World Wealth Money Management 2013 Update Press briefing-NYC- version_DEC2013.pdf

8/10/2019 World Wealth Money Management 2013 Update Press briefing-NYC- version_DEC2013.pdf

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Global Wealth 2013

Press briefing

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


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Welcome to BCG

Today's speakers will share highlights from our Global Wealth 2013

eserved

.

Daniel KesslerBruce Holley Anna ZakrzewskiBrent Beardsley Federico BurgoniFederico Muxi

ng

Group,

Inc.

Allrig

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Global Leader of theWealth ManagementTopic / Europe

Topic Expert for WealthManagement and PrivateBanking in the U.S.

Topic Expert for WealthManagement

Global Leader of theAsset and WealthManagement Segmentof BCG's FinancialInstitutions Practice

Asia-Pacific Leader ofthe Asset and WealthManagement Segmentof BCG's FinancialInstitutions Practice

Topic Expert for WealthManagement in Latin

America

by

The

Bos

ton

Consu

lti

ur c+41 44 388 86 [email protected]

ew or+1 212 446 [email protected]

ur c+41 44 388 86 [email protected]

+1 312 993 [email protected]

ngapore+65 6429 [email protected]

uenos res+54 11 4317 [email protected]

Joining by video link

1

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Thank you for joining us today

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


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This is our 13th edition of the Global Wealth report

200620052001 2002 2003 2004

2013

eserved

.

Taking the Client'sPerspective

Searching forProfitable Growth

Richer Prospects inWealth Management

Prospering inUncertain Times

Winning in aChallenging Market

The Rich Return toRicher Returns

2007 2008 2009 2010 2011 2012

ng

Group,

Inc.

Allrig

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MaintainingMomentum in a

by

The

Bos

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Consu

lti

Tapping HumanAssets to Sustain

Growth

A Wealth ofOpportunitiesin Turbulent

Times

Delivering onthe

Client Promise

Regaining LostGround

Shaping a NewTomorrow

The Battle toRegain

Strength

Complex World

2

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Global Wealth 2013 - Maintaining Momentum in a Complex

WorldThe 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

eserved

.

problems (e.g. regulation, profitability)

Core challenges:

Old world - how to make the most of the modest

ng

Group,

Inc.

Allrig

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1. Overview of Wealth Markets1

New world - how to capture a substantial share

of the the ongoing wealth creation

Imperatives for wealth managers: Pers ective on the wealth mana ement market

by

The

Bos

ton

Consu

lti

.3. Imperatives for the Wealth Management Landscape3

in 2020 Key actions to be taken today to be positioned

for success in the future

3

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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

eren s ra eg es an us ness mo e s w e requ re osucceed in the old world and monetize growth in the new world


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Key takeaways of Global Wealth 2013

Complexity: Wealth managers have to deal with an increasingly complex industry this complexity isnot onl the realit toda but will continue oin forward

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

eserved

.

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

ng

Group,

Inc.

Allrig

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

by

The

Bos

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Consu

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Future success: Ongoing adaptation of wealth managers to key trends will be necessary for success in2020 speed, flexibil ity and will ingness to t ransform are crucial elements

4

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Global wealth-management industry has become complex

eserved

.

ng

Group,

Inc.

Allrig

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by

The

Bos

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5

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Agenda for Global Wealth 2013 press briefing

eserve

d.

Market Sizing: A Rebound Year

Benchmarking: In Pursuit of Precrisis Performance

ng

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Allrig

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Wealth Management in 2020: A Call to Action

by

The

Bos

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6

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Key insights: Development of wealth markets globally

Global1

Global private wealth1 increased by 7.8% in 2012, reaching $135.5 trillion Stron rebound of e uit market as main rowth driver in the old world2, while the new world3 wealth

wea

Wealth2

39% of total global wealth was held by 1% of all households in 2012

creation was additionally driven by high savings (% of GDP)

eserve

d.

Outlook

3 Private wealth is expected to rise by 4.8% annually to reach $171 trillion in 2017 Asia-Pacific ex Ja an and its new wealth will account for the bulk of lobal rowth

, .

ng

Group,

Inc.

Allrig

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Offshorewealth

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

4

by

The

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Selectedregional

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

7

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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


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Global wealth growth accelerated to 7.8%, increasing total

wealth to $135.5T in 2012

1 Overall wealth

39.943.3

40.2

Private financial wealth in $trillions

7.80.8

35.834.033.7

2012

2.3

2011

2.1

2010

1.8

. .

16.4 13.217.216.816.7

0.6 2.4

eserve

d.

North America

Western Europe

201220112010

Eastern Europe

3.6

Japan

201220112010

7.8

ng

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135.5125.7121.4

3.93.63.22012

4.8

2011

4.4

2010

4.3

28.024.6

21.7

9.7 10.5

3.7 9.1

13.1 13.8

.

by

The

Bos

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Consu

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20112010 2012

201220112010

Latin AmericaMiddle East and Af rica

Asia-Pacif ic (ex Japan)

201220112010

8

Copyrig

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201Annual 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 acrossall private households, including life insurance and pension fund reserves. Countries included in each region can be found in the reportSource: BCG Global Wealth Market-Sizing Database, 2013

o a


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New world wealth growth more than double of old world

wealth growth in 2012

1 Overall wealth

Growth of private wealth 2010-2012Key drivers in 2012

135.5125.7

Change'11-'12

Growth mainly driven by savingsas % of GDP

trillions

eserve

d.

New world1

39.1(29%)34.6

(28%)

.

31.0(26%)

12.9%

world1 rong grow n n a an

China stimulated wealth creation

In addition, strong equity markets

supported growth

ng

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Old world296.4

(71%)91.0

(72%)90.3

(74%)5.9%

Old

Principal driverwas strongrebound of equity market

Existing assets contributed far

by

The

Bos

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Consu

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2011 20122010

woru u w w

Supportive monetary policies andeconomic clarity after elections

9

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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


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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) GDP growth

+10.1%(+13.1%)

w y w

Equity performance

Savings rate

f

+9.0%

(+8.9%)

+12.9%(-9.6%)

New world

1 +12.9%

(+11.6%)

Asia-Pacific (ex Japan) Eastern Europe Latin America

~2.5 $tril lions3

eserve

d.

+

Globalprivate

financial

Existing assets4 Bond performance

Cash performance

f+2.7%(+6.4%)

~0%(~0%)

Middle East and Africa

~4.5 $trillions~1.9 $trillions5

ng

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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%+

~1.4 $trillions3

by

The

Bos

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Consu

lti

Existing assets4

Equity performance

Bond performance

f

f

+12.7%(-6.9%)

+1.4%(+3.3%)

.

North America Western Europe Japan

~5.3 $trillions

10

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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%)

~ . r ons


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

2 Wealth dis tribution and millionaires

Global 2012 New world1 2012 Old world2 2012

6.9%

1,118

4.2%

39 CAGR '12-'17CAGR '12-'17CAGR '12-'17135

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% +3.3%

+3.2%

1%

eserve

d.

15.1%

.

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

+15.4%

+2.5%

39%

ng

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Inc.

Allrig

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95.5%31.0%

47.1%82.0%

40.5%

53.7%+3.3%

+8.1%

+2.1%

by

The

Bos

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Cons

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Households(millions)

Private wealth($trillions)

.


13.7%

Households(million)

Households(millions)

8.2%


+3.7%

+ .

-2.1%

11

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201x.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 Europe

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. All numbers are rounded and maynot sum to totalsSource: BCG Global Wealth Market-Sizing Database, 2013


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


Millionaire household development(in thousands) Millionaire households in 2012

+10%13,829

12,584

+1.24m Number of millionairehouseholds (thousands)

Proportion of mil lionairehouseholds by market (%)

eserve

d.

New world1,

(26%)3,131(25%) +469k

Qatar

Switzerland

Kuwait

Hong Kong

Singapore3

14.3%

11.6%

11.5%

9.4%

8.2%

1.(1)

2. (3)

3. (2)

4. (4)

5. (5)

USA

Japan

China

UK

Switzerland

5'876

1'460

1'304

509

395

1.(1)

2. (2)

3. (3)

4. (4)

5. (5)

ng

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Old world210,228(74%)

9,453(75%)

Bahrain

Taiwan

UAE

Israel

Oman

.

4.9%

4.0%

4.0%

3.8%

3.3%

.

7. (6)

8. (9)

9. (8)

10. (10)

11. 11

ana a

Germany

Taiwan

Italy

France

Hon Kon

362

312

274

256

231

.

7. (7)

8. (8)

9. (9)

10. (10)

11. 11

by

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BelgiumCanada

Japan

Netherlands

3.2%2.8%

2.6%

2.6%

12. (12)13. (13)

14. (14)

15. (16)

NetherlandsRussia

Australia

India

191180

178

164

12. (12)13. (13)

14. (14)

15. (15)

( ) = Ranking in 2011

12

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1. 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 methodologyapplied for the estimate of wealth held in equities and cash at the end of 2012

Note: 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 notsum to totalsSource: BCG Global Wealth Market-Sizing Database, 2013


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

Number of ult ra-high-net-worth (UHNW)households

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

+7%12,093

11,321

+772 Number of UHNWhouseholds

Proportion of UHNWhouseholds by market(per 100,000 households)

eserve

d.

New world14,285(35%)3,870

(34%) +415

Hong Kong

Switzerland

Austria

Qatar

Norway

13

10

9

8

8

1.(1)

2. (2)

3. (3)

4. (4)

5. (5)

USA

UK

China

Germany

Canada

3016

1001

851

680

476

1.(1)

2. (2)

3. (3)

4. (4)

5. (5)

ng

Group,

Inc.

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Old world27,808(65%)

7,45166%

ngapore

Kuwait

Israel

Belgium

UK

New Zealand

7

4

4

4

4

.

7. (7)

8. (8)

9. (10)

10. (9)

11. 12

a y

France

Turkey

Switzerland

Russia

Hon Kon

371

357

339

328

323

.

7. (7)

8. (9)

9. (8)

10. (11)

11. 12

by

The

Bos

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Cons

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CanadaSweden

Denmark

UAE

43

3

3

12. (11)13. (14)

14. (15)

15. (13)

AustriaBrazil

Australia

Indonesia

314236

231

221

12. (10)13. (14)

14. (13)

15. (16)

( ) = Ranking in 2011

13

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Note: 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 notsum to totalsSource: BCG Global Wealth Market-Sizing Database, 2013


15/40

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

3 Outlook

Growth of private wealth 2012-2017Projected key drivers

CAGR'12-'174.8% 171 Wealth growth driven by highsavings rates and continued strongGDP

trillions

eserve

d.

10.5%

New world1

(38%)135

39(29%)

world1 High savings have strong effect on

wealth creation growth rate sincewealth stock still relatively low

compared to GDP

ng

Group,

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2.1%Old world2

107(62%)

96(71%)Old

Growth more dependent onperformance of existing wealth

by

The

Bos

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Cons

ulti

20172012

wor Moderate/constant GDP growthand savings rates projected

14

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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


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

3 Outlook

Growth trillions

Regional contr ibution to growth in global wealth 2012-2017 ($tri llions)

4.7

4.8

35.71.0

40

30

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

~20%

eserve

d.

1.71.7

1.920.0

20 New wealthcreation

ng

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10

~ ~80% of totalgrowth

by

The

Bos

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Cons

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NorthAmerica

WesternEurope

EasternEurope

Middle Eastand Africa

LatinAmerica

Asia-Pacific(ex Japan)

GlobalJapan

Performance of old wealth3: 13% 43%

15

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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 assets4. 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 ofcurrency fluctuations. Performance of old wealth vs. new wealth creation splits are estimatesSource: BCG Global Wealth Market-Sizing Database, 2013

New wealth creation4: 87% 57%


17/40

...and will likely overtake North America by 2017 as largestwealth region

3 Outlook

CAGR 2012-2017Future regional pr ivate wealth 2012-2017Ranking of regions

vera .

11.4%

an

As ia-Pacif ic (ex Japan)1 (3/4)28.0

48.1

48.0

o a r ons

eserve

d.

.

2.5%

North America

Western Europe

3 (2/2)

43.3

40.6

35.8

ng

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6.2%

1.1%Japan

Middle East and Africa5 (5/5)

4 (4/3)

6.5

4.8

.

17.2

by

The

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Cons

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8.3%

11.3%

Latin America

Eastern Europe

6 (6/6)

7 (7/7)

.

3.9

4.0

2.3 20122017

16

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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. Calculations for all years are basedon the same methodologySource: BCG Global Wealth Market-Sizing Database, 2013

New world1 Old world2


18/40

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 ($trill ions)

50

39

43

40

eserve

d.

2830

+104%

ng

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8778

17 18

14

554 556

20

10

+127%+90%

by

The

Bos

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Cons

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20

32

32 3 23

2

3 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)

Aust ral ia

11(17/16)Russia

12(11/12)Taiwan

13(12/15)SouthKorea

14(14/14)HongKon

15(13/11)

Switzer-land

17

Cop

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Rank 2017 (2012/2007) 2012 2017

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


19/40

Offshore wealth in the new world is projected to grow in l inewith onshore wealth in the new world...

4 Offshore wealth

Growth of offshore wealth 2007-2017Key drivers

Especially HNW / UHNW looking forgeographical diversification

Clients continue to seek high-quality

CAGR'12-'17

11.2

trillions

eserve

d.

world1

serv ces an po ca s a y notax avoidance motivation)

Lack of sophisticated onshoreofferings lead to higher share ofwealth booked offshore 9.0%

7.5

(67%)

8.5

4.9

7.3

ng

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Inc.

Allrig

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Old

Offshore WM industry underpressure from tax authorities

Offshore clients seeking foreconomic stabili t 2

New world1

3.73.7

(57%)

3.7

3.6(49%)

by

The

Bos

ton

Consu

ltiwor

Modest repatriation is going to beoffset by performance of existingassets

.

6.5%in % of total

6.3% 6.6%

2017

(33%)

2012

(43%)

2007

(51%)

18

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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


20/40

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

4 Offshore wealth

CAGR'07-'11

Regional mix of pr ivate 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

4%9%3% 5%

Eastern Europe

11.2

0.5

6.1%

8.2%

5.7%

12.0%

eserve

d.

8.3%

3.7%

19%

20%

18%

18%Middle Eastand Africa

Latin America

New

world1

1.5

2.1

7.3%

7.9%

9.2%

5.2%

ng

Group,

Inc.

Allrig

htsr

-4.0%

5.2%

35%

3%

1%

30%

2%

32%Japan

Asia-Pacific(ex Japan)

0.2

3.4

-0.7%

9.8%

-2.5%

11.3%

by

The

Bos

ton

Consu

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0.0%

-3.5%

24%

2007

13%

2017

8%9%

2012

Western Europe

North America

world2 2.7

0.8

4.5%

-1.2%

0.4%

1.4%

19

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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


21/40

MEA and Latin America have the highest offshore sharecompared with other regions

4 Offshore wealth

Western Europe

8%

as ern urope

13%

North America

2%

eserve

d.

As ia-Pacif icex Ja an

1%

ng

Group,

Inc.

Allrig

htsr

Middle Eastand Africa

Latin America

25%

7%

lowoffshore

by

The

Bos

ton

Consu

lti

33%high

offshoreshare

20

Copyrig

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201eg ons w ess sop s ca e ons ore o er ng s ow 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


22/40

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

4 Offshore wealth

USSwitzerland UK3 Hong KongLuxembourg Singapore

ChannelIslands2

30.0 T3.5 TSize1 2012(AuM USD)

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

eserve

d.

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

ng

Group,

Inc.

Allrig

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Wealth 20%2%

24%

by

The

Bos

ton

Consu

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structure(2012)4

37%

63%76%

82%

32%

80%90%

10%

68%98%

18%

21

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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 wealth4. 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


23/40

eserve

d.

Regional deep dives

ng

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by

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22

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24/40

APAC (ex Japan) is projected to become the world's largestwealth 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 bystrong economic growth and high saving

rates3.8

15.7 28.0 48.1

eserve

d.4.1%

5.5% Profitability is recovering, but still poorrelative to other markets. Institutions haveaccepted this but expect high growth and

future potential

3.6

2.92.8

3.0

2.6 4.5

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17.8%

4.7%

.

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

2.02.9

2.52.3

13.5

.

2.42.1

1.71.8

1.9 27.5

by

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15.3% Booking centers in HK and SG aresignificant and continue to grow. They arebenefiting from rising Asian wealth, the fact that

Asians prefer local relationships and regulatory

20122007

4.7

.

2017

ChinaAustraliaSouth KoreaRest of APAC (ex Japan)

23

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pyrig

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201pressure n uropeIndiaTaiwanHong 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)


25/40

LatAm wealth market is growing strongly and becoming amore 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

2.5 3.9 5.9

eserve

d.

LatAm Wealth market is becoming a morecompetitive market

New entrants and increasing relevance of

regional LatAm players:0.4

0.4

.

0.4

0.7

7.6%

7.6%

.

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Asset managers (e.g. boutiques, hedgefunds, etc.) moving into WM space

Family offices deepening their offeringsUniversal banks without a presence yet

2.3

.

1.0

0.30.3

.

0.60.2

0.2 0.10.5 4.7%

6.8%

by

The

Bos

ton

Con

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Increasing demand for sophist icatedproduct offerings:Decrease in interest rates put pressure on

wealth managers to continue generating

2017

.

20122007

0.9

Colombia MexicoRest of LatAM

10.0%

24

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pyrig

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201

returns for clientsAccess to clients and distribution is not the

only key to success anymore


Argentina Chile Brazil



26/40

North America is losing ground due to a high dependency onthe 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

eserv

ed

.

Growth predominately driven by growth ofexisting assets via market performance

Therefore, wealth managers will largely be

4.1

3.5

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2.1% playing a share stealing game for existingwealth in which both an institutions startingposition and its ability to retain clients will becrucial

43.539.2

35.9

by

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The more stabilized economic outlook in theU.S. leads to a more positive market sentiment

201720122007

Canada USA

25

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27/40

Agenda

eserv

ed

.



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28/40

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

AuM1 andNNA2

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 theemerging wealth markets, especially Asia-Pacific and Latin America

ROA3 andRevenues

2 ROA slightly decreased to an average of 81 bps in 2012, with pressure stemming from a decrease ofmanaged 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

eserv

ed

.Costs andEfficienc

3 Costs increased on average by 3%, which was less than revenue and AuM increases, indicating modest costcontrols 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

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Pretax profit 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 mar ins of to erformers show that wealth mana ers with the ri ht business model can be

4

years with less well-performing equity markets

by

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successful in all regions

RM4 Front efficiency is increasing, as shown in higher CAL5 and revenues per RM from wealth managers

across most re ions

5

27

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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

c ency Front management is gaining importance for wealth managers to further increase front efficiency


29/40

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

+12.9%

Return on-4.1%

sse s un ermanagement

.

Strong equity performance Increased net new assets flow

eserv

ed

.

f

assets2 (ROA)

Revenues

+4.8%Profit

Margin3

Declining return on assets Less favorable asset allocation

Full price realization difficult

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fCost/income

ratio (C/I)

-2.5%+2.7%

Good revenue increase Lower increase than AuM1 changeAsia-Pacific increasing strongest

by

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Cost+3.1%

Slight increase of cost base

n er propor ona cos ncrease

Improved efficiency Driven by higher AuM & modest cost

increases

28

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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 CAL

Note: 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

Non-front-related COA decreasing most x% change 2011 2012

1 A M d NNA


30/40

Strong AuM growth for wealth managers in most regions, drivenby 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

-2.8

-1.9

9.6

9.4

Europe onshore

Europe offshore1

1.8

5.5

7.7

3.9

eserv

ed

.

9.0

.

18.0

22.7

Latin America

Asia-Pacific

3.4

8.2

.

9.8

10.8

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0.1

0.9

.

4.6

11.0

North American brokers

or mer can an s

5.6

0.0

4.6

7.6

by

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

2011-2012

2010-2011

.

0% 5% 10% 15%

Performance2

Net new assets

29

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ht

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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

g grow ra es n emerg ng mar e s s ow eimportance of bui lding a strong presence there

2 ROA and Revenues


31/40

Strong AuM growth not fully monetized as share of managedproducts 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%

eserv

ed

.

67%580%8

64%63%72%64%

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2007 2012 2012200720122007

by

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OtherManaged Products3 x% Discretionary Mandates in % of AuM

In line with the decline of mana ed roducts, the share of

30

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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 Fundsand 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

discretionary mandates also dropped by 9 percentage pts

2 ROA and Revenues


32/40

Decreasing ROA levels a major challenge for wealth managers stil l 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)

eserv

ed

.94

111112106102

109

100

150

93

7076

10699

100

818481

92 78

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7079

41

595457

0

50535455

0

50

by

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Asia-

Pacific

Latin

America

NA

brokers

NA

banks

Europe

offshore

Europe

onshore

201220112010

4th quartile1st quartile

Weightedaverage 2012Weighted 4th quartile

st

31

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1. Revenues divided by yearly average client assets and liabilities

Note: Averages are weighted by CAL. CAL is Client Assets and Liabilities. Numbers are roundedSource: BCG Wealth Manager Performance Database, 2011, 2012 and 2013

3 Costs and Efficiency


33/40

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

3 Costs and Efficiency

Costs r ising, but less than AuM1 andrevenues (change 2011 2012 in %)

Cost development stronglydiffering by funct ion

8%

5%

5%Accounting, Finance and Controlling

Front-related Services

Other Central Functions2

12.9%

15%

eserv

ed

.

4%

3%

3%Asset and Product Management

Human Resources

Legal & Compliance

4.8%

10%

Cost increased lessthan AuM and

revenue

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3%

0%

1%

Risk Management

Investment Advisors

Operation and IT3.1%

0%

by

The

Bos

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Costs will be a challenge for wealth managers in years

1050-10-15

Communication & Marketing - 8%

CostsRevenuesAuM1

Weighted delta 2011-2012

32

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ht

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1. 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 projectsand 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

4 Pretax profit margin


34/40

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


Return on assets in bps1

- 5 bps

Pretax profit margin in bps3

- 10 bps

86 81

eserve

d.Cost-income ratio in %2

33

20122007

ng

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73%61%

23

20122007

by

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20122007

Wealth managers have to improve both top line and costs

33

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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-bankingoperations. 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



35/40

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

p g

Average pretax prof it margin (bps)by region/business model 20112012

Average globalpretax profi t margin1 (bps)

45

65

4750

60

70

Profit margin (bps)

60

80

Profit margin (bps)

eserve

d.

19

28

21

35

39

33

27

363536

20

30

40

1514

2426232320

15

27272523

38

4342

40

232223

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12

8

13

-6

12

-6

11

-10

0

10

6775

Asia- Latin NANAEurope Europe

80

20

2012

4

2011

7

2010

by

The

Bos

ton

Consu

lti

AverageChange'11-'12(bps)

Weightedaverage

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

34

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1. Revenues less total costs from private banking, divided by average CAL

Note: Averages are weighted by CAL. CAL is Client Assets and LiabilitiesSource: BCG Wealth Manager Performance Database, 2011, 2012 and 2013 Weightedaverage 2011 4

th quartile1st quartileWeightedaverage 2012

re ax marg ns o op per ormers s ow a wea managerswith the right business model can be successful in all regions

5 RM Efficiency


36/40

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

y

Average Client Assets and Liabi li ties (CAL) perRelationshi Mana er USD M

Average Revenues perRelationshi Mana er USD M

241254

238

278268

239

273

242300 5

eserve

d.113

212 217

105

204

171

100

200

1.92.2

2.8

1.7

1.5

2.4

1.8

2.7

2.2

1.7

1.2

2.3

2

3

+9%

ng

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0

.0.8

0

1

GlobalAsia-Pacific

LatinAmerica

NAbrokers

NAbanks

Europeoffshore

Europeonshore

GlobalAsia-Pacific

LatinAmerica

NAbrokers

NAbanks

Europeoffshore

Europeonshore

by

The

Bos

ton

Consu

lti

20122011

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

35

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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

c en ron -o ce managemen s ga n ngimportance for wealth managers


37/40

Agenda

eserve

d.



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38/40

Key trends that will shape wealth management for the rest ofthe 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

eserve

d.

Client

Traditional value propositions are fading

New sources of value s rin from dee er insi ht into diverse customer needs

ng

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Nature of client interaction will change with emergence of Generation Y

by

The

Bos

ton

Consu

lti

BusinessEconomics

Regulations wil l add costs and complexity

European players will have to adapt as retrocession payments wind down

37

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Overall pressure on margins wi ll continue

Source: BCG


39/40

Key actions to be taken by wealth managers

Build a presence in high-growthmarkets and client segments

Offer segmentspecific value propos ition

Develop technology- and

big data-enabled distribution

Enable IT to support

business agility and innovation

eser

ve

d.

Achieve leadershipin investment solutions

Embrace client centrici ty

LeadingWealth Manager

2020

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Drive excellence in executionof transactions and financing

Embed operationalexcellence into the organization

by

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Co

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Develop multi-booking-center capabilities

At tain top per formancein advisory and services

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Each wealth manager needs to find i ts individual set ofactions given its organization & competitive environment

Source: BCG


40/40

Questions?

eser

ve

d.

We appreciate your interest!

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39

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World Wealth Money Management 2013 Update Press briefing-NYC- version_DEC2013.pdf

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Transcript of World Wealth Money Management 2013 Update Press briefing-NYC- version_DEC2013.pdf