Print this article

Record Industry Growth Threatened by Lack of Quality Wealth Managers - PwC Survey

Emma Rees

22 June 2007

Chief executives of wealth managers and private banks are more optimistic about the fortunes of their own firms and those of the industry over the next three years than at any time in the last 14 years, according to the latest findings from PricewaterhouseCoopers 2007 Global Private Banking/Wealth Management Survey. CEOs predict that their assets under management will increase at a staggering rate of 30 per cent per annum and that industry AuMs will grow by 23 per cent. The respected biennial survey interviewed senior executives of 265 organisations across 43 countries and the predictions of quantum growth were echoed by chief operating officers and finance directors. Bruce Weatherill, global private banking and wealth management leader, PricewaterhouseCoopers, told WealthBriefing that there are a number of factors driving growth in AuM including increase in assets due to the impact of the stock market, greater share of wallet, expansion into new markets, new clients not currently served by the industry, as well as acquisitions: “Some of these like stock market growth will have no impact on an individual firm’s resourcing. Winning clients off competitors will, but is neutral as far as industry net new wealth is concerned. Entering new markets and attracting new clients to the industry will require a firm to recruit additional client relationship managers, but there remains a war for talent in the industry which is threatening growth ambitions.” The report warns that the current CRM model is under severe strain and needs re-engineering and says that talent management must be on the main board’s agenda. An alarming 26 per cent of CEOs claim to be very confident that they will be able to recruit enough CRMs to fulfil their growth ambitions over the next three years and just 17 per cent rate CRMs as having very high ability to manage the needs of their clients.” Mr Weatherill says that stealing CRMs from competitors is not sustainable for the industry and points to Singapore as an exemplar: “Singapore has three institutions turning out CRMs - the Wealth Management Institute and the UBS and Credit Suisse training facilities. Switzerland also has wealth management and private banking schools. In the UK there are courses, but no official industry accreditation or a training facility turning out the hundreds of private bankers that are required. However, one or two UK players are concentrating on innovative training for new recruits of both graduates and from other professions.” Mr Weatherill believes that most current UK qualifications tend to be investment management led and focused on mandatory training such as regulation and anti-money laundering legislation at the expense of softer client service led social skills. The survey points to Asia Pacific and Eastern Europe as the markets that are expanding the fastest, as firms rush to service the new wealth creators in these regions. In Asia Pacific, CEOs expect their businesses’ assets under management to grow at an annual rate of 34 per cent and in Russia between 30 and 50 per cent. CEOs’ plans for growth include entry into these lucrative markets, including by acquisition. Almost 90 per cent of CEOs feel that there will be at least some, if not significant, consolidation in the industry and more than half of CEOs plan to open operations in new countries, including the BRIC countries, over the next two years to access new clients: “Chief executives need to be more focused and base corporate strategy decisions on their strengths and what differentiates them”, says Mr Weatherill. “It is important not to try to chase every opportunity and if resources are tight in the UK, there is little sense in sending CRMs to China where the success rate is relatively low. Otherwise client service can suffer at the expense of ambitious growth plans.” The report finds that the means by which most wealth management organisations seek to differentiate themselves are brand value, personal relationship and quality of professional advice. It also reveals a real commitment among wealth managers to increase “share of wallet”, with the 50 per cent of wealth managers currently holding more than 40 per cent of their clients’ investable wealth expected to increase markedly to 80 per cent over the next three years. This is important for two key reasons. The first is that existing clients are an excellent source of new assets, revenues and profits with low acquisition costs. The second that increased share of wallet has a negligible impact on the scarcest resource of all, the CRM, as well as increasing client satisfaction and creating important cross-referrals. Brand is increasingly something that wealth management firms are focusing on with 93 per cent of business managers viewing it as important or very import, significantly more than in previous surveys. The top three business issues considered to be most pressing over the next three years are regarded as acquisition and retention of clients, acquisition and retention of key staff and image and reputation, but just 20 per cent of CEOs said that they were very satisfied with their business’s current position and performance. With dissatisfaction with service found to be the most common reason for clients leaving a wealth management firm, Mr Weatherill concludes: “Most clients don’t want to understand the technicalities or know about exotic trades – that’s why they go to an expert. Client service is about advice, about understanding your client, their aims and objectives. It is important for a CRM to act as an interface and be able to discuss in layman’s terms what they should do with their assets.”