An annual benchmark of the world's wealth management industry shows they held more assets last year and raised their profits. UBS remains number one. Cost/income ratios, meanwhile, have actually risen.

The world’s wealth management industry saw profits rise last year although cost/income ratios widened in the face of new rules, while Switzerland’s UBS held its spot as the world’s largest player in the sector, a report by Scorpio Partnership shows. The report also highlighted how American firms have found it more profitable to focus on a “stay at home” strategy.  

Examining 25 of the world’s largest wealth managers in its Global Private Banking Benchmark 2014 report, it found managers logged an average rise of 11.3 per cent in assets under management last year. The top 25 firms oversee over 78 per cent of industry AuM, which is a one per cent rise from 2012, suggesting further industry consolidation at work.

AuM at UBS rose last year by 15.4 per cent to stand at $1.966.9 trillion, followed in second place (unchanged from 2012) by Bank of America Merrill Lynch, with AuM rising 12.5 per cent, at $1.866.6 trillion, and in third spot, by Morgan Stanley, with a rise of 17.5 per cent in AuM to $1.454 trillion, the report said.

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Up and down
Among the notable changes in the rankings for 2013 were rises by France’s BNP Paribas and Germany’s Deutsche Bank, while Hong Kong/London-listed HSBC slipped from sixth to eighth place. Scorpio said that HSBC’s decline in AuM “would appear to be due to its ongoing strategy of pulling out of non-core markets”. On the other side of the coin, Zurich-listed Julius Baer, which is taking over non-US wealth management assets of Bank of America Merrill Lynch, has seen its assets surge 40.7 per cent, the report said. (The report would have been issued prior to the recent heavy fine on BNP Paribas by the US authorities regarding sanctions violations.)

Across the wider industry figures for 200 benchmark banks, Scorpio said that AuM growth has been strong, at 19.7 per cent, more than double the growth rate seen in 2012. This means the industry as a whole oversees a total of $20.3 trillion of high net worth money, up from $18.5 trillion a year before.

Some of these gains have been driven by rises in markets, as well as net new inflows. At the benchmark banks, net new inflows averaged $1.8 billion.

Net new money also drove income growth; wealth managers saw an average rise of 10.9 per cent in income for 2013.

Margins
In a world of rising regulatory costs – with no immediate end in sight – private banks have had to adapt; the cost/income ratio across the sector was 83 per cent in 2013, up from 80 per cent in 2012. In spite of that rise,, net new money figures meant profitability nudged up 1.7 per cent last year, although not as fast as the 5.3 per cent rise in 2012.

“This year’s results highlight major structural changes taking place in global wealth management,” Seb Dovey, managing partner at Scorpio, said in the report. “Overall, key growth indicators are positive but efficiency averages are not yet improving, which is an alarm bell to consider by many in the corridors of power,” he added.

Bringing it all back home
One feature of the report is noting how US firms in particular have, in certain cases, disposed of non-domestic business to focus on home markets. Both Bank of America and Morgan Stanley have, for example, spun off some of their non-domestic business (as previously mentioned, BoA has sold its international wealth business of Merrill Lynch to Julius Baer.)

As a result of such behaviour, Scorpio has brought out a new ranking for leading US wealth managers, with BoA Merrill Lynch in top spot, followed by Morgan Stanley; JP Morgan; Goldman Sachs; Northern Trust; Wells Fargo; BNY Mellon, and Citi Private Bank.