Wealth Management in Switzerland 2009

Published by: Datamonitor

Published: Jul. 6, 2009 - 70 Pages

Table of Contents

Overview

Catalyst

Summary

Methodology

Executive Summary

Switzerland is at the center of changes in the international wealth management business

Swiss investors have acted more defensively over the past months

There are important differences in Swiss HNW attitudes that wealth managers need to cater for

Wealth managers need to consider the overlooked area of advisory services and step up the frequency of their client contact

Table of Contents

Table of figures

Table of tables

SPECIAL FEATURE: THE END OF AN ERA IN GLOBAL WEALTH MANAGEMENT?

Switzerland is at the center of changes in the international wealth management business

Economic circumstances are driving a re-examination of global wealth management practices

US court action is only one attack on Switzerland's status

The G20 and OECD have brought further damage to the Swiss model of banking

Increasing wealth in non-Western markets is fuelling growth in wealth management in those countries and in the process creating a more competitive international wealth management landscape

UBS has been damaged by a number of difficulties but is still standing

There is no doubt that the image of UBS has been tarnished by the bank's troubles

The need to be bailed out has further undermined UBS's standing

UBS's biggest threat is now the damage caused by its misconduct in the US

Wealth managers in Switzerland do not believe that UBS has been irretrievably damaged

UBS management is aiming to return to profitability in 2009

UBS still faces an uncertain future

There are unique opportunities for wealth managers to profit in this new environment

These opportunities should be explored at the same time as wealth managers work to lift brand, image and reputation

Wealth management opportunities in a downturn need to revolve around boosting the company profile

Actively recruit good relationship managers from competitors

Leverage CRM systems to identify new wealth management clients

The media can be used to raise the public profiles of both individuals and the financial institution

The onshore market for wealth management remains significant and unaffected by challenges to the Swiss banking model

The structure of the wealth management industry in Switzerland may be set to change

Expansion abroad is a key strategy for developing the wealth management business

Swiss wealth managers should exploit their strengths to position themselves strategically globally

It is the end of an era for wealth management but there is still a leading role for Switzerland

SWITZERLAND'S WEALTH

Swiss households play it safe but still manage to increase their net financial assets through savings growth

The financial assets of Swiss households increased at a slower rate during 2007

Swiss household balances have moved away heavily from equities and mutual funds

Swiss households show an inclination toward more safe investments

The Swiss Exchange lost less value than other European exchanges in 2008

Wealth Data in 2009

THE SWISS HNW INVESTOR

Swiss investors are cautious and need guidance from their wealth managers

Swiss investors are most likely to have cash holdings as their financial investment

Wealth management service implication: clients need guidance to take advantage of the market recovery

Innovative global example: ClientFirst Wealth Management in the US provides online tools to help educate its clients

Innovative global example: BTC Wealth Management Group has online financial planning library resource to help clients learn about investment

Over the next two years, investors will cautiously start to return to asset classes currently out of favor

Swiss investors are looking to equities, corporate bonds and capital protected funds as the economy starts to recover

Wealth management service implication: offer clients innovative capital protected products to see them through the economic uncertainty

Innovative example: UBS launches capital protected product to satisfy demand for equity products

Innovative example: Macquarie has a capital protected Geared Equity Investment product

Swiss HNWs demonstrate an appetite for risk but are demanding in terms of the standard of wealth management service

HNWs exhibit an above average appetite for risk but are more confused about the impact of the market turmoil on their investment portfolios

Wealth management service implication: Switzerland should aim to lift the bar and educate clients more about investment matters

Innovative example from Switzerland: UBS is investing in educating its clients

Swiss HNWs are demanding in terms of standard of wealth management service

Wealth management service implication: wealth managers must continue to refine client-focused operational models

Faced with uncertainty, Swiss HNWs want to understand their investments

Clients are clearly seeking guidance from their wealth managers

Swiss investors are more likely to be looking to asset preservation than profiting from the downturn

HNW clients in Switzerland are happy to delegate investment responsibility to their wealth manager

Wealth management service implication: wealth managers need to understand the fundamental attitudes of their clients

THE SWISS WEALTH MANAGER'S VIEW

In two years' time, HNWs will still need some guidance from their wealth managers across a range of investments

Several fundamental products and services will be in demand from HNWs in the next two years

Within an overall desire for guidance from their wealth management service, Swiss HNWs are still likely to be seeking less risky products in two years' time

A continued demand for capital protected funds and bonds

Innovative example: RBS provides capital protected investment fund and a higher savings rate to its customers

Infrastructure funds are set to grow in popularity in the future

Innovative example: UBS launched an international infrastructure fund

There are three key areas where wealth managers are focusing their resources in two years' time

Wealth management service implication: understand the fundamental attitudes of HNWs in order to shape the right products and services for them but encourage them to think beyond the recession

Innovative example from the US: Morgan Stanley creates a global infrastructure fund to take advantage of the current market conditions

Wealth managers must pay attention to brand, image and reputation, and develop personal relationships with clients as these are the key drivers of HNWs' choice of wealth management service

Wealth managers can proactively enhance their level of personal service to help the image of the firm

Wealth managers in Switzerland see personal relationships as their biggest strength and service quality as their biggest weakness

Swiss wealth managers need to convince clients that the company is financially sound, and give them several points of contact

The key to increasing share of wallet is to assure clients that the company is financially sound

Wealth managers need to give clients several points of contact within the bank in order to be successful at retaining HNW clients

Wealth managers in Switzerland are more likely to talk their clients daily than other European wealth managers, with investors mostly wanting to talk about the performance of their portfolio

Swiss clients are being contacted by phone more frequently than in other countries

Swiss wealth managers are also good at getting in front of their clients

Overall portfolio performance is mostly what Swiss HNWs want to talk about when they speak to their wealth manager

APPENDIX

Definitions

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

References

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: Wealth managers' views of UBS's wealth management services

Table 2: Wealth managers' views of UBS's wealth management services

Table 3: Wealth managers' views of UBS's wealth management services

Table 4: Wealth managers' views of strength and weaknesses of UBS's wealth management services

Table 5: Personal disposable income per adult in Europe, 2004-08 ($)

Table 6: Household savings rates as a percentage of disposable income, 2004-08

Table 7: Swiss household balances, 2007-08 (€m)

Table 8: Market capitalization of European and US stock exchanges, 2004-08

Table 9: What proportion of your HNWs' portfolios is allocated to the following five asset classes?

Table 10: HNWs' portfolio allocation now versus in two years' time

Table 11: HNWs' portfolio allocation by product area now versus in two years' time

Table 12: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high)

Table 13: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high)

Table 14: What are HNWs demanding today?

Table 15: In two years' time, how much demand do you expect from HNWs for the following product areas?

Table 16: What product areas will your wealth management service focus most resources on in the next two years?

Table 17: What will determine HNWs' choice of wealth management service over the next two years?

Table 18: What are your company's biggest strengths and weaknesses today?

Table 19: What is the most effective means of increasing share of wallet today?

Table 20: What is the best way to retain clients today?

Table 21: On average, how often do your relationship managers speak by phone to each HNW client?

Table 22: On average, how often do your relationship managers speak in person to each HNW client?

Table 23: When speaking with clients, what do they most want to talk about today?

List of Figures

Figure 1: UBS's brand, image and reputation has suffered as a result of the turbulence

Figure 2: UBS is perceived as having a more limited product range but is stronger in its advisory service

Figure 3: UBS's wealth management operation is most let down by the quality of its relationship managers and their depth of relationships with clients

Figure 4: Switzerland consistently has one of the highest savings rates in Europe

Figure 5: Swiss household balances have moved heavily away from equities and mutual funds

Figure 6: The Swiss Exchange lost a lower percentage of its market capitalization than other European exchanges

Figure 7: The majority of HNW wealth in Switzerland is invested in the 'cash or near cash' asset category, with this accounting for 25% of all investments

Figure 8: Over the next two years investors will move away from those assets currently more in favor

Figure 9: In 2011, the majority of high net worth assets in Switzerland will be invested in the 'Equities' category, with this accounting for 23% of all investments

Figure 10: HNW investors in Switzerland have a lower risk appetite than the average European HNW investor

Figure 11: There is a lower risk of HNW clients in Switzerland leaving to find another wealth manager than the average European HNW investor

Figure 12: In Switzerland, HNW investors' greatest demand is for simple, transparent investments

Figure 13: In two years' time, the greatest demand amongst HNW investors in Switzerland will be for infrastructure funds, with 23% of HNW investors demanding this category of product

Figure 14: Wealth managers in Switzerland will be focusing most of their resources on direct equity investment in two years' time

Figure 15: HNW investors in Switzerland are most influenced by brand, image and reputation in their choice of wealth manager

Figure 16: The greatest strength of wealth managers in Switzerland is their personal relationships with clients

Figure 17: The best way for wealth managers in Switzerland to increase share of wallet is to convince clients that the company is financially sound

Figure 18: The best way for wealth managers in Switzerland to retain HNW investors is to give the client several points of contact within the bank

Figure 19: In Switzerland, wealth management relationship managers speak to clients by phone approximately once a week

Figure 20: In Switzerland, wealth management relationship managers speak to to clients in person approximately once a quarter

Figure 21: The majority of clients in Switzerland want to speak to their wealth manager about the performance of their overall portfolio

Abstract

• HNW demographic and attitudinal attributes based on our Wealth Management Market Leaders Survey 2009.
• Sizes, segments and forecasts the number of affluent individuals across 10 liquid asset bands from EUR50k.
• Extensive primary research from 20 wealth management companies, highlighting their strategies for revenue growth, acquiring and keeping customers.
• In depth assessment of how UBS's wealth management operations are currently perceived, following the spate of bad news from the UBS AG.

• Understand the HNW population's investments by sector and geography, appetite for risk, and reasons for choosing/leaving their wealth service.
• Assess market attractiveness by reviewing size and growth forecasts for the potential wealthy client base five years ahead.

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