Wealth Management in Switzerland 2009

Introduction

This report focuses on the onshore liquid wealth of affluent individuals and the liquid assets they hold, sizing, segmenting and forecasting the affluent population across 10 liquid asset bands. It also presents detailed HNW demographic and decision trigger analysis, and strategies to drive revenue growth based on large scale survey of the main players.

Scope

*HNW demographic and attitudinal attributes based on our Wealth Management Market Leaders Survey 2009.

*Sizes, segments and forecasts the number of affluent individuals across 10 liquid asset bands from EUR50k.

*Extensive primary research from 20 wealth management companies, highlighting their strategies for revenue growth, acquiring and keeping customers.

*In depth assessment of how UBS's wealth management operations are currently perceived, following the spate of bad news from the UBS AG.

Highlights

Switzerland is now officially in recession. With asset prices in freefall, affluent individuals have had to fight to protect what they have got. Swiss HNWs now have one-quarter of their investments in cash; they are uncertain about the impact of current market conditions on their portfolios and are leaning on wealth managers for guidance.

In this time of market uncertainty, wealth managers need to understand the underlying attitudes of clients more than ever, for they drive the type of services that is appropriate. Ideally, wealth managers should be helping clients see opportunities in the downturn as well as educating their clients at this time, following the lead of UBS.

HNWs are focusing more on the brand, image and reputation of providers, followed by personal service. A greatly enhanced personal service on the part of Swiss wealth managers is vital to overcome any damage done to reputation by market developments.

Reasons to Purchase

*Understand the HNW population's investments by sector and geography, appetite for risk, and reasons for choosing/leaving their wealth service.

*Assess market attractiveness by reviewing size and growth forecasts for the potential wealthy client base five years ahead.

Report Highlights
Highlights

Switzerland is now officially in recession. With asset prices in freefall, affluent individuals have had to fight to protect what they have got. Swiss HNWs now have one-quarter of their investments in cash; they are uncertain about the impact of current market conditions on their portfolios and are leaning on wealth managers for guidance.

In this time of market uncertainty, wealth managers need to understand the underlying attitudes of clients more than ever, for they drive the type of services that is appropriate. Ideally, wealth managers should be helping clients see opportunities in the downturn as well as educating their clients at this time, following the lead of UBS.

HNWs are focusing more on the brand, image and reputation of providers, followed by personal service. A greatly enhanced personal service on the part of Swiss wealth managers is vital to overcome any damage done to reputation by market developments.
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Table of Contents 4
Table of figures 5
Table of tables 6
SPECIAL FEATURE: THE END OF AN ERA IN GLOBAL WEALTH MANAGEMENT? 7
Switzerland is at the center of changes in the international wealth management business 7
Economic circumstances are driving a re-examination of global wealth management practices 7
US court action is only one attack on Switzerland's status 7
The G20 and OECD have brought further damage to the Swiss model of banking 8
Increasing wealth in non-Western markets is fuelling growth in wealth management in those countries and in the process creating a more competitive international wealth management landscape 9
UBS has been damaged by a number of difficulties but is still standing 10
There is no doubt that the image of UBS has been tarnished by the bank's troubles 10
The need to be bailed out has further undermined UBS's standing 10
UBS's biggest threat is now the damage caused by its misconduct in the US 10
Wealth managers in Switzerland do not believe that UBS has been irretrievably damaged 11
UBS management is aiming to return to profitability in 2009 13
UBS still faces an uncertain future 15
There are unique opportunities for wealth managers to profit in this new environment 16
These opportunities should be explored at the same time as wealth managers work to lift brand, image and reputation 16
Wealth management opportunities in a downturn need to revolve around boosting the company profile 16
Actively recruit good relationship managers from competitors 16
Leverage CRM systems to identify new wealth management clients 17
The media can be used to raise the public profiles of both individuals and the financial institution 17
The onshore market for wealth management remains significant and unaffected by challenges to the Swiss banking model 18
The structure of the wealth management industry in Switzerland may be set to change 18
Expansion abroad is a key strategy for developing the wealth management business 18
Swiss wealth managers should exploit their strengths to position themselves strategically globally 19
It is the end of an era for wealth management but there is still a leading role for Switzerland 19
SWITZERLAND'S WEALTH 20
Swiss households play it safe but still manage to increase their net financial assets through savings growth 20
The financial assets of Swiss households increased at a slower rate during 2007 20
Swiss household balances have moved away heavily from equities and mutual funds 23
Swiss households show an inclination toward more safe investments 23
The Swiss Exchange lost less value than other European exchanges in 2008 24
Wealth Data in 2009 26
THE SWISS HNW INVESTOR 27
Swiss investors are cautious and need guidance from their wealth managers 27
Swiss investors are most likely to have cash holdings as their financial investment 27
Wealth management service implication: clients need guidance to take advantage of the market recovery 28
Innovative global example: ClientFirst Wealth Management in the US provides online tools to help educate its clients 29
Innovative global example: BTC Wealth Management Group has online financial planning library resource to help clients learn about investment 30
Over the next two years, investors will cautiously start to return to asset classes currently out of favor 30
Swiss investors are looking to equities, corporate bonds and capital protected funds as the economy starts to recover 31
Wealth management service implication: offer clients innovative capital protected products to see them through the economic uncertainty 33
Innovative example: UBS launches capital protected product to satisfy demand for equity products 33
Innovative example: Macquarie has a capital protected Geared Equity Investment product 34
Swiss HNWs demonstrate an appetite for risk but are demanding in terms of the standard of wealth management service 34
HNWs exhibit an above average appetite for risk but are more confused about the impact of the market turmoil on their investment portfolios 34
Wealth management service implication: Switzerland should aim to lift the bar and educate clients more about investment matters 35
Innovative example from Switzerland: UBS is investing in educating its clients 36
Swiss HNWs are demanding in terms of standard of wealth management service 37
Wealth management service implication: wealth managers must continue to refine client-focused operational models 38
Faced with uncertainty, Swiss HNWs want to understand their investments 38
Clients are clearly seeking guidance from their wealth managers 38
Swiss investors are more likely to be looking to asset preservation than profiting from the downturn 39
HNW clients in Switzerland are happy to delegate investment responsibility to their wealth manager 39
Wealth management service implication: wealth managers need to understand the fundamental attitudes of their clients 41
THE SWISS WEALTH MANAGER'S VIEW 42
In two years' time, HNWs will still need some guidance from their wealth managers across a range of investments 42
Several fundamental products and services will be in demand from HNWs in the next two years 42
Within an overall desire for guidance from their wealth management service, Swiss HNWs are still likely to be seeking less risky products in two years' time 44
A continued demand for capital protected funds and bonds 44
Innovative example: RBS provides capital protected investment fund and a higher savings rate to its customers 45
Infrastructure funds are set to grow in popularity in the future 45
Innovative example: UBS launched an international infrastructure fund 45
There are three key areas where wealth managers are focusing their resources in two years' time 46
Wealth management service implication: understand the fundamental attitudes of HNWs in order to shape the right products and services for them but encourage them to think beyond the recession 48
Innovative example from the US: Morgan Stanley creates a global infrastructure fund to take advantage of the current market conditions 49
Wealth managers must pay attention to brand, image and reputation, and develop personal relationships with clients as these are the key drivers of HNWs' choice of wealth management service 49
Wealth managers can proactively enhance their level of personal service to help the image of the firm 49
Wealth managers in Switzerland see personal relationships as their biggest strength and service quality as their biggest weakness 51
Swiss wealth managers need to convince clients that the company is financially sound, and give them several points of contact 53
The key to increasing share of wallet is to assure clients that the company is financially sound 53
Wealth managers need to give clients several points of contact within the bank in order to be successful at retaining HNW clients 55
Wealth managers in Switzerland are more likely to talk their clients daily than other European wealth managers, with investors mostly wanting to talk about the performance of their portfolio 57
Swiss clients are being contacted by phone more frequently than in other countries 57
Swiss wealth managers are also good at getting in front of their clients 59
Overall portfolio performance is mostly what Swiss HNWs want to talk about when they speak to their wealth manager 60
APPENDIX 62
Definitions 62
The drivers of growth in the wealthy population 62
Income growth (combined with inflation, changes in GDP by sector, household savings rates and debt levels) 62
Investment returns (market capitalization, interest rates and bond yields) 62
The following measures are not, in themselves, drivers of wealthy population growth 62
Market capitalization 62
GDP 62
The following measures are not drivers of wealthy population growth except under very restricted circumstances 63
Primary residence value growth 63
Inheritance 63
Methodology 63
Wealth Management Market Leaders Survey 2009 63
Global Wealth Model 63
The UK sub model 63
Global sub model (for all other countries) 64
Forecasting methodology 64
Continuous refinement to the understanding of liquid wealth distribution 64
Datamonitor's wealth numbers compared with other wealth numbers 65
Definitions 65
Western Europe 65
References 65
Further reading 66
Ask the analyst 66
Datamonitor consulting 66
Disclaimer 66
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List of Tables
Table 1: Wealth managers' views of UBS's wealth management services 12
Table 2: Wealth managers' views of UBS's wealth management services 13
Table 3: Wealth managers' views of UBS's wealth management services 14
Table 4: Wealth managers' views of strength and weaknesses of UBS's wealth management services 15
Table 5: Personal disposable income per adult in Europe, 2004-08 ($) 21
Table 6: Household savings rates as a percentage of disposable income, 2004-08 22
Table 7: Swiss household balances, 2007-08 (€m) 24
Table 8: Market capitalization of European and US stock exchanges, 2004-08 26
Table 9: What proportion of your HNWs' portfolios is allocated to the following five asset classes? 28
Table 10: HNWs' portfolio allocation now versus in two years' time 31
Table 11: HNWs' portfolio allocation by product area now versus in two years' time 33
Table 12: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high) 35
Table 13: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high) 38
Table 14: What are HNWs demanding today? 40
Table 15: In two years' time, how much demand do you expect from HNWs for the following product areas? 44
Table 16: What product areas will your wealth management service focus most resources on in the next two years? 48
Table 17: What will determine HNWs' choice of wealth management service over the next two years? 51
Table 18: What are your company's biggest strengths and weaknesses today? 52
Table 19: What is the most effective means of increasing share of wallet today? 55
Table 20: What is the best way to retain clients today? 57
Table 21: On average, how often do your relationship managers speak by phone to each HNW client? 58
Table 22: On average, how often do your relationship managers speak in person to each HNW client? 60
Table 23: When speaking with clients, what do they most want to talk about today? 61
List of Figures
Figure 1: UBS's brand, image and reputation has suffered as a result of the turbulence 11
Figure 2: UBS is perceived as having a more limited product range but is stronger in its advisory service 13
Figure 3: UBS's wealth management operation is most let down by the quality of its relationship managers and their depth of relationships with clients 14
Figure 4: Switzerland consistently has one of the highest savings rates in Europe 21
Figure 5: Swiss household balances have moved heavily away from equities and mutual funds 23
Figure 6: The Swiss Exchange lost a lower percentage of its market capitalization than other European exchanges 25
Figure 7: The majority of HNW wealth in Switzerland is invested in the 'cash or near cash' asset category, with this accounting for 25% of all investments 28
Figure 8: Over the next two years investors will move away from those assets currently more in favor 31
Figure 9: In 2011, the majority of high net worth assets in Switzerland will be invested in the 'Equities' category, with this accounting for 23% of all investments 32
Figure 10: HNW investors in Switzerland have a lower risk appetite than the average European HNW investor 35
Figure 11: There is a lower risk of HNW clients in Switzerland leaving to find another wealth manager than the average European HNW investor 37
Figure 12: In Switzerland, HNW investors' greatest demand is for simple, transparent investments 40
Figure 13: In two years' time, the greatest demand amongst HNW investors in Switzerland will be for infrastructure funds, with 23% of HNW investors demanding this category of product 43
Figure 14: Wealth managers in Switzerland will be focusing most of their resources on direct equity investment in two years' time 47
Figure 15: HNW investors in Switzerland are most influenced by brand, image and reputation in their choice of wealth manager 50
Figure 16: The greatest strength of wealth managers in Switzerland is their personal relationships with clients 52
Figure 17: The best way for wealth managers in Switzerland to increase share of wallet is to convince clients that the company is financially sound 54
Figure 18: The best way for wealth managers in Switzerland to retain HNW investors is to give the client several points of contact within the bank 56
Figure 19: In Switzerland, wealth management relationship managers speak to clients by phone approximately once a week 58
Figure 20: In Switzerland, wealth management relationship managers speak to to clients in person approximately once a quarter 59
Figure 21: The majority of clients in Switzerland want to speak to their wealth manager about the performance of their overall portfolio 61
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