Oliver Wyman and Deutsche Bank today released their fourth annual Wealth Management report titled “Out of the pit stop - into the fast lane.” In 2018, Wealth Managers faced growing headwinds.
The report finds that global high-net worth (HNW) wealth growth slowed to 4 percent in 2018. Lower assets under management (AuM) growth, more challenging markets and continued fee compression led to declining Wealth Management business valuations. The revenue pressure felt by Wealth Managers in late 2018 highlights the continued vulnerability of operating models to market stress. The rebound in early 2019 brought short-term relief for some, but further pressure is inevitable as the end of the cycle approaches.
Mathieu Vasseux, Partner and Head of Financial Services (MEA) at Oliver Wyman, said: “To realize above average growth, serving developed markets will not be sufficient. Emerging Markets including the Middle East and Africa, are the engine for growth going forward as the industry continues to face fee margin and cost pressures in developed markets.”
The report highlights the following priorities for the C-suite:
· Rethink footprint in Emerging Markets – More than half of HNW wealth growth will originate in Emerging Markets vs one third of stock today. Wealth Managers need to rethink their positioning in these markets especially Asia-Pacific and Latin America.
· Simplify the operating model -- The Q1 2019 market rebound has given Wealth Managers a last chance to improve efficiency of their operating model and adjust their cost base before an eventual downturn.
o To increase efficiency in the front office, Wealth Managers must free up advisor capacity for revenue generating activities by automating and digitizing processes, particularly in client onboarding, KYC/AML, and lending. Embedding different service levels and greater automation in the investment engine is still a largely underutilized lever. Wealth Managers need to align their offering with client needs in an industrialized, mass personalized offering.
o Allocated costs remain stubbornly high and should be tackled by lowering group services consumption. Wealth Managers need to focus on understanding and steering cost allocations as well as establishing a culture of cost ownership to get into the driver’s seat for allocated costs.
