A Meeting of Minds Wealth Management & Private Banking The Berkeley Hotel, London SW1X 7RL 15 November 2018 The Scene Setter Results
What is the nature of your firm? 7% 4% 7% 7% 3 Discretionary Fund Manager Wealth Manager 15% 3 Private Client Asset/Investment Manager Execution Only Investment Service Provider Multi Family Office Private Bank Single Family Office
The areas of most concern to you 2% 4% 6% 8% 1 12% 14% Cost/income pressures Achieving greater productivity People - finding and keeping them Regulation Cyber attack Sourcing new clients Changing client demographics Innovation - keeping up Disruptive new entrants to the industry Reputational threat The impact of Brexit Geopolitics - market volatility Nov-17 Jun-17 Cost income pressures and achieving greater productivity along with the difficulties of finding good people would all appear to go hand in hand. The only other noticeable change is the fact that Brexit is gaining some attention.
THE SWOT ANALYSIS Strengths: Quality of people, adaptability "Connectivity to investment banking and research Skills of employees" Our trusted relationships with our clients especially compared to other financial services companies Giving good advice to clients "Quality of salesforce Quality of product suite Reputation (with some)" "Product/service offering Client retention" Staff expertise, small structure for fast decision "1) Strong new business generating capability. 2) Highly client focused. 3) Strong market position in selected niche segments." Quality of Strategy & People Bespoke, flexibility Of this business: genuine collegiate culture; actually putting clients first; long term tenure of advisers and clients Ability to find bespoke solutions for clients "Client contact Reputation People" The client experience is first class
THE SWOT ANALYSIS Weaknesses: Lack of transparency around pricing "technology profitability" The speed at which we are innovating and adopting technology to improve the customer experience Lack of depth/differenciation in our investment offering "Systems and tech Reputation (with some)" "Client service Proof of value" Lack of geography diversity "1) Non-standard operating processes across various client teams. 2) Multiple custodian relationships - operational complexity." Market Returns in the Future Lack of brand Of the industry: business models that don't allow clients to actually be put first; compensation that encourages short term sales; 'revolving door' of front office "Lack of flexibility /difficult being nimble Implementing regulation" "Ageing demographic Cost v Value v New enstrants" High fixed cost base and reliance on operational leverage
THE SWOT ANALYSIS Opportunities: Developing propositions for millennials and Gen Z that help gain trust. growth through recruitment Technology if we embrace it to empower the service we can give to clients and reinforce our position at the centre of their financial life. Next generation Adding retail products and lending Better use of data on existing and future clients o match service and product needs Growing global growth. Identification and penetration of new niche market segments. Less Players Ageing population Of this business: effective engagement with our clients next generation Digitalisation Differentiation for the best firms and winning wallet share as a result Low cost digital platforms
THE SWOT ANALYSIS Threats: Stupid over-regulation and clients falling for new entrants that later fail to deliver. "profitabiity issues lack of compliance" Technology if we don't embrace it and get disintermediated by other providers who control the data and have a more comprehensive platform of solutions Self direct "Brexit (short term) Pressure on margins (long term)" "Low profitability Inability to scale" Cyber corruption or Corbin government Inability to attract and retain new advisers. Stock Market declines Regulator Not doing above (for this business) Price squeeze v cost Ironically, low cost digital platforms!
How do you feel about the year ahead? 9 8 7 6 7.33 7.34 7.03 6.86 6.53 7.56 7 6.71 8.17 8 7.73 7.59 7.83 8.22 8.22 Spring 2015 Autumn 2015 Crikey - even more depressed than usual! 5 Spring 2016 Autumn 2016 4 Spring 2017 3 Autumn 2017 Spring 2018 2 Autumn 2018 1 0 Wealth Managers & Private Banks Advisory Distributors
How did your business numbers change over the past year in terms of clients? 9 8 7 6 8 7 84% 65% Maybe more measured. Still think there will be a 65% increase which is no mean feat. 5 4 3 35% Jun-17 Nov-17 2 1 15% 15% 15% 12% 4% 5% More Same Fewer
How do you think your business numbers will change over the next year in terms of clients 10 9 9 88% 88% Bullish! 8 7 7 6 5 4 3 Jun-17 Nov-17 2 1 15% 15% 12% 1 8% 4% More Same Fewer
How did your business numbers change over the past year in terms of your client facing employees? 8 7 6 5 4 3 52% 5 4 4 24% 71% 4 3 25% 25% Jun-17 Nov-17 Nearly ¾ of your firms maintained a static number of client facing employees 2 1 8% 6% More Same Fewer
How do you think your business numbers will change over the next year in terms of your client facing employees? 8 7 65% 7 64% 65% Think that will increase. 6 5 Jun-17 4 3 25% 36% 3 35% Nov-17 2 1 1 More Same Fewer
How did your business numbers change over the past year in terms of your back office headcount? 7 6 5 55% 55% 48% 65% Only 25% of you seem to have increased your headcount both back and front office. 4 3 2 25% 35% 32% 24% 2 2 Jun-17 Nov-17 1 1 12% More Same Fewer
How do you expect your business numbers to change over the next year in terms of your back office headcount? 8 7 6 5 4 3 4 35% 32% 24% 5 55% 56% 71% Jun-17 Nov-17 Front office might be on the up but not a lot of change in the back office. 2 1 1 1 12% 6% More Same Fewer
How did your business numbers change over the past year in terms of assets under management? 10 9 9 85% AUM increase has slowed. 8 7 6 72% 59% 5 4 35% Jun-17 Nov-17 3 2 1 2 1 5% 5% 5% 8% 6% More Same Fewer
How do you expect your business numbers to change over the next year in terms of assets under management? 12 But not for long? 10 8 9 10 76% 82% 6 4 Jun-17 Nov-17 2 2 18% 5% 5% 4% More Same Fewer
How did your business numbers change over the past year in terms of revenues 10 9 8 85% 9 8 Revenues slowing 7 6 59% Jun-17 5 Nov-17 4 35% 3 2 1 15% 12% 1 8% More Same Fewer 6%
How do you think your business numbers will change over the next year in terms of revenues 12 But not for long. 10 9 10 88% 8 8 6 4 Jun-17 Nov-17 2 16% 12% 5% 5% More Same Fewer
How did your business numbers change over the past year in terms of your costs? 8 7 7 72% Costs levelling off? 6 5 5 53% Jun-17 4 35% 35% Nov-17 3 2 1 2 12% 1 15% 16% 12% More Same Fewer
How do you expect your business numbers to change over the next year in terms of your costs? 9 8 7 8 71% Something about the word more? 6 55% 5 4 48% 4 Jun-17 Nov-17 3 2 1 24% 2 1 1 25% 12% 6% More Same Fewer
We asked if you felt you might like any support from your strategic partners? 14% 1 14% 3% 3% 3% 17% 34% The emphasis is clearly on front end technology. Technology (front end) Technology (back end) Distribution Support Risk Analytics Training Full Service Marketing Support Products
The average age of your clients The average age of your clients is 58; last time it was 55; before that it was 54 and before that 53.6! They are getting older!!
In terms of how many relationship managers you influence? The average was 161.5.
We asked about your use of products in house versus outsourced 73% Fairly consistent. Externally sourced 69% 71% Internally sourced 27% 29% 31% 24% 76% Nov-17 Jun-17 1 2 3 4 5 6 7 8
We asked you about your use of active versus passive funds? 34% Remarkably stable. Passive Active 25% 27% 28% 66% 73% 72% 75% Nov-17 Jun-17 1 2 3 4 5 6 7 8
We asked you about your funds under management? 12% 12% 18% 6% On average firms represented at this Meeting have 17.8BN. 12% 6% < 500M 500M - 750M 12% 750M - 1BN 1BN - 2.5BN 12% 6% 6% 2.5BN - 5BN 7.5BN- 10BN 10BN- 15BN 20BN- 25BN 25BN- 50BN > 50BN
We asked you to describe the sort of service you offer 9 8 7 6 81% 73% 61% 65% 68% 68% No great change there. 5 4 3 2 1 13% 13% 14% 13% 3 8% 2 21% 15% 11% 23% 9% Advisory Discretionary Execution only Jun-16 Nov-16 Jun-17 Nov-17
We asked you which approach you use for investment portfolios? 45% 4 4 35% 3 29% 3 25% 2 23% 21% 19% 15% 12% 1 5% Centralised Investment Proposition - in house 5% 5% Centralised Investment Proposition - third party 3% Centralised Retirement Proposition - in house Centralised Retirement Proposition - third party Discretionary Fund Management - in house 3% Discretionary Fund Management - third party Fully Bespoke Investment Service - in house 7% Fully Bespoke Investment Service - third party 2% Banking only
We asked you how you charge? 8 7 68% 71% 6 5 4 35% 3 27% 2 1 5% 12% 14% 6% 18% 18% 18% 6% 18% 18% 9% 14% Adviser charge per hour - initial Advisers charge per hour - ongoing % of investment - initial % of investment - ongoing A fixed fee - initial A fixed fee - ongoing A combination - initial A combination - ongoing
We asked what you typically charge as a % of investment? 6 5 4 3 2 1 14% 24% 9% 5 29% 36% 36% 47% 45% 9% Nov-17 In terms of how much you charge per hour, the range offered is between 200 and 500. The most common range being between 200 and 300. % shifting towards 1%. 0.25% - 0.5% 0.5% - 0.75% 0.75%-1% <1%
If you were Theresa May what would you be focusing on? Doing the right thing for the country and ignoring the extremes of the party. And doing this, above all else, to avoid a Corbyn government. New shoes Making Brexit as smooth as possible My next job. Brexit with free market for goods and services My next job A Brexit deal Brexit Next Job Brexit Collective responsibility and unity in the Cabinet Continue to negotiate Retirement Keeping job + delivering Brexit in a manageable format How to relax A Brexit deal and a comprehensive strategy to boost business investment
If each day suddenly had 25 hours in it - what would you do with that extra hour?? Play with my children Run for 35 minutes Shower and dress for 25 minutes" Business development Exercise Sleep Think Spend more time with my people. Read more and go to the Gym Sleep Sadly that would not be a free hour to allocate; it would be absorbed into the working day Exercise Read more Sleep Read more investment research
We hope you found this research of interest. If you would like to discuss any aspect of it, do please call Evie Owen at Owen James on 01483 861334 or email her at evieowen@owenjamesgroup.com