Themes in wealth management 2009: Part 3
To mark the start of 2009, Wealth-Bulletin is running a series of insights from leading wealth practitioners on their thoughts of the likely big trends in wealth management during the course of the year.
Today, Sebastian Dovey, managing partner of the wealth management consultancy, Scorpio Partnership, gives his thoughts.
Business model
The credit crunch may have passed, just. However, the private banking revenue crunch is just about to begin as wealth managers experience the declining margins precipitated by falling asset levels and shifts into less complex asset classes. Many private banks will need to re-examine their routes to acquiring assets and the cost bases on which they operate.
Markets
We are entering a decade of wealth re-creation as clients seek to identify ways to recover from the decimation of their wealth. The burning question will be the role they see the private banks playing in this. Currently that role is very much in flux.
Strategy
2009 is going to be an almighty battle for best distribution in wealth management. Never before has there been such extreme pressure for the industry to deliver on its ability to secure assets from private clients and ultimately revenue.
Innovation
In every recessionary market we have experienced there has been a heightened level of creativity and innovation in techniques to win business. We expect in this case some traditional paradigms of wealth management will be cast aside (largely because some banks will face extinction otherwise) and the winning business will take on a more dynamic approach to gaining market share. This is good news. This is modernisation. We have been calling for this and developing solutions on this for over decade. The time has come.
Leadership
There will be a number of new faces at the top of financial institutions. Bonus time will be the first wave, but also we expect the end of second quarter to precipitate further changes as boards decide to changes faces as a possible means to halt the margin decline. But what excites us most is that there are now a small cadre of future leaders rapidly rising through the ranks of many international wealth managers. They embrace a need to change the approach of the business model and install deeper corporate values around customer service.
Consolidation
In 2009 a few pieces of large family silver will be sold off. There is little way to avoid it. However, the buyers may not be other financial institutions, this time it may include private equity houses interested in the client segment and the distribution model.
Clients
2009 will see a further radicalisation of the client with much greater activism in terms of their decision to choose or review private banks. There will naturally be a higher level of litigation against the actions of some financial institutions although, in our view, most of these cases will be won by the financial institutions. But the consequence of the activism will be a greater pressure on banks to work to regain the confidence and trust of the customer. This will see more campaigns that are above the line and centrally controlled.
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