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Biggest Wealth Firms Growing Despite Margin Pressures

August 10, 2017

UBS, Bank of America, Morgan Stanley, Wells Fargo and the Royal Bank of Canada were the world’s biggest wealth managers last year, according to a new report by ScorpioPartnership, a London-based research and consulting firm.

Overall, Scorpio says the results, gleaned from public data on more than 200 wealth firms, show these businesses “successfully navigated regulatory and political upheaval in 2016, with assets under management rising by almost 4% on average.”

Meanwhile cost-to-income ratios dipped under 80% in the past year – something that hasn’t happened since 2012. According to Scorpio, this reflects wealth managers’ success using technology to cut “costs despite continued compliance pressures.”

But Scorpio is quick to add a sour note. This “strong profitability growth masked the industry’s underlying struggle to improve revenues, with operating income rising just 0.04% on average” last year.

In its write-up of the Scorpio report, the Financial Times tells of “a maelstrom of national, regional and supra-national regulations” triggering new compliance expenditures for wealth firms. A U.S. example of such new regulatory burdens is the the Department of Labor’s more stringent requirements for retirement accounts, which recently went into partial effect.

(Getty)

For Scorpio, this year’s report flags the challenge of wealth firms to manage “the revenue side of the profits equation” in the face of rising compliance costs as well as curtailed sales from investments as cheaper passive vehicles take market share from active plays.

Rounding out the 10 biggest wealth firms are Credit Suisse, Citi, JPMorgan, Goldman Sachs and BNP Paribas.

Of the top 10, Toronto-based RBC, which owns the U.S. mega-regional brokerage RBC Wealth Management, grew fastest last year with a gain of nearly 14%. At the other end JPMorgan shed about 0.5%.

Expanding the list to include 25 of the biggest wealth managers shows Chinese firms growing fastest. China Merchant Bank grew 33% last year, while Bank of China jumped 23%.

By Thomas Coyle
  • To read the Financial Times article cited in this story, click here.