovation and growth 19
Data tables 20
Implications for the industry 22
Measures of financial progress can indicate which private banks are implementing successful strategies 22
The top players in the super league are all developing their presence in emerging markets 22
Major changes can bring large rewards but also present challenges 22
In future, the super league is likely to continue to pursue market entry opportunities as the key driver of global growth 23
APPENDIX 24
Note 24
Definitions 24
UBS Wealth Management 24
Credit Suisse Private Banking 24
Goldman Sachs Investment Management 24
Smith Barney Private Client Group 24
HSBC Private Banking Holdings 24
Methodology 24
Further reading 25
Ask the analyst 25
Datamonitor consulting 25
Disclaimer 25

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Table 1: Top 10 global private banks by worldwide assets under managemAssets under management growth 4
Table 2: Assets under management growth and current size for top ten wealth managers by AuM 20
Table 3: Operating revenues for the five biggest global wealth managers by AuM, 2002-2006 (EURm) 20
Table 4: Operating expenses for the five biggest global wealth managers by AuM, 2002-2006 (EURm) 21
Table 5: Operating profits for the five biggest global wealth managers by AuM, 2002-2006 (EURm) 21
Table 6: Cost-income ratio comparison 2004 and 2006 21


Figure 1: Assets under management growth and current size for top ten wealth managers by AuM 6
Figure 2: Operating revenues for the five biggest global wealth managers by AuM, 2002-2006 7
Figure 3: Operating expenses for the five biggest global wealth managers by AuM, 2002-2006 8
Figure 4: Operating profits for the five biggest global wealth managers by AuM, 2002-2006 9
Figure 5: Cost-income ratio comparison 2004 and 2006 10

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