Wealth Management in Germany 2009

Published by: Datamonitor

Published: Apr. 23, 2009 - 286 Pages

Table of Contents

Overview

Catalyst

Summary

Methodology

Executive Summary

The fight at the top is intensifying in German wealth management

Fiscal restraint and high savings rates were not enough to protect Germany's investors from the market turmoil in 2008

German HNW investors are 'parking' in cash, and have shifted substantially into bonds

Many wealth managers in Germany are missing opportunities

Table of Contents

Table of figures

Table of tables

Special feature: THe changing face of competition in German Wealth Management

The fight at the top is intensifying

Newly combined Commerzbank-Dresdner plans to leverage its international presence, SME position and structured products capabilities

Deutsche Bank Private Wealth Management has suffered in size in the downturn

HVB Wealth Management's profits were down significantly in 2008

While the traditional German private banks continue to do 'business as usual'

August Lenz continued to increase assets under administration in 2008

Berenberg Private Bank posted growth in 2008

BHF-Bank Private Banking saw strong net inflows from entrepreneurial families in 2007, and continued net inflows in the first half of 2008

HSBC Trinkaus & Burkhardt withstood 2008's market volatility fairly well despite a sharp decline in AUM

Germany's wealth management market structure is unlikely to change significantly because of this downturn

Germany's Wealth

Fiscal restraint and high savings rates were not enough to protect Germany's investors from the market turmoil in 2008

Germany's highly export-dependent economy is in recession

Germans have among the highest savings rates, and lowest debt per capita, in Europe

Negative equity investment returns in 2008 knocked the legs out from under German investors' portfolios

Deposit rates did add slowly to German investors' portfolios

Germany's retail investors rediscovered bonds in the first half of 2008, and continued to invest in mutual funds despite negative performance there

German investors continued to invest in mutual funds through Q2 2008 but scaled back sharply in Q3 as turmoil took hold

Germany's investors sought the safety of bonds in 2008

The Wealth Data in 2009

The German HNW investor

German HNWs have defensively positioned their portfolios, but are showing optimism in the recovery

German HNW investors are 'parking' in cash, and have shifted substantially into bonds

Wealth management service implication: Find returns on cash and cash-like products for clients

Innovative example from Brunei: CIMB Islamic's Liquidity fund is actively managed, liquid, and could provide returns above conventional USD deposit rates

German HNWs are showing optimism in the recovery, and will shift back into equities and alternative investments by 2011

Wealth management service implication: Counterparty financial stability and risk management/corporate governance procedures will become as important as performance in clients' investment decisions

German HNWs will significantly reduce their holdings of both corporate and government bonds in the next two years

German HNWs understand the implications of the current market turmoil for their portfolios, but are at risk of leaving their wealth manager

German HNWs have a better understanding of the current market conditions than their counterparts across Europe

German HNWs are at high risk of defection to other wealth managers

Wealth management service implication: Many wealth managers will need to develop investment training and future-focused communications programs for their Relationship Managers

HNWs are planning for the future, both in short-term investment opportunities and long-term succession

German HNWs want inheritance planning services

Mortgage financing demand is an opportunity that smart wealth managers will exploit

Wealth management service implication: inheritance planning and mortgage financing services are a must

Innovative example from the UK: Bank of Scotland Private Banking puts lending at its core

HNW Germans' strong understanding of the market ensures future demand for more independent services and opportunistic products

Data tables

The German wealth manager's view

German wealth managers are missing key opportunities

Germany's wealth managers don't plan to exploit their HNW clients' anticipated demand for execution-only services, and are misaligned with client demand in other ways too

HNW investors choose the proactive wealth manager who truly understands their needs; investment performance will not win clients

Investment performance is more of a weakness among German wealth managers than it is a strength

Demanding clients means more effort is needed from Relationship Managers

Leveraging their strength in CRM, the best way to increase share of wallet will be to target relationship managers on cross-selling products

There is a fair amount of work to be done to convince clients about their bank's financial stability

In a market where everything seems to be going wrong, HNWs will not tolerate errors from their wealth manager

Four fifths of German Relationship Managers speak to their clients at least once a week

Almost three quarters of German HNWs see their Relationship Managers at least monthly

Relationship managers have to be able to credibly discuss their clients' portfolio allocations and asset performance; more than half of HNW clients demand it

APPENDIX

The drivers of growth in the wealthy population

Income growth (combined with inflation, changes in GDP by sector, household savings rates and debt levels)

Investment returns (market capitalization, interest rates and bond yields)

The following measures are not, in themselves, drivers of wealthy population growth

Market capitalization

GDP

The following measures are not drivers of wealthy population growth except under very restricted circumstances

Primary residence value growth

Inheritance

Methodology

Wealth Management Market Leaders Survey 2009

Global Wealth Model

The UK sub model

Global sub model (for all other countries)

Forecasting methodology

Continuous refinement to the understanding of liquid wealth distribution

Datamonitor's wealth numbers compared with other wealth numbers

Definitions

Western Europe

Further reading

Bibliography

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: To what extent do you agree with the following statements about competition in your country?

Table 2: Regarding nationalized/part-nationalized banks, to what extent do you agree with the following?

Table 3: What proportion of your HNWs' portfolios is allocated to the following five asset classes?

Table 4: HNWs' portfolio allocation now versus in 2 years' time

Table 5: HNWs' portfolio allocation by product area now versus in 2 years' time

Table 6: Please rate your high net worth clients in Germany on a scale of 1 to 4 (openness to new investment ideas, understanding of current market )

Table 7: Please rate your high net worth clients in Germany on a scale of 1 to 4 (relationship drivers )

Table 8: Please rate your German high net worth clients' demand TODAY for the following on a scale of 1 to 4

Table 9: Please rate the following product areas in terms of expected demand from your HNW clients during the next two years

Table 10: To what extent do you agree with the following statements about the motivations of your HNWs clients in your country to make their investment decisions today?

Table 11: To what extent do you agree with the following statements about the motivations of your HNWs clients in your country to make their investment decisions today? Continued

Table 12: To what extent do you agree with the following statements about the motivations of your HNWs clients in your country to make their investment decisions today? Continued

Table 13: To what extent do you agree with the following statements about the motivations of your HNWs clients in your country to make their investment decisions today? Continued

Table 14: From the product areas just mentioned, which two will your wealth management service focus most resources on in the next two years?

Table 15: In your experience, what will most determine a German client's choice of wealth management service over the next two years?

Table 16: What are your company's biggest strengths and weaknesses?

Table 17: What is the most effective means of increasing share of wallet today?

Table 18: What is the best way to retain clients today?

Table 19: On average how often do your Relationship Managers speak by phone to each HNW client living in Germany?

Table 20: On average how often do your Relationship Managers speak by phone to each HNW client living in Germany?

Table 21: On average how often do your Relationship Managers speak in person to each HNW client living in Germany?

Table 22: When you speak with clients, what do they most want to talk about?

List of Figures

Figure 1: Despite weak markets in 2008, retail investors put faith in mutual funds in the first half

Figure 2: The greatest strength of Wealth Managers in Germany is their personal relationships with clients

Figure 3: Investment losses in 2008 wiped out €40 billion from Deutsche Bank PWM's client portfolios

Figure 4: Wealth managers in Germany think that nationalized/part nationalized banks will be more formidable competitors than they were

Figure 5: The view of wealth managers is that nationalized and part nationalized banks will attract good relationship managers because they are financially secure

Figure 6: German investors are retrenching for the recession, as debt per capita falls and savings rates rise

Figure 7: The Deutsche Börse market cap has felt the pinch of the recession as badly as the rest of the market

Figure 8: German deposit rates have fallen back from 2007 highs, but still offer a return

Figure 9: Despite weak markets in 2008, retail investors put faith in mutual funds in the first half

Figure 10: Federal bond yields provide small investment returns on short-dated maturities, rising with time

Figure 11: The majority of HNW wealth in Germany is invested in the 'cash or near cash' asset category, with this accounting for 26% of all investments

Figure 12: German HNWs will shift strongly away from fixed income by 2011 and into equities and alternative investments

Figure 13: In 2011, the majority of high net worth assets in Germany will be invested in the 'Equities' category, with this accounting for 27% of all investments

Figure 14: HNW investors in Germany have a lower level of market knowledge than the average European HNW investor

Figure 15: There is a lower risk of HNW clients in Germany leaving to find another wealth manager than the average European HNW investor

Figure 16: The recession has strongly impacted the amount of wealth transfer to the next generation

Figure 17: In Germany, HNW investors' greatest demand is for execution-only asset management services

Figure 18: In 2 years time, the greatest demand amongst HNW investors in Germany will be for deposits and savings products with 27% of HNW investors demanding this category of product

Figure 19: Wealth managers in Germany will be focusing most of their resources on direct equity investment in two years time

Figure 20: HNW investors in Germany are most influenced by ability to identify investment opportunities in the downturn in their choice of Wealth Manager

Figure 21: The greatest strength of Wealth Managers in Germany is their personal relationships with clients

Figure 22: The best way for Wealth Managers in Germany to increase share of wallet is to target relationship managers on cross-selling products

Figure 23: The best way for Wealth Mangers in Germany to retain HNW investors is to not make errors

Figure 24: In Germany the Wealth Management relationship managers speak to clients by phone approximately once a week

Figure 25: In the Wealth Management relationship managers speak to in person to clients approximately once a month

Figure 26: The majority of clients in Germany want to speak to their wealth manager about performance of specific asset classes within their portfolio

Abstract

• HNW demographic and attitudinal attributes based on our Wealth Management Market Leaders Survey 2009
• Extensive primary research from 20 wealth management companies highlights thier strategies for revenue growth, acquiring and keeping clients
• Aggregated data covers onshore liquid assets including cash and deposits, mutual funds, direct investment in equities and direct investment in bonds
• Discusses the changing wealth management competitor landscape

• Understand the HNW population's investments by sector and geography, and see how innovative products/services have capitalized on these trends
• Analyze the HNW population's appetite for risk, and reasons for choosing/leaving their wealth service
• Assess the threats and opportunities for wealth managers by understanding how peers are planning to grow revenues, acquire and keep clients

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