Wealth management: global trends

The rich, as they say, will always get richer. And helping them achieve this is the army of wealth managers around the world, whose assets under management (AuM) continue to swell in spite of turbulent market conditions.

Last year was the sixth year of straight growth for wealth managers, with assets under management swelling by a massive 35% to $43.5 trillion, according to the Boston Consulting Group (BCG).

And BCG is predicting that this will climb 26% to $138 trillion over the next five years.

That's not to say that every firm has benefited from the inflows of cash. Credit Suisse and EFG International saw the largest increase in net money flows in the first half of 2008, according to research by Wealth-bulletin - $25.1bn and $11.9bn, respectively.

UBS, the world's largest wealth manager, was the biggest loser. It saw over $10bn in assets walk out the door. As unwelcome as this is, it still only amounts to 1% of the bank's total assets, according to wealth consultant Scorpio Partnership.

More concerning to UBS is the fact that a number of its relationship managers have jumped ship. The bank was fending off the twin threats of competitors such as Credit Suisse and Julius Baer poaching talent, and a flood of private bankers leaving for Vestra - a firm set up by ex-UBS staff. Vestra has now agreed to stop poaching UBS staff for a year.

Though globally assets under management are up, some regions have fared better than others. The stars of the show are Latin America and the Asia-Pacific region, which both posted AuM gains of 13.6%, according to BCG.

Latin America's ascension was driven by Brazil's burgeoning economy, while Asia-Pacific's rise can be pinned on China, which saw a massive 36.8% increase in AuM in 2007.

The US still holds the top spot for high-net-worth individuals - those rich folk with over $1m in investable assets - but has witnessed the smallest increase in assets under management, at 3.8%, down from a growth rate of 8.9% in 2006. Europe and Japan were also weak, according to BCG.

The wealth management divisions of investment banks have generally performed well this year so far. In Q2 2008, Morgan Stanley's wealth management arm's revenues were up 4% on the same period last year and Citi's increased by the same percentage.

In the same period, the wealth management arms of Credit Suisse and Merrill Lynch meanwhile posted 4% and 5% falls in net revenues respectively. The divisions remain relatively profitable, however, and the banks put the drop down to exceptionally strong performance during the same period in 2007.

Click here for an explanation of the wealth management sector.