World wealth money management 2013 update press briefing nyc- version dec2013

Global Wealth 2013 Maintaining Momentum in a Complex WorldMaintaining Momentum in a Complex WorldPress briefing

New York, May 30, 2013 – Embargoed until 12:00pm EDT today

Welcome to BCGToday's speakers will share highlights from our Global Wealth 2013

eser

ved.Daniel Kessler

Partner

Bruce Holley

Senior Partner

Anna Zakrzewski

Principal

Brent Beardsley

Partner

Federico Burgoni

Partner

Federico Muxi

Partner

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BCG Z i h

PartnerGlobal Leader of the Wealth Management Topic / Europe

BCG N Y k

Senior Partner Topic Expert for Wealth Management and Private Banking in the U.S.

BCG Z i h

PrincipalTopic Expert for Wealth Management

BCG Chicago

Partner Global Leader of the Asset and Wealth Management Segment of BCG's Financial Institutions Practice

BCG Si

PartnerAsia-Pacific Leader of the Asset and Wealth Management Segment of BCG's Financial Institutions Practice

BCG B Ai

PartnerTopic Expert for Wealth Management in Latin America

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nBCG Zurich+41 44 388 86 [email protected]

BCG New York+1 212 446 [email protected]

BCG Zurich+41 44 388 86 [email protected]

BCG Chicago+1 312 993 [email protected]

BCG Singapore+65 6429 [email protected]

BCG Buenos Aires+54 11 4317 [email protected]

Joining by video link

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Thank you for joining us today

Note: This document contains information that goes beyond the contents of the report

This is our 13th edition of the Global Wealth report

200620052001 2002 2003 2004

2013

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Taking the Client'sPerspective

Searching for Profitable Growth

Richer Prospects inWealth Management

Prospering inUncertain Times

Winning in aChallenging Market

The Rich Return toRicher Returns

2007 2008 2009 2010 2011 2012

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Maintaining Momentum in a

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Tapping HumanAssets to Sustain

Growth

A Wealth of Opportunities in Turbulent

Times

Delivering on the

Client Promise

Regaining LostGround

Shaping a NewTomorrow

The Battle to Regain

Strength

Complex World

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Global Wealth 2013 - Maintaining Momentum in a Complex World

The 2013 report contains three key elements...

...and discusses the new wealth management industry complexity

Global wealth-management industry has become complex:

• Old world2 and new world3 moving at different speeds

• Wealth managers grappling with diverse sets of

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• Wealth managers grappling with diverse sets of problems (e.g. regulation, profitability)

Core challenges:• Old world - how to make the most of the modest

growth expected in mature economies

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1. Overview of Wealth Markets

2 Wealth Manager Benchmarking1

1

2

growth expected in mature economies• New world - how to capture a substantial share

of the the ongoing wealth creation

Imperatives for wealth managers:• Perspective on the wealth management market

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3. Imperatives for the Wealth Management Landscape 2

3

p gin 2020

• Key actions to be taken today to be positioned for success in the future

Diff t t t i d b i d l ill b i d t

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1. Based on proprietary data 2. Japan, North America, Western Europe 3. Asia-Pacific (ex Japan), Eastern Europe, Latin America, Middle East and AfricaNote: This document contains information that goes beyond the contents of the report

Different strategies and business models will be required to succeed in the old world and monetize growth in the new world

Key takeaways of Global Wealth 2013

Complexity: Wealth managers have to deal with an increasingly complex industry – this complexity is not only the reality today, but will continue going forwardnot only the reality today, but will continue going forward

Wealth markets: Wealth grew overall in 2012, driven by strong market performance – Asia-Pacific (ex Japan) is expected to surpass North America in 2017 as the largest wealth market

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Growth drivers: New wealth creation will account for over 2/3 of total growth through 2017 – growth will be driven by high savings rates and continued strong GDP growth in rapidly developing economies

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Profits: Precrisis profits for wealth managers are out of reach for now and the future – profit margins remain under pressure and the cost base is still high among most wealth managers

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Future success: Ongoing adaptation of wealth managers to key trends will be necessary for success in 2020 – speed, flexibility and willingness to transform are crucial elements

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Global wealth-management industry has become complex

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Agenda for Global Wealth 2013 press briefing

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Market Sizing: A Rebound Year

Benchmarking: In Pursuit of Precrisis Performance

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Wealth Management in 2020: A Call to Action

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Key insights: Development of wealth markets globally

Globallth

1 • Global private wealth1 increased by 7.8% in 2012, reaching $135.5 trillion• Strong rebound of equity market as main growth driver in the old world2, while the new world3 wealth

wealth

Wealth distribution

2• 39% of total global wealth was held by 1% of all households in 2012• Total number of millionaire households globally increased by 10% reaching 13 8 million

g q y g ,creation was additionally driven by high savings (% of GDP)

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Outlook

distribution

3• Private wealth is expected to rise by 4.8% annually to reach $171 trillion in 2017• Asia-Pacific (ex Japan) and its new wealth will account for the bulk of global growth

• Total number of millionaire households globally increased by 10%, reaching 13.8 million

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Offshore wealth

• Offshore wealth grew to $8.5 trillion in 2012 mainly due to strong market performance• Cross-border business is projected to stagnate in the old world and to grow strongly in the new world

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Selected regional

deep dives

5• Wealth continues to grow strongly in the new world, driven by strong economic growth & high saving rates• APAC (ex Japan) is projected to reach $48.1 trillion, overtaking North America in 2017

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3deep dives

1. Includes life insurance and pension fund reserves; across the 63 markets considered in the BCG Global Wealth 2013 report 2. Japan, North America, Western Europe 3. Asia-Pacific (ex Japan), Eastern Europe, Latin America, Middle East and AfricaSource: BCG Global Wealth Market-Sizing Database, 2013

Global wealth growth accelerated to 7.8%, increasing total wealth to $135.5T in 2012

1 Overall wealth

39.943.340.2

Private financial wealth in $trillions 7.80.8

0 9 5 2

2011 20122010

35.834.033.7

2012

2.3

2011

2.1

2010

1.8

0.9 5.2

16.4 13.217.216.816.7

0.6 2.4

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2011

North America

20122010

Western Europe

201220112010Eastern Europe

3.6

Japan

201220112010

7.8

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135.5125.7121.4

3.93.63.22012

4.8

2011

4.4

2010

4.328.0

24.621.7

9.7 10.5

3.7 9.1

13.1 13.8

3.6 8

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A l h (%)

20112010

Gl b l

2012

201220112010

Latin America

Middle East and Africa

Asia-Pacific (ex Japan)

201220112010

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3Annual change (%)

Note: Private financial wealth numbers for all years were converted to U.S. dollars at year-end 2012 exchange rates to exclude the effect of currency fluctuations. Percentage changes and global totals of private financial wealth are based on complete (not rounded) numbers. Calculations for all years are based on the same methodology. Global wealth is measured by financial wealth across all private households, including life insurance and pension fund reserves. Countries included in each region can be found in the report Source: BCG Global Wealth Market-Sizing Database, 2013

Global

New world wealth growth more than double of old world wealth growth in 2012

1 Overall wealth

Growth of private wealth 2010-2012 Key drivers in 2012$

135.5

121 4 125.7

Change'11-'12

New

• Growth mainly driven by savings as % of GDPSt GDP th i I di d

$trillions

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New world1

39.1(29%)34.6

(28%)

121.4

31.0(26%)

12.9%New

world1• Strong GDP growth in India and

China stimulated wealth creation• In addition, strong equity markets

supported growth

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Old world296.4

(71%)91.0

(72%)90.3

(74%) 5.9%

Old ld2

• Principal driver was strong rebound of equity market

• Existing assets contributed farmore than s al to ealth gro th

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2011 20122010

world2 more than usual to wealth growth

• Supportive monetary policies and economic clarity after elections

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1. Asia-Pacific (ex Japan), Eastern Europe, Latin America, Middle East and Africa 2. Japan, North America, Western EuropeNote: All numbers are rounded and may not sum to totals Source: BCG Global Wealth Market-Sizing Database, 2013

Wealth growth driven by newly created wealth in the new world and strong performance of existing assets in the old world

1 Overall wealth

DriversGrowth in 2012

~x%(~y%)

2012(2011)

Ne l created ealth3GDP growth

f+10.1%(+13.1%)

Newly created wealth3

Equity performance

Savings rate

f

f+9.0%(+8.9%)

+12.9%(-9.6%)

New world1 +12.9%(+11.6%)

• Asia-Pacific (ex Japan)• Eastern Europe• Latin America

~2.5 $trillions3

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+

Global private

financial wealth

Existing assets4 Bond performance

Cash performance

f +2.7%(+6.4%)

~0%(~0%)

• Middle East and Africa

~4.5 $trillions~1.9 $trillions5

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+7.8% (+3.6%)

~9.8 $trillions

GDP growth

Savings ratef

+2.3%(+2.7%)

3.7%(+4.0%)

Newly created wealth3

Old world2 +5.9%(+0 8%)

~1.4 $trillions3

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Existing assets4

Equity performance

Bond performance

f

f

+12.7%(-6.9%)

+1.4%(+3.3%)

(+0.8%)

• North America• Western Europe• Japan

~5.3 $trillions

3 9 $trillions5

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1. Asia-Pacific (ex Japan), Eastern Europe, Latin America, Middle East and Africa 2. Japan, North America, Western Europe 3. New private financial wealth, generated primarily through income 4. Growth in asset values 5. EstimatesNote: Growth rates are nominal, including GDP growth rates. Performance averages are weighted by GDP and reflect domestic developments. All numbers are rounded and may not sum to totalsSource: BCG Global Wealth Market-Sizing Database, 2013

Cash performance ~0%(~0%)

~3.9 $trillions5

In 2012, 1% of all households represented 39% of global wealth

2 Wealth distribution and millionaires

Global 2012 New world1 2012 Old world2 2012

6.9%1,1184.2%

39

19 8%

CAGR '12-'17 CAGR '12-'17 CAGR '12-'17 135

16.7%

5.5%1,481

17.0%

13.8 3.6

5.0%363.12.4%

15.5%

96.4

10.2

+9.2%

+8.0%

+17.3%

15 4%

+3.3%

+3.2%

1%

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15.1%

19.8%

16.9% 56.7% 17.7%+4.6%+10.0%

+15.4%

+2.5%

39%

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27 2%

31.0%47.1%

82.0%

40.5%

53.7%+3.3%

+8.1%

7 3%

+2.1%

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Households(millions)

Private wealth($trillions)

27.2%


13.7%

Households(million)

Households(millions)

8.2%


+3.7%+7.3%

-2.1%

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x.x # millionaire HH (in millions) 0 - 0.1m USD0.1 - 1.0m USD1 - 5m USD5 - 100m USD> 100m USD

1. Asia-Pacific (ex Japan), Eastern Europe, Latin America, Middle East and Africa 2. Japan, North America, Western EuropeNote: Private financial wealth numbers for all years were converted to U.S. dollars at year-end 2012 exchange rates to exclude the effect of currency fluctuations. All numbers are rounded and may not sum to totalsSource: BCG Global Wealth Market-Sizing Database, 2013

In 2012, the number of millionaire households grew by 10%


Millionaire household development(in thousands) Millionaire households in 2012

+10%13,829

3 60112,584

+1.24m Number of millionaire households (thousands)

Proportion of millionaire households by market (%)

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New world13,601(26%)3,131

(25%) +469k

QatarSwitzerlandKuwaitHong KongSingapore3

USA

14.3%11.6%11.5%9.4%8.2%4 9%

1. (1)

2. (3)

3. (2)

4. (4)

5. (5)

6 (7)

USAJapanChinaUKSwitzerlandCanada

5'876 1'460 1'304

509 395 373

1. (1)

2. (2)

3. (3)

4. (4)

5. (5)

6 (6)

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Old world210,228(74%)9,453

(75%)+775k

USABahrainTaiwanUAEIsraelOman

4.9%4.9%4.0%4.0%3.8%3.3%

6. (7)

7. (6)

8. (9)

9. (8)

10. (10)

11. (11)

CanadaGermanyTaiwanItalyFranceHong Kong

373 362 312 274 256 231

6. (6)

7. (7)

8. (8)

9. (9)

10. (10)

11. (11)

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20122011

+775k OmanBelgiumCanadaJapanNetherlands

3.3%3.2%2.8%2.6%2.6%

11. (11)

12. (12)

13. (13)

14. (14)

15. (16)

Hong KongNetherlandsRussiaAustraliaIndia

231 191 180 178 164

11. (11)

12. (12)

13. (13)

14. (14)

15. (15)

( ) = Ranking in 2011

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3201220111. Asia-Pacific (ex Japan), Eastern Europe, Latin America, Middle East and Africa 2. Japan, North America, Western Europe 3. Singapore figures restated due to changes in the methodology applied for the estimate of wealth held in equities and cash at the end of 2012Note: UAE is United Arab Emirates. 2011 ranking is determined on the basis of year-end 2012 exchange rates to exclude the effect of currency fluctuations. All numbers are rounded and may not sum to totals Source: BCG Global Wealth Market-Sizing Database, 2013

( ) g


In 2012, the number of UHNW households increased by 7%

Number of ultra-high-net-worth (UHNW) households

UHNW households in 2012(more than $100 million in private financial wealth)

+7%12,093

11,321

+772 Number of UHNWhouseholds

Proportion of UHNWhouseholds by market

(per 100,000 households)

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New world14,285(35%)3,870

(34%) +415

Hong KongSwitzerlandAustriaQatarNorwaySi

13 10

9 8 8 7

1. (1)

2. (2)

3. (3)

4. (4)

5. (5)

6 (6)

USAUKChinaGermanyCanadaItal

30161001851680476381

1. (1)

2. (2)

3. (3)

4. (4)

5. (5)

6 (6)

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Old world27,808(65%)

7,451(66%) +357

SingaporeKuwaitIsraelBelgiumUKNew Zealand

7 7 4 4 4 4

6. (6)

7. (7)

8. (8)

9. (10)

10. (9)

11. (12)

ItalyFranceTurkeySwitzerlandRussiaHong Kong

381371357339328323

6. (6)

7. (7)

8. (9)

9. (8)

10. (11)

11. (12)

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20122011

( ) +357 New ZealandCanadaSwedenDenmarkUAE

4 4 3 3 3

11. (12)

12. (11)

13. (14)

14. (15)

15. (13)

Hong KongAustriaBrazilAustraliaIndonesia

323314236231221

11. (12)

12. (10)

13. (14)

14. (13)

15. (16)

( ) = Ranking in 2011

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320122011 ( ) g

1. Asia-Pacific (ex Japan), Eastern Europe, Latin America, Middle East and Africa 2. Japan, North America, Western EuropeNote: UAE is United Arab Emirates. 2011 ranking is determined on the basis of year-end 2012 exchange rates to exclude the effect of currency fluctuations. All numbers are rounded and may not sum to totals Source: BCG Global Wealth Market-Sizing Database, 2013

Wealth growing to $171T in 2017, driven by new world wealth creation

3 Outlook

Growth of private wealth 2012-2017 Projected key drivers$

CAGR'12-'174.8% 171

64New

• Wealth growth driven by high savings rates and continued strong GDP

$trillions

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10.5%

New world1

64(38%)

135

39(29%)

New world1 • High savings have strong effect on

wealth creation growth rate since wealth stock still relatively low compared to GDP

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2.1%Old world2

107(62%)96

(71%)Old ld2

• Growth more dependent on performance of existing wealth

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20172012

world2 • Moderate/constant GDP growth and savings rates projected

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1. Asia-Pacific (ex Japan), Eastern Europe, Latin America, Middle East and Africa 2. Japan, North America, Western EuropeNote: All numbers are rounded and may not sum to totalsSource: BCG Global Wealth Market-Sizing Database, 2013

Asia-Pacific (ex Japan) will account for bulk of global growth through 2017...

3 Outlook

Growth ($trillions)

Regional contribution to growth in global wealth 2012-2017 ($trillions)

4.7

4.8

35.71.0

Growth ($trillions)

40

30

New world1 contributes ~70% Old world2 contributes ~30%

~20%

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1.71.7

1.920.0

20

80%

New wealth creation accounts for

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~80% accounts for ~80% of total growth

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North America

Western Europe

Eastern Europe


Latin America


0GlobalJapan

Performance of old wealth3: 13% 43%

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1. Asia-Pacific (ex Japan), Eastern Europe, Latin America, Middle East and Africa 2. Japan, North America, Western Europe 3. Growth in asset values, assuming moderate returns on assets 4. New private financial wealth, generated primarily through income

Note: All numbers are rounded and may not sum to totals. Private financial wealth numbers for all years were converted to U.S. dollars at year-end 2012 exchange rates to exclude the effect of currency fluctuations. Performance of old wealth vs. new wealth creation splits are estimates Source: BCG Global Wealth Market-Sizing Database, 2013

New wealth creation4: 87% 57%

...and will likely overtake North America by 2017 as largest wealth region

3 Outlook

CAGR 2012-2017Future regional private wealth 2012-2017

O ll 4 8%

Ranking of regions

R k 2017 (2012/2007) T t l ($t illi ) Overall 4.8%

11.4%

2 1%

Rank 2017 (2012/2007)

N th A i

Asia-Pacific (ex Japan)1 (3/4)

2 (1/1)

28.048.1

48.0

Total ($trillions)

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2.1%

2.5%

North America

Western Europe

2 (1/1)

3 (2/2)

43.3

40.635.8

18 2

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6.2%

1.1%Japan

Middle East and Africa5 (5/5)

4 (4/3)

6.54.8

5 9

18.217.2

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8.3%

11.3%

Latin America

Eastern Europe

6 (6/6)

7 (7/7)

5.93.9

4.02.3 20122017

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1. Asia-Pacific (ex Japan), Eastern Europe, Latin America, Middle East and Africa 2. Japan, North America, Western EuropeNote: Private financial wealth numbers for all years were converted to U.S. dollars at year-end 2012 exchange rates to exclude the effect of currency fluctuations. Calculations for all years are based on the same methodologySource: BCG Global Wealth Market-Sizing Database, 2013

New world1 Old world2

China is projected to become the 2nd wealthiest nation in 2017, with India and Russia moving up in the ranking

3 Outlook

15 largest wealth markets in 2017 ($trillions)

50

39

43

40

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2830

+104%

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17 18

14

54 54 55 6

20

10+127%

+90%

34

3 by

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0

32 32 3 23233 4 3

1(1/1)U.S.

2(3/5)

China

3(2/2)

Japan

4(5/4)

Germany

5(4/3)U.K.

6(6/7)

France

7(7/6)Italy

8(8/8)

Canada

9(15/18)India

10(9/9)

Australia

11(17/16)Russia

12(11/12)Taiwan

13(12/15)South Korea

14(14/14)Hong Kong

15(13/11)

Switzer-land

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Rank 2017 (2012/2007) 2012 2017

Korea Kong land

Note: 2007, 2012 and 2017 rankings are determined on the basis of year-end 2012 exchange rates to exclude the effect of currency fluctuations. All numbers are rounded and may not sum to totalsSource: BCG Global Wealth Market-Sizing Database, 2013

Offshore wealth in the new world is projected to grow in line with onshore wealth in the new world...

4 Offshore wealth

Growth of offshore wealth 2007-2017 Key drivers$

New

• Especially HNW / UHNW looking forgeographical diversification

• Clients continue to seek high-qualityi d liti l t bilit (

CAGR'12-'17

11.2

$trillions

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New world1

services and political stability (no tax avoidance motivation)

• Lack of sophisticated onshore offerings lead to higher share of wealth booked offshore 9.0%

7.5(67%)

8.5

4.9

7.3

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Old ld2

• Offshore WM industry under pressure from tax authorities

• Offshore clients seeking for economic stability 0 5%Old world2

New world1

3.73.7

(57%)

3.7

3.6(49%)

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offset by performance of existing assets

0.5%

6.5%in % of total wealth 6.3% 6.6%

Old world

2017

(33%)

2012

(43%)

2007

(51%)

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3wealth

1. Asia-Pacific (ex Japan), Eastern Europe, Latin America, Middle East and Africa 2. Japan, North America, Western Europe Note: Offshore wealth, defined as assets booked in a country where the investor has no legal residence or tax domicile. All numbers are rounded and may not sum to totalsSource: BCG Global Wealth Market-Sizing Database, 2013

...while the share of offshore wealth in old world is on the decline

4 Offshore wealth

CAGR'07-'11

Regional mix of private wealth booked offshore 2007-2017 (by client domicile)

Wealth '17($trillions)

CAGR'12-'17

CAGR'11-'12

Total($trillions)

7.3 11.28.5 2.4%

10.6%

Overall

11%4%

9%3%

13%

5% Eastern Europe

11.2

0.5

6.1%

8.2%

5.7%

12.0%

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8.3%

3.7%

23%

19%

11%

20%

18%18%

13%


Latin AmericaNew

world1

1.5

2.1

7.3%

7.9%

9.2%

5.2%

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-4.0%

5.2%23%

35%

3%

1%

30%2%

32%Japan


Old0.2

3.4

-0.7%

9.8%

-2.5%

11.3%

3 by

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0.0%

-3.5%

24%

2007

13%

2017

8%

3 %

9%

2012

Western Europe

North America

Oldworld2

2.7

0.8

4.5%

-1.2%

0.4%

1.4%

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1. Asia-Pacific (ex Japan), Eastern Europe, Latin America, Middle East and Africa 2. Japan, North America, Western EuropeNote: Offshore wealth, defined as assets booked in a country where the investor has no legal residence or tax domicile. All numbers are rounded and may not sum to totalsSource: BCG Global Wealth Market-Sizing Database, 2013

MEA and Latin America have the highest offshore share compared with other regions

4 Offshore wealth

E t E

Western Europe8% Japan

Eastern Europe13%

North America2%

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ved.Asia-Pacific

(ex Japan)

Japan1%

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Latin America25%

( p )7%

lowoffshore share

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33%

R i ith l hi ti t d h ff i h

highoffshore

share

share

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3Regions with less sophisticated onshore offering show a higher share of private wealth booked offshore

Note: Offshore wealth, defined as assets booked in a country where the investor has no legal residence or tax domicileSource: BCG Global Wealth Market-Sizing Database, 2013

Most of the offshore assets flow to few key financial centers –an overview

4 Offshore wealth

USSwitzerland UK3 Hong KongLuxembourg SingaporeChannel Islands2

30.0 T3.5 TSize1 2012(AuM USD)

3.9 T 2.1 T0.6 T 1.2 T1.4 T

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0.6 T 0.7 TOf which off-shore assets 2.2 T 0.9 T 0.4 T0.6 T 0.8 T1.1 T

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Wealth 20%2%24%

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37%

63%

76%82%

32%80%

90%

10%

68%98%

18%

24%

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1. On- and offshore assets booked in respective country (excl. life insurance and pensions) 2. Including Dublin on- and offshore 3. Excluding Channel Islands & Dublin on- and offshore wealth 4. Onshore wealth for Channel Islands and Luxembourg are estimatesNote: Offshore wealth, defined as assets booked in a country where the investor has no legal residence or tax domicileSource: BCG Global Wealth Market-Sizing Database, 2013

OnshoreOffshore

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Regional deep dives

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APAC (ex Japan) is projected to become the world's largest wealth market in 2017, driven by strong economic growth

5 Regional deep dives – Asia-Pacific (ex Japan)

Wealth development in APAC (ex Japan)(in $trillions) Looking at growth opportunities ahead

7.6%

CAGR'12-'17

Overall 11.4% • Wealth continues to grow strongly, driven by

strong economic growth and high saving rates

3.8

15.7 28.0 48.1

eser

ved.

3 2%

4.1%

5.5% • Profitability is recovering, but still poor relative to other markets. Institutions have accepted this but expect high growth and future potential

3.6

2.92.8

3.0

2 12.6

4.5

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17.8%

4.7%

3.2%

• APAC wealth managers need to transform their business models (institutionalizing, industrializing, shift away from brokerage)

2.02.9

2.52.3

13.5

2.1

1 12.42.11.7 1.81.9 27.5

3 by

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15.3% • Booking centers in HK and SG are significant and continue to grow. They are benefiting from rising Asian wealth, the fact that Asians prefer local relationships and regulatory

i E

2012

13.5

2007

4.71.1

2017

ChinaAustraliaSouth KoreaRest of APAC (ex Japan)

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3pressure in EuropeIndiaTaiwanHong Kong

Note: Data include life insurance and pension fund reserves. All numbers are rounded and may not sum to totalsSource: BCG Global Wealth Market-Sizing Database, 2013

Total wealth ($trillions)

LatAm wealth market is growing strongly and becoming a more competitive market

5 Regional deep dives – Latin America

Wealth development in Latin America(in $trillions) Looking at growth opportunities ahead

CAGR'12-'17

Overall 8.3%

• Wealth projected to grow a cross the region by 8.3% annually, e.g.

– In Brazil especially, the wealth extremes of very poor and very rich will grow strongly

1 1

2.5 3.9 5.9

9 1%

eser

ved.

• LatAm Wealth market is becoming a more competitive market

• New entrants and increasing relevance of regional LatAm players:

1 4

0.4

0.4

1.1

0.4

0 20.7

7.6%

7.6%

9.1%

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funds, etc.) moving into WM space– Family offices deepening their offerings– Universal banks without a presence yet

developing specific WM offering2.3

1.4

1 4

1.0

0.30.3

0.2

0.60.2 0.2 0.1

0.5 4.7%

6.8%

3 by

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ndeveloping specific WM offering• Increasing demand for sophisticated

product offerings:– Decrease in interest rates put pressure on

wealth managers to continue generating

2017

1.4

20122007

0.9

Colombia MexicoRest of LatAM

10.0%

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3g g greturns for clients

– Access to clients and distribution is not the only key to success anymore


Argentina Chile Brazil


North America is losing ground due to a high dependency on the growth of existing assets

5 Regional deep dives – North America

Wealth development in North America(in $trillions) Looking at growth opportunities ahead

CAGR'12-'17

1.9%

Overall 2.1% • Wealth projected to grow moderately by 2.1% annually

4.5

39.3 43.3 48.0

eser

ved.

• Growth predominately driven by growth of existing assets via market performance

• Therefore, wealth managers will largely be

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2.1% playing a “share stealing” game for existing wealth in which both an institution’s starting position and its ability to retain clients will be crucial

43.539.2

35.9

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• The more stabilized economic outlook in the U.S. leads to a more positive market sentiment

201720122007

Canada USA

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Key insights: Wealth manager's performance in a complex world

AuM1 and NNA2

1 • Overall, wealth managers saw strong growth of AuM by 13%, with especially high growth rates in Asia-Pacific (23%) and LatAm (18%), driven by NNA flows and exceptionally strong equity performance

• High growth rates in rapidly developing economies shows the importance of building a presence in the emerging wealth markets, especially Asia-Pacific and Latin America

ROA3 and Revenues

2 • ROA slightly decreased to an average of 81 bps in 2012, with pressure stemming from a decrease of managed products penetration, which in 2012 was 21% below precrisis levels of 2007

• Widespread performance among best and worst wealth managers shows potential and need to work on improved return on assets

eser

ved.Costs and

Efficiency

3 • Costs increased on average by 3%, which was less than revenue and AuM increases, indicating modest cost controls by wealth managers and a slight improvement of the cost-income ratio

• Cost management will remain critical for wealth managers as rising costs will hurt profitability, especially in

improved return on assets

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Pretax profit margin

• Wealth managers posted slightly improved pretax profit margins; compared to precrisis years, they are significantly down (-10 bps) through both lower returns on assets and a higher cost-income ratio

• Pretax margins of top performers show that wealth managers with the right business model can be

4

yyears with less well-performing equity markets

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nmargin Pretax margins of top performers show that wealth managers with the right business model can be successful in all regions

RM4

Effi i• Front efficiency is increasing, as shown in higher CAL5 and revenues per RM from wealth managers

across most regions

5

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1. Assets under Management 2. Net New Assets 3. Return on Assets 4. Relationship Manager 5. Client Assets and LiabilitiesNote: Averages are weighted by CAL. CAL is Client Assets and Liabilities. Numbers are roundedSource: BCG Wealth Manager Performance Database, 2012 and 2013

Efficiency g• Front management is gaining importance for wealth managers to further increase front efficiency

Profit margin of wealth managers increased on average by 2.7% globally, driven by AuM growth and moderate cost increases

A t d +12.9%

f Return on -4.1%

Assets under management

12.9%

• Strong equity performance• Increased net new assets flow• Strongest growth in emerging markets

eser

ved.

f

f

assets2 (ROA)

Revenues+4.8% Profit

Margin3

• Strongest growth in emerging markets

• Declining return on assets• Less favorable asset allocation• Full price realization difficult

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f Cost/incomeratio (C/I)

-2.5% +2.7%• Good revenue increase• Lower increase than AuM1 change• Asia-Pacific increasing strongest

U d ti l t i

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Cost+3.1%

• Slight increase of cost base• Costs over assets (COA) decreasing slightly

• Under proportional cost increase• Improved efficiency• Driven by higher AuM & modest cost

increases

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1. Assets under Management 2. Revenues divided by yearly average client assets and liabilities 3. Revenues less total costs from private banking, divided by average CALNote: Averages are weighted by CAL. CAL is Client Assets and Liabilities. Numbers are rounded. One participant from Asia excluded due to structural change of operations for costsSource: BCG Wealth Manager Performance Database, 2012 and 2013

• Costs over assets (COA) decreasing slightly• Non-front-related COA decreasing most x% change 2011 – 2012

Strong AuM growth for wealth managers in most regions, driven by both NNA increase and strong equity performance

1 AuM and NNA

AuM increase much stronger than in previous year ...... driven by NNA increase and

and equity performance

2 2

-2.8

-1.9

9.6

9.4

Europe onshore

Europe offshore1

11 9

1.8

5.5

7.7

3.9

eser

ved.

4 9

9.0

2.2

18.0

22.7

N th A i b k

Latin America

Asia-Pacific

3.4

8.2

11.9

9.8

10.8

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0.1

0.9

4.9

12 9

4.6

11.0

Global

North American brokers

North American banks

5.6

0.0

3.4

7 3

4.6

7.6

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n12.9

-5% 0% 5% 10% 15% 20% 25%

Global

2011-20122010-2011

7.3

0% 5% 10% 15%

Performance2

Net new assets

Hi h th t i i k t h th

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1. Europe offshore includes Swiss banks and institutions from other European offshore centers, such as Andorra or Luxembourg 2. Market performance (also including M&A activity)Note: Averages are weighted by CAL. CAL is Client Assets and Liabilities. Numbers may not add up due to roundingSource: BCG Wealth Manager Performance Database, 2012 and 2013

High growth rates in emerging markets show the importance of building a strong presence there

Strong AuM growth not fully monetized as share of managed products decreased by 21% compared to precrisis levels

2 ROA and Revenues

Offshore banks1

asset mix (%) 2007-2012Onshore banks

asset mix (%) 2007-2012Global asset mix (%)

2007-20122

20%7

33%4 36%37%28%36%-21% -39%

-2%

eser

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67%580%8

64%63%72%64%

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2007 2012 20122007

21%6 14%9 33% 27%

20122007

30% 21%

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n21%6 14%9 33% 27%

OtherManaged Products3

30% 21%

x% Discretionary Mandates in % of AuM

In line with the decline of managed products, the share of

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1. Includes institutions from Switzerland, Andorra, Spain, Singapore, Hong Kong and Latin America 2. Excluding brokers 3. Mutual Funds, Hedge Fund, Money Market Funds, Private Equity Funds and Structured Products 4. CH: 33% 5. CH: 67% 6. CH: 19% 7. CH: 26% 8. CH:74% 9. CH: 15%Note: Averages are weighted by CAL (CAL 2007 for 2007, average CAL 2011-2012 for 2012). CAL is Client Assets and Liabilities. Brokers are excluded. All numbers are roundedSource: BCG Wealth Manager Performance Database, 2008 and 2013

g p ,discretionary mandates also dropped by 9 percentage pts

Decreasing ROA levels a major challenge for wealth managers –still some players manage to keep a good top line

2 ROA and Revenues

Average ROA (bps) by region 2012Average global ROA1 (bps)

200

RoA (bps)

115

150

RoA (bps)

eser

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94111112106102109

100

150

93

687076

10699

100818481

9278

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7079

41

595457

0

50

6870

535455

0

50

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Asia-Pacific

Latin America

NAbrokers

NAbanks

Europeoffshore

Europeonshore

201220112010

4th quartile1st quartile

Weightedaverage 2012Weighted

average4th quartile1st quartile

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1. Revenues divided by yearly average client assets and liabilitiesNote: Averages are weighted by CAL. CAL is Client Assets and Liabilities. Numbers are roundedSource: BCG Wealth Manager Performance Database, 2011, 2012 and 2013

average 1 quartile

In contrast to strong AuM and good revenue performance, costs increased slightly

3 Costs and Efficiency

Costs rising, but less than AuM1 and revenues (change 2011 – 2012 in %)

Cost development strongly differing by function

8%

5%

5%Accounting, Finance and Controlling

Front-related Services

Other Central Functions2

12.9%

15%

eser

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4%

3%

3%Asset and Product Management

Human Resources

Legal & Compliance

4.8%5%

10%Cost increased less

than AuM and revenue

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3%

0%

1%

Risk Management

Investment Advisors

Operation and IT3.1%

0%

5%

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Costs will be a challenge for wealth managers in years with smaller revenue and AuM increases

1050-10-15

Communication & Marketing - 8%CostsRevenuesAuM1

Weighted delta 2011-2012

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3with smaller revenue and AuM increases1. Asset under Management 2. Include head office charges and FTEs that have been allocated to the private client business unit. Other central functions may comprise for example one-off projects and restructuring costs if common across yearsNote: Averages are weighted by CAL. CAL is Client Assets and Liabilities. Numbers may not add up due to rounding and incomplete cost allocations. One participant from Asia excluded due to structural change of operationsSource: BCG Wealth Manager Performance Database, 2013

Despite controlled cost increase and good revenue growth, pretax profit margins still significantly below precrisis levels

4 Pretax profit margin

Return on assets in bps1

- 5 bps

Pretax profit margin in bps3

- 10 bps

86 81

eser

ved.Cost-income ratio in %2

1233

20122007

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73%61%

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20122007

Wealth managers have to improve both top line and costs in order to close gap to precrisis pretax profit margins

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1. Revenues divided by yearly average client assets and liabilities 2. Cost-to-income ratios are likely to be understated because large banks often do not fully allocate costs to their private-banking operations. 3. Revenues less total costs from private banking, divided by average CAL.Note: This analysis is based in U.S. dollars. Averages are weighted by CAL (CAL 2007 for 2007 KPIs, average CAL 2011-2012 for 2012 KPIs). CAL is Client Assets and Liabilities. Brokers are excluded from 2007 figures. All numbers are roundedSource: BCG Wealth Manager Performance Databases, 2008 and 2013

in order to close gap to precrisis pretax profit margins

In comparison to 2011, pretax profit margins slightly improved, with pronounced differences by players per region

4 Pretax profit margin

Average pretax profit margin (bps) by region/business model 2011–2012

Average globalpretax profit margin1 (bps)

45

65

4750

60

70

Profit margin (bps)

60

80

Profit margin (bps)

eser

ved.

19

2821

3539

3327

363536

20

30

40

1514

2426232320

15

2727252338

4342

40

232223

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128

13

-6

12

-6

11

-10

0

10

6775

Asia-Pacific

Latin America

NAbrokers

NAbanks

Europeoffshore

Europeonshore

80

20

2012

4

2011

7

2010

3 by

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nPacific America brokersbanksoffshore onshoreAverage Change'11-'12(bps)

Weightedaverage

4th quartile1st quartile +2 -0 +5 -0 -2 +1

P t i f t f h th t lth

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1. Revenues less total costs from private banking, divided by average CALNote: Averages are weighted by CAL. CAL is Client Assets and LiabilitiesSource: BCG Wealth Manager Performance Database, 2011, 2012 and 2013

Weightedaverage 2011

4th quartile1st quartile

Weightedaverage 2012

Pretax margins of top performers show that wealth managers with the right business model can be successful in all regions

One reason for improved profit margin in 2012 is increased front efficiency, as shown in higher CAL and revenues per RM

5 RM Efficiency

Average Client Assets and Liabilities (CAL) per Relationship Manager (USD M)

Average Revenues per Relationship Manager (USD M)

241254238

278268239

273242300

4

5

p g ( ) p g ( )

eser

ved.113

212 217

105

204171

100

200

1.9

0 9

2.22.8

1.71.5

2.4

1.8

2.72.2

1.71.2

2.3

2

3

4

+9%

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0

0.90.8

0

1

GlobalAsia-Pacific

Latin America

NAbrokers

NAbanks

Europeoffshore

Europeonshore

GlobalAsia-Pacific

Latin America

NAbrokers

NAbanks

Europeoffshore

Europeonshore

3 by

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20122011

Change of Relationship Managers 2011-12 (in %) 0% +2% -1% +1%+1% 0% 0%

Effi i t f t ffi t i i i

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Note: Averages were weighted by CAL. CAL is Client Assets and Liabilities. Figures for 2010 and 2011 may deviate from previous stated figures because the sample size has increasedSource: BCG Wealth Manager Performance Database, 2012 and 2013

Efficient front-office management is gaining importance for wealth managers

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Key trends that will shape wealth management for the rest of the decade

Market • Growth rates significantly higher in emerging markets than in developed world

LandscapeTrends

• Boundaries between wealth mgmt, asset mgmt and IB will break down

• Digitalization will require IT to play a more active role in the business

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ClientT d

• Traditional value propositions are fading

• New sources of value spring from deeper insight into diverse customer needs

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• Nature of client interaction will change with emergence of Generation Y

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Business Economics

Trends

• Regulations will add costs and complexity

• European players will have to adapt as retrocession payments wind down

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3Trends• Overall pressure on margins will continue

Source: BCG

Key actions to be taken by wealth managers

Build a presence in high-growth markets and client segments

Offer segment specific value proposition

Develop technology- and big data-enabled distribution

Enable IT to support business agility and innovation

eser

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Achieve leadershipin investment solutionsEmbrace client centricity

Leading Wealth Manager

2020

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Drive excellence in executionof transactions and financing

Embed operational excellence into the organization

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Develop multi-booking-center capabilities

Attain top performance in advisory and services

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Each wealth manager needs to find its individual set of actions given its organization & competitive environment

Source: BCG

Questions?

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We appreciate your interest!

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World wealth money management 2013 update press briefing nyc- version dec2013

Economy & Finance

Transcript of World wealth money management 2013 update press briefing nyc- version dec2013