Regulations in wealth management industry

The status quo in the private banking and wealth management industry is changing as the focus shifts to client service and value delivery, according to a new PwC report published today. The report -Anticipating a New Age in Wealth Management - includes findings from PwC’s 2011 Global Private Banking and Wealth Management Survey.

In its 2011 biennial report, which surveyed a record 275 institutions from 67 countries, PwC found that wealth management continues to be a lucrative business with untapped potential for significant growth if institutions can be agile in adapting to meet changing demands.

New competitors are challenging the dominance of established firms, and the impact of new regulations and more demanding client expectations are forcing private banks and wealth managers to change their client service infrastructures and the way they operate. Those who can master change will be in a position to win increased market share and lead the industry, says PwC.

Some highlights:

Today’s client is cautious, smart, less loyal and expects excellent service and clear value.

Regulation has become the not-so-invisible hand, increasing the cost of operations.  

Greater operational efficiency and effectiveness are required, not just to compete but to survive

Standing still is no longer an option and institutions must now quickly adapt or face being left behind.

On what this means for the Indian scenario, Robin Roy, Associate Director – Financial Services, PwC India said:  

“China and India are among the biggest with middle-class populations predicted to swell by hundreds of millions over the next de­cade. The new middle classes will seek out investment opportunities as their attention shifts from basic subsistence to stabilising and growing income. While political and regulatory risks can be signifi­cant in these markets, the decline of state-owned entities, abundant natural resources and economic reform agendas will spur economic activity, establishing the conditions for wealth creation. Wise wealth managers will need to diversify their client bases while increasing their awareness of non-traditional, high-growth emerging market countries.”

PwC’s survey found that the industry faces multiple pressures in five key areas, as follows:

Performance and Change: The DNA of the wealthy investor has been transformed as a result of the global financial crisis and recent scandals. The result is higher expectations of service and value. Clients are more active in managing their affairs and they are paying increased attention to reputation, regulatory compliance and risk management.

Markets and Clients: Shifting patterns of world wealth between emerging and established markets and tougher regulatory oversight present challenges for some wealth managers and opportunities for others.

Client Relationship Managers and Human Capital: The shortage of talent is one of the biggest barriers to future growth.  Top quality people are becoming more valuable, more difficult to source and more expensive to train.  The industry is getting better at institutionalising client relationships with organisations.  Links between performance and pay are becoming critical.  New strategies, incentives and support are needed to attract and retain qualified professionals. 

Operations and Technology: Respondents are at different stages of their operational evolution. Many continue to run legacy systems and manual processes. Technology budgets are being directed to better support client relationship managers and the front-end client experience.

Risk Management and Regulation: Risk management systems and processes are being upgraded to provide integrated approaches to better align risk and value.  The global wealth management industry is now at the forefront of regulatory change.  Cross-border standards, customer protection and transparency are anticipated to impact the front-end client experience and increase costs.

On the future of the industry, Justin Ong, PwC Global Private Banking and Wealth Management, Asia Pacific leader, said:

“Our survey shows that the centre of gravity for wealth management is moving, and established centres are under pressure from emerging markets.  In response to increased regulatory pressures, our respondents see Switzerland, London and, to a lesser extent, New York, all being challenged by the rise of Singapore and Hong Kong in the coming two years.”  

ENDS

About the PricewaterhouseCoopers Global Private Banking and Wealth Management Survey

The PwC Global Private Banking and Wealth Management Survey was conducted between December 2010 and April 2011. Survey questionnaires were open to members of the private banking and wealth management community, and completed by 275 institutions in 67 countries, including 62 percent from Europe, 24 percent from the Americas and 14 percent from the Asia-Pacific region. The survey is not sponsored by any third party is part of PwC’s thought leadership to the financial services industry.

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