Of the $18.5 trillion in assets now managed by the global wealth management industry, 76 per cent is in the hands of the top 20 operators, according to Scorpio Partnership's latest Global Private Banking Benchmark.

Net new money across the global
private banking industry made a sharp turnaround in 2012, with the top 20
players by size leading the success story – a finding in line with consumer
demand for a single wealth management proposition, according to new research by
London-based Scorpio Partnership.

Wealth managers logged, on
average, a percentage change in net new money of 23.7 per cent last year - a
considerable improvement from the nadir of 2011 when the average percentage
change in new money plummeted to -27.9 per cent, the consultancy's Global Private Banking Benchmark 2013 shows. 

The report examined year-end 2012 data
of over 200 global financial institutions; please click here for more details
on how to purchase a copy.

Of the $18.5 trillion (2011: $16.7 trillion) in assets now managed by the global wealth management industry, 76 per cent is in the hands of the top 20 operators. These
so-called “mega-wealth managers” experienced a 10.9 per cent growth in their AuM during the
review period compared to 8.7 per cent across the industry as a whole, the report found. 

Partly facilitated by its
“robust” growth of 9.7 per cent, Switzerland’s UBS sits at the top
of this year’s roster in AuM terms, with $1.71 trillion, as Bank of America slipped into second
place with a growth rate of 5.9 per cent and $1.67 trillion. Behind UBS and BoA are, in ascending
order*: Wells Fargo; Morgan Stanley; Credit Suisse; Royal Bank of Canada;
HSBC; Deutsche Bank; BNP Paribas; Pictet (up one place); JP Morgan (down one place); Citi Private Bank (up one place); Goldman
Sachs (down one place); ABN AMRO; Barclays; Julius Bär; Northern Trust; BNY Mellon; Lombard
Odier (up one place); and Santander (which returned into the top 20 for the first time since 2010). 

Scorpio said Santander’s
return into the top 20 - up three places - reflects the Spanish bank’s decision to buy out minority
shareholders in Banesto and Banif, while absorbing the local banks into the Santander organisation. This resulted in 66.2 per cent AuM growth during the year - by far the highest among all top 20 banks. In seventh place, HSBC logged the smallest asset growth, at 5.6 per cent. 

In the report, Scorpio says that that dominance of the global top 20
reflects consumer demand for a single wealth management proposition. The firm
notes that
41.4 per cent of 4,400 millionaires surveyed this year expressed a “strong
preference” for working with a single wealth manager versus 14.4 per cent who
said they prefer multiple providers. 

A new league emerges - but firms mustn't get complacent 

“In spite of numerous challenges - both economic and regulatory - we have seen the confirmation of a new champions' league of global wealth managers,” says Sebastian Dovey, managing
partner at Scorpio Partnership. He adds that these businesses collectively have a role in managing 75 per cent of all high net worth wealth, saying: “They are beginning to demonstrate very distinct mega-player
characteristics which the rest of the competition will have to work out how to
challenge.”

Indeed, the report describes the “sharp
uptick” in new money as a turnaround for the private banking industry, which has struggled
to attract convincing levels of new client assets since the financial crisis.
However, challenges remain - particularly with regard to cost management.

While the future “looks good” in some
areas, firms must work at maintaining profit margins. For example, despite “solid” pre-tax
profits across the industry, the average percentage change on profits
was 5.3 per cent for 2012, compared to 12.3 per cent for 2011, the report shows. It recommends that the wealth management industry addresses rising operating costs by determining efficiency
points and then optimising them. In conclusion, there
are still signs of weakness in the model for many operators, it says. 

Regional breakdown

In a bid to unearth the wealth
management industry’s “true strategic focus”, this year’s report also
considers the regional breakdown of firms’ AuM. Data from a selection of wealth
management firms collectively managing $1.1 trillion illustrates that 42 per
cent of assets are booked in Europe, followed by Latin America (28 per cent),
Asia-Pacific (21 per cent), North America (7 per cent) and the Middle East and Africa (2 per cent). This, the report notes, means that
over half (51 per cent) of total assets booked are in emerging markets.

(The firms that provided data on
the regional breakdown of their AuM have their respective headquarters in
northern Europe, southern Europe, North America, Latin
America and Asia-Pacific.)

According to Catherine Tillotson,
managing partner at Scorpio, the data suggests that re-orienting a wealth
management business to access growth in emerging markets is a complex
challenge. “International expansion is a
long-term commitment and wealth managers must focus on how to translate their
services to meet local needs if they wish to convert emerging market assets
into a stable revenue stream,” she says.  

Scorpio's 2013 benchmark is based on results from 209 global private banks with total AuM of $14.8 trillion. 

*The top 20 global private banks by AuM (in US dollar billions) are: UBS ($1,705); BoA ($1,674); Wells Fargo ($1,400); Morgan Stanley ($1,308); Credit Suisse ($854.6); RBC ($628.5); HSBC ($398); Deutsche Bank ($387.3); BNP Paribas ($346.9); Pictet ($322.2); JP Morgan ($318); Citi Private Bank ($250); Goldman Sachs ($240); ABN AMRO ($212.7); Barclays ($201.4); Julius Bär ($200.8); Northern Trust ($197.7); BNY Mellon ($179); Lombard Odier ($175.5); and Santander ($172.7).