Assets under management have seen a significant upswing around the world but these gains have not translated into the top-and-bottom-line growth that wealth managers would expect based on past recoveries, according to Booz & Company.
The company has released the results of an extensive global survey – conducted from interviews with over 150 wealth management executives, senior financial advisors, and regulators from more than 15 international markets – the results of which reveal that a number of issues are affecting the speed of recovery.
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Key findings highlight that new global regulations, reduced revenue pools, new competition and changing customer behavior represent major challenges for wealth firms.
The survey reveals that not all wealth managers are equipped to benefit from the expected upturn, and the prognosis varies by region. The report highlights that Europe continues to lag behind other regions, and, accordingly, it is the European banks that have had to take the biggest hit in terms of profitability.
Despite substantial cost reductions at many banks, the average cost/income ratio for European wealth managers rose from 60% in 2007 to 78% in 2012, and around 20% of European wealth managers are struggling to turn a profit.
Looking beyond Europe, assets under management continue to increase significantly on a global level. In Asia, the Middle East and Latin America, growth rates over the past five years have been well into double-digit figures. In North America, assets under management recently re-passed the pre-crisis level.
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By GlobalDataTo equip themselves to respond to the new market conditions, wealth managers must:
- apply a "capabilities lens" to ensure they focus on markets where they can compete and differentiate themselves effectively;
- rethink their value proposition with tiered offerings ensuring transparency and customer suitability;
- go digital to enhance the customer experience and reduce the cost to serve;
- and adapt their operating model and cost structure to the new revenue realities.
Alan Gemes, co-author and senior partner with Booz & Company’s London office, said: "Wealth managers looking to play a leading role will need to fundamentally adapt their value proposition and operating model if they are to capitalize on the continued economic recovery in 2014 and 2015."
