First quarter rough on wealth managers’ client base, assets

The average U.S. wealth management firm experienced client attrition of 6% to 10% and asset attrition of 11% to 25% in the first quarter, according to the Global Private Banking and Wealth Management Survey released today by PricewaterhouseCoopers LLP.
Expansion in the industry has “been brought to a screeching halt,” the report said.
Chief financial officers of wealth management firms are forecasting a 15% rise in new assets under management, and revenue growth of 13% through the rest of this year, the report stated.
However, financial officers predicted no growth in profits this year “before tax growth.”
The most profitable segment of the market, according to the survey of 238 wealth managers in more than 40 countries, includes clients with net assets of $500,000 to $20 million.
To remain competitive, wealth management firms will also need to cut costs by 20%, while at the same time increasing investments in technology, due diligence and reporting, the study concluded,
Only 20% of chief executives consider their client relationship managers “to be of high caliber in terms of meeting their client needs,” according to the accounting and consulting firm’s study.
The most profitable wealth managers have significantly lower ratios of clients per adviser, according to the report.
Transparency has become the new “gold standard” for wealth managers in terms of products and client servicing, the study asserted.
“Transparent product offerings together with robust due diligence processes are critical, not only to drive customer value but also to protect the reputations of wealth managers,” the report stated.
The pressures on the industry may force consolidation, said C. Steven Crosby, leader of the U.S. private banking and wealth management practice for New York-based PricewaterhouseCoopers.
Servicing strategies for clients must address “specific client segments with differentiated offering and effective delivery channels,” according to the study.
The survey also found “no direct link between size and profitability” for wealth management firms.
“How large an organization is has little bearing on how profitable it is, and size simply for size’s sake does not appear an attractive goal for wealth managers to pursue,” the report concluded.
The survey was conducted in person and online between December 2008 and March 2009.

Related Topics: IN Research, Wealth Management