Private banks and wealth managers saw their profitability improve substantially over the past 18 months due to recovering stock markets and to sales of high-margin products, such as hedge funds and structured investments.
Wealth managers in all the major regions – Europe, the Americas and Asia-Pacific – improved their profitability, with all business models doing well. This improvement was driven by improved margins, a better product mix and by capturing revenue from selling more services as markets rose and wealthy investors returned to the equity markets.
The importance of wealth management is growing for large financial institutions. Wealth management, broadly defined, could now represent as much as 20% of economic profit at many large financial institutions. The United States, meanwhile, was the single most important wealth management market in the world last year, accounting for 60% of the industry’s overall profits, according to The Boston Consulting Group’s The Rich Return to Richer Returns: Global Wealth 2004.
“The trends are encouraging, but many firms are missing promising opportunities, particularly with emerging wealthy investors,” said Christian de Juniac, Senior Vice President and Director in BCG’s London office. “We believe that wealth management will continue to see strong growth due to healthier markets, and continuing demographic trends.”
The report draws insights from a survey of the performance of almost 100 of the world’s leading wealth managers. In addition to the traditional markets of the US and Europe, new and fast-growing wealth management markets such as India and Greater China, Eastern Europe, Latin America and the Middle East, offer promising prospects for competitors with global reach.