The wealth management industry is facing “huge challenges” as it
grapples with greater demands from wealthy clients as well as
spiralling cost pressures, regulation and ongoing talent shortages,
PwC’s biennial global wealth survey has found.

PwC’s 2011 survey, Anticipating a New Age in Wealth
Management, said increased regulation, and associated costs,
were the number one challenge to business growth. More than 70% of
respondents rated excessive regulation as quite high or high.

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Jeremy Jensen, PwC’s Global Private Banking and Wealth
Management leader for EMEA, told PBI one of several key
areas for attention was “back office lag”.

 

Need for back office investment

PwC’s research found banks are not investing enough into
improving their back-office functions, instead choosing to put more
effort into front office functions.

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When asked to rate their organisation’s current state and their
desired target state in the next two years, only about 10% of
respondents viewed themselves as currently being leading or high
performing in terms of operational platforms, systems and
applications and organisational approach.

Of concern was that only about 20% of respondents had a desire
to be leading or high performing in these areas over the same two
year period.

“The sector has been underinvested for so long, it is really
about actions that you took five years ago determining where you
are today. Actions banks take today will drive where they are in
five years time,” Jensen said.

Some of the key findings included:

Performance

  • Cost-to-income ratios remain “stubbornly high” with average
    ratios sitting about 71 percent.
  • 39% of clients now demand evidence of compliant performance
    track records, while 35% insist on having controls reports.
  • Half of client assets leave the firm on intergenerational
    wealth transfers in many markets.

Growing competition

  • All respondents saw new competitors emerging, 30% of wealth
    firms expect significant consolidation in the coming 2 years, the
    same level as in 2009.
  • Poaching talent from competing firms remains the top means of
    recruiting client relationship managers (CRMs), despite only 23% of
    CRMs bringing more than 40% of client assets with them when
    changing jobs

Regulating and managing risks

  • According to the study, 41% of CRMs were rated as having
    average or below average ability to meet client risk -management
    and regulatory requirements.

The PwC survey was completed by 275 institutions in 67 countries
between December 2010 and April 2011.