A rising stock market and net new money meant the global wealth industry boasted a generally strong set of numbers by the end of last year, hopefully placing it in a better position to handle adverse shocks, a study says.

Wealth managers’ profits rose by an average of more than a quarter (25 per cent) in 2017, and the sector drew in net new money, with rising markets lifting the sector overall, even while costs also increased, according to an annual study by Scorpio Partnership.

The study also confirmed that UBS ($2.403 trillion in assets under management) is the world’s largest wealth management house, unchanged from 2016 and seeing year-on-year growth of 11.78 per cent; in second place is Morgan Stanley ($2.223 trillion AuM), up 14.1 per cent y/y, and then Bank of America ($2.206 trillion), up 11.87 per cent.

Asia’s wealth managers fared the strongest, clocking average AuM growth of 15.2 per cent (in base reporting currency terms), far outstripping the 7.5 per cent rise for European firms and the 13.9 per cent rise in the Americas.

The findings come in Scorpio’s 2018 Global Private Banking Benchmark and it lists figures for the 25 largest organisations, who collectively oversaw $16.2 trillion in AuM as at the end of last year.
With the sector generally floating higher on a rising tide of equity markets last year, a question that may arise is what happens if or when conditions turn less favourable. 

“Conditions have been exceptionally positive for global wealth management in the last 12 months but wealth firms must also be given credit for starting to find new revenue,” Caroline Burkart, director at Scorpio, said in a release about the data.

“Wealth firms should put processes in place now to measure and respond to customer feedback, so that when the next market downturn occurs, they have the insight they need to continue delivering a compelling client experience,” she continued. “A handful of wealth firms are starting to publish their client satisfaction data, highlighting that this is creeping up the agenda as a complimentary measure to financial performance.”

Costs rose 8.1 per cent in 2017 from a year before; investment in tech was a big driver of costs, driven by a need to make front offices work more effectively for clients and advisors, as well as to streamline back-office lines. The average 13.9 per cent rise in income nevertheless meant profits growth was robust last year.

Across all 25 firms, the cost/income ratio shrank last year to 69.27 per cent from 73.8 per cent a year before. There was a 4.27 per cent rise in net new money, faster than the 0.82 per cent figure for 2016. In total, AuM rose 17.04 per cent.

The banks in descending AuM size in the study are: UBS; Morgan Stanley; Bank of America; Wells Fargo; Royal Bank of Canada; Credit Suisse; Citi; JP Morgan; Goldman Sachs; BNP Paribas; Julius Baer; BMO Financial Group; China Merchants Bank; Northern Trust; Pictet; HSBC; Deutsche Bank; Safra Sarasin Group; ABN AMRO; Bank of NY Mellon; Santander; ICBC; Crédit Agricole, Bank of China and CIC.