Table of Contents

Wealth management super league 2008 - An investigation into organisational scale in the private wealth management market, including a profile of the top five competitors and commentary on their strategic development.

Product Code: dmfs2240

Publication Date: 22-Jan-2009

---

Overview

Introduction

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.

Scope

· Organizational scale in the private wealth management market, covering the major European and US wealth management firms.

· Key financial performance indicators of the top five wealth managers over the last three years.

· Strategic opportunities for wealth managers in an economic downturn.

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.

Reasons to Purchase

· Quantitatively assess your performance through 2008 against the world's largest wealth managers.

· Understand the strategic development of the five largest super league players.

· Gain insight into strategic opportunities for wealth managers in challenging times.

---

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
List of Tables
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
List of Figures
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

---