According to a study released Thursday, July 8, by the consultant firm Scorpio Partnership, the assets of the high-net-worth exceed what is currently under management by private banks and wealth managers by some 58%, leaving approximately $10 trillion in realistically investable assets on the table.
The Global Private Banking KPI Benchmark study, now in its eighth incarnation, shows that while the assets under management (AUM) at banks rose by a median of 17% from losses last year, the key performance indicator (KPI) for profitability is off at a median of 35% from last year. Not only that, but net new money inflows are down at a median 60% as cost-to-income ratios continue to rise (78.2%, up from 72.4% last year). The study concludes that the health of the industry is “far from good,” citing efficiency factors from the approximately 230 wealth management institutions surveyed as an indicator that the trend is static to down, although assets have grown substantially.
Asset management in the arena is highly concentrated, with the top five firms in the survey managing 41.4% of current high-net-worth AUM, the top 10 managing 64%, and the top 20 accounting for 77%. Based on the survey’s estimation of the total realistic amount of high-net-worth bankable assets at $26 trillion, that means that the industry, currently managing some $16.5 trillion, stands to recover and grow if it can capture that elusive $10 trillion.
One way the survey suggests doing that is by shedding the boutique image cultivated by so many firms. Catherine Tillotson, managing partner at Scorpio, commented in a statement, “We feel it is time the fashion to retain the cottage industry perception is laid to rest. The benchmark data point clearly toward the fact that the industry can, and must, take on the mantle of being the market leader of industrially managing the assets of the world’s wealthiest. Those businesses and professionals that cling on to the past are likely to be marginalized rapidly and the current benchmark data suggests their days are numbered.”