The return of the global wealth manager?

News and opinion on finance

A look at wealth management earnings at the largest firms at the end of the first quarter proved that the hypothesis is true: wealth management is a good business to be in – always. UBS Global Wealth Management increased its operating profit before tax year on year to $1.2 billion from $863 million, even while invested assets fell to $2.3 billion.

It remains to be seen what the second quarter brings as client activity slows. It will be interesting to see who is picking up net new assets because, in times of crisis, clients get to see in real time whether their manager is working for them. 

Already some wealth managers are saying that they have seen large inflows as clients drop other advisers. A consolidation of wallet share is inevitable.

Who wins that share? For sure, those who have remained committed to wealth management over the last decade – those that have invested in technology, advice and asset allocation. But also, those that are deemed the safest pair of hands – the latter being typically the large Swiss managers and the US banks.

Renewed competition

But even if there is some consolidation, there’s also going to be renewed competition as universal banks see the value of wealth management businesses. Goldman Sachs announced in May that it was buying wealth management business Folio.

This period could also lead to a gradual return of the global wealth manager. In the last 10 years, the former large global wealth players – Deutsche Bank, Merrill Lynch, Credit Suisse, HBSC, Citi and Barclays – have all either retreated, cut back business, or become less visible. 

UBS has been the last visible large global wealth manager, certainly in the markets that count for growth: Asia and North America.

According to Credit Suisse’s wealth report, 29.4% of the world’s wealth resides in the US and 2.4% in Canada, 17.7% in China, 6.9% in Japan, 3.5% in India and 2% in Korea.

The biggest contender (unless Credit Suisse gets back into the US) is going to be Morgan Stanley. 

From acquiring Smith Barney and focusing largely on its domestic market of the US, the firm has stealthily been building out its wealth management globally. It announced in May the launch of Canada Wealth Management. 

In March, Morgan Stanley and Mitsubishi UFJ Financial Group said they will be expand their relationship by enhancing their wealth management operation in Japan. And in Asia ex-Japan, the firm has been rapidly ramping up in the ultra-high net-worth and mega wealth sectors. All this while also acquiring E*trade. 

With greater competition from a big US competitor as well as competition more broadly, UBS is going to be under pressure not to lose its crown.