Fund Management

Consolidation is Major Theme for Private Banks—PWC Report

Contributing Editor, 16 June 2005

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Consolidation is due to accelerate among European private banks and wealth managers and the major players in the sector reinforce their stre...

Consolidation is due to accelerate among European private banks and wealth managers and the major players in the sector reinforce their strengthening position through acquisition, according to PricewaterhouseCoopers.

PWC’s latest global private banking/wealth management survey released today found that 43 per cent of private banks in Europe expect to gain market share through buying competitors.

Acquisitions in the wealth management sector are rising rapidly, up more than 50 per cent in the first five months of 2005, compared with the same period a year ago, according to research from WealthBriefing released today.

“We believe there will be significant repositioning in the market,” said Bruce Weatherill, global leader of PWC's private banking business, at a press conference in London. “More and more, size will matter as international banks go on an acquisition trail and local/national banks look to achieve scale through less costly growth strategies.”

He added: “Our analysis shows that the large wealth managers are beginning to benefit from scale in both profitability and asset growth.”

PWC said that 130 wealth managers and private banks participated in the survey—a record number.

Competition for wallet share will intensify, said the report, which found that around 64 per cent of participating banks in the survey expect to hold more than 40 per cent of the assets of their clients by 2008, compared with 45 per cent today.

European and Asian wealth managers are expecting the largest rise during the next three years, said the survey.

“Wealth managers are set for a competitive few years in their quest to gain market share,” said Richard Collier, global leader of the banking tax practice at PWC. “The provision of comprehensive, integrated wealth management planning and investment performance are two rising differentiators.”

Wealth Rises
The survey also showed that all tiers of wealthy clients groups, from the affluent with $100,000 to $500,000 total assets to the top tier of ultra-high net worth individuals with more than $50 million, have seen their wealth rise.

The report found that the UHNW ($50 million-plus) represent an average of 19 per cent of funds under management, compared with 11 per cent two years ago. Very high net worth individuals (assets of $5 million to $50 million) now represent an average of 30 per cent of funds under management, compared with 26 per cent in 2003.

Margins under Pressure
The survey found that revenue growth in wealth management has been strong, although margins are coming under rising pressure. Thirty two per cent of participants saw margins falling against 18 per cent expected them to rise, and 47 per cent believing they will be maintained.

PWC’s study also found a reluctance of wealth managers to move to open architecture in areas such as discretionary asset management and mutual funds, as well as why alternative investments have become core products.

“Open architecture is still a masquerade for most wealth managers and in reality only exists at the margin,” said Mr Weatherill. “Many wealth managers still manufacture product either themselves or via their parent.”

He added: “From banking services to specialist advisory services to asset management, banks are mainly providing proprietary products.”

More detail on the report will be provided during the next few days on WealthBriefing

An executive summary of the report is available on:

www.pwc.com/wealth

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