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Wealth management results show increasing polarisation between global and boutique firms


Scorpio Partnership’s annual Private Banking Benchmark of the global wealth management industry shows international providers weathered the storms of 2011 more successfully than smaller players.

Firms in the top half of the Benchmark performed better than lower tier wealth management firms in terms of net new money, assets under management, income and pre-tax profit growth.

However, large firms had higher expenses linked to increasing levels of global regulation and expansion into new markets. For these firms, expansion is a double-edged sword fuelling growth on the one hand but also increasing expenditure and exposing firms to the growing complexity of international regulation.

Wealth managers that lack global reach also faced difficult operating conditions. Their net new money flows more than halved and margin pressure reduced overall levels of income. Many of these firms responded with cuts in order to maintain their profitability. The smaller Swiss private banks were particularly prone to these challenges. They face the additional pressure of heightened global scrutiny on tax issues.

In spite of their different challenges, large and small wealth management firms navigated the complex economic and regulatory environment successfully, reporting solid growth in profitability. This suggests wealth managers are adapting to the structural changes taking places in the financial services industry and the rapidly evolving economic and market conditions.

These are the main findings of The Scorpio Partnership Private Banking Benchmark 2012, which is an annual assessment of the efficiency and effectiveness of wealth management as a business model servicing high net worth clients. This year’s analysis of the industry’s key performance indicators covers 201 wealth management entities around the world.

“Since the financial crisis began in 2008, the operating environment has been changing rapidly for wealth managers. This year’s analysis shows some firms are reacting better than others to the new reality of changing economic patterns and extensive compliance,” says Sebastian Dovey, managing partner at Scorpio Partnership.

The report finds assets under management for the sector as a whole held level. The average percentage change was up 0.61 per cent versus the previous year. This marks a solid result given the onslaught of the Eurozone crisis, US deficit problems and sluggish growth in Asia in the latter half of the year.

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