Germany The Future of HNWIs to 2016: Wealth in the Powerhouse of Europe

Germany The Future of HNWIs to 2016: Wealth in the Powerhouse of Europe China The Future of HNWIs to 2015: Opportunities for Wealth Managers and Private Banks Publication date: May, 2012. WealthInsight. This report is a licensed product and is not to be photocopied. Report code: WI0034MR

TABLE OF CONTENTS TABLE OF CONTENTS 1 Introduction... 8 1.1 What is this Report About?... 8 2 Executive Summary... 12 3 Wealth Sector Fundamentals... 16 3.1 Political Background...16 3.2 Economic Background to the Wealth Sector...18 3.3 Benchmarking German Wealth in Context...20 3.3.1 Distribution of Wealth... 20 4 Findings from the WealthInsight HNWI Database... 24 4.1 Trends in HNWI Wealth to 2016...24 4.1.1 HNWI Trend Analysis... 24 4.1.2 HNWI Volume Trend Analysis... 25 4.1.3 HNWI Wealth Trend Analysis... 25 4.1.4 Per Capita HNWI Net Worth Trend Analysis... 26 4.1.5 Trends of the Wealth Bands... 28 4.1.6 HNWIs: Demographic Breakdown... 30 4.2 UHNWIs...31 4.2.1 UHNWI Volume Trend Analysis... 31 4.2.2 UHNWI Wealth Trend Analysis... 32 4.2.3 UHNWIs: Demographic Breakdown... 33 4.2.4 UHNWIs Job Titles... 35 4.2.5 UHNWIs Industry Breakdown... 36 4.2.6 UHNWIs Industry Performance... 37 4.2.7 UHNWIs Industry Forecasts... 38 4.2.8 UHNWIs Source of Wealth: Entrepreneurship, Earnings or Inheritance... 39 4.2.9 UHNWI breakdown by City... 40 4.2.10 UHNWIs City Performance... 42 4.2.11 UHNWIs City Forecasts... 44 4.2.12 UHNWIs Smaller City Review... 45 4.3 UHNWIs The Billionaires...47 4.3.1 Billionaire Volume Trend Analysis... 48 4.3.2 Billionaire Wealth Trend Analysis... 48 4.3.3 Billionaire Per Capita Net Worth Trend Analysis... 48 4.3.4 City-wise Breakdown of Billionaires... 48 4.3.5 Industry Breakdown of Billionaires... 49 4.3.6 Top 20 Billionaires... 50 4.4 UHNWIs The Centimillionaires...51 4.4.1 Centimillionaire Volume Trend Analysis... 52 4.4.2 Centimillionaire Wealth Trend Analysis... 52 WealthInsight. This report is a licensed product and is not to be photocopied. Page 1

TABLE OF CONTENTS 4.4.3 Centimillionaire Per Capita Net Worth Trend Analysis... 52 4.5 UHNWIs The Affluent Millionaires...53 4.5.1 Affluent Millionaire Volume Trend Analysis... 54 4.5.2 Affluent Millionaire Wealth Trend Analysis... 54 4.5.3 Affluent Millionaire Per Capita Net Worth Trend Analysis... 54 4.6 Core HNWIs...55 4.6.1 Core HNWI Volume Trend Analysis... 55 4.6.2 Core HNWI Wealth Trend Analysis... 56 4.7 Core HNWIs The Mid Tier Millionaires...58 4.7.1 Mid Tier Millionaire Volume Trend Analysis... 59 4.7.2 Mid Tier Millionaire Wealth Trend Analysis... 59 4.7.3 Mid Tier Millionaire Per Capita Net Worth Trend Analysis... 59 4.8 Core HNWIs Lower Tier Millionaires...60 4.8.1 Lower Tier Millionaire Volume Trend Analysis... 60 4.8.2 Lower Tier Millionaire Wealth Trend Analysis... 61 4.8.3 Lower Tier Millionaire Per Capita Net Worth Trend Analysis... 61 5 Analysis of German HNWI Investments... 62 5.1 Analysis by Asset Class...62 5.1.1 Changing Trends in Liquid Assets Equity, Fixed Income and Cash and Deposits... 63 5.1.2 Trends in Alternative Assets... 65 5.1.3 Trends in Art, Wine and Wheels... 67 5.1.4 Trends of Investments in Real Estate... 69 5.1.5 Trends of Investments in Cash and Deposits... 73 5.1.6 Trends of Investments in Fixed Income... 73 5.1.7 Trends of Investments in Equity... 74 5.1.8 Trends of Investments in Business Interest... 75 5.2 Analysis of Foreign Investments...76 5.2.1 Trend of Investments in Rest of Europe... 78 5.2.2 Trend of Investments in Asia-Pacific... 79 5.2.3 Trend of Investments in North America... 79 5.2.4 Trend of Investments in Latin America, the Middle East and Africa... 79 5.3 Analysis of German Ultra HNWI Investments...80 6 Competitive Landscape of the Wealth Sector... 82 6.1.1 Private Banks... 82 6.1.2 Wealth Managers... 84 6.1.3 Family Offices... 86 6.1.4 Financial advisors... 89 6.2 Developments in German Private Banking Industry...89 6.3 German Wealth Management Industry Clientele Model and Maturity...90 6.4 Behavioral Mapping of Wealth Management and Private Banking Industry in Germany...92 6.5 Porter s Five Force Analysis Wealth management industry in Germany...93 6.6 Financial Services Review...95 WealthInsight. This report is a licensed product and is not to be photocopied. Page 2

TABLE OF CONTENTS 6.6.1 Retail Banks... 95 6.6.2 Fund Management... 95 6.6.3 Hedge funds... 95 7 Appendix... 96 7.1 Major Cities in Germany...96 7.2 Additional Components of the Wealth Sector in Germany...96 7.2.1 Philanthropy... 96 7.2.2 Demand for Intergenerational Wealth Transfer... 96 7.2.3 Human Resource Availability for the Wealth Management industry... 97 7.3 Regulatory Environment in Germany...97 7.3.1 Banking Regulations... 97 7.3.2 Regulations on Taxes... 98 7.3.3 Regulations on Wealth Management and Private Banking... 100 7.3.4 Regulations related to immigration, investment and employment... 101 7.4 Key Economic Trends and Drivers... 102 7.4.1 EUR to USD Moving Annual Average Exchange Rate... 102 7.4.2 Real GDP Growth... 103 7.4.3 Per Capita GDP... 104 7.4.4 Gross Savings Rate as a % of GDP... 105 7.4.5 Domestic Market Capitalization... 106 7.4.6 Housing Price Index... 107 7.4.7 Commodity Index... 108 7.4.8 Foreign Direct Investment (FDI)... 109 7.4.9 Investments of FII s in Equity Products... 110 7.4.10 Inflation Rate... 111 7.4.11 Interests Rate... 112 7.4.12 Balance of Payments... 113 7.4.13 Government Debt... 114 7.4.14 Stock Market Performance... 115 7.4.15 HNWI Wealth vs. GDP Ratio... 116 7.4.16 Capital Formation as % of GDP... 117 7.4.17 Disposable Income as % of GDP... 118 7.5 Case Study Financial regulation in the European Union (EU)... 119 7.6 Social Background of Germany... 122 7.7 Technological Background of Germany... 123 8 About WealthInsight... 127 WealthInsight. This report is a licensed product and is not to be photocopied. Page 3

TABLE OF CONTENTS LIST OF TABLES Table 1: HNWI Wealth Band and Group Definitions... 9 Table 2: Major Regions in Germany, 2010... 17 Table 3: HNWIs Volume Distribution Wealth Pyramid, 2011... 28 Table 4: HNWIs Wealth Distribution Wealth Pyramid, 2011... 29 Table 5: Top 10 German cities for UHNWIs, 2007-2011... 40 Table 6: UHNWIs Top 10 Cities by Wealth Growth, 2007 2011... 43 Table 7: UHNWIs WealthInsight forecasts for Top 10 cities... 44 Table 8: UHNWIs Smaller German Cities, 2011... 45 Table 9: UHNWIs Former East German Cities, 2011... 46 Table 10: Billionaires Market Overview, 2007-16... 47 Table 11: Billionaires Cities by Wealth Growth, 2007 2011... 49 Table 12: Billionaires Sector Breakdown, 2011... 49 Table 13: Billionaire s Top 20 List, 2011... 50 Table 14: UHNWIs Centimillionaires Market Overview, 2007-16... 51 Table 15: UHNWIs The Affluent Millionaires Market Overview, 2007-16... 53 Table 16: Core HNWIs Mid Tier Millionaires Market Overview, 2007-16... 58 Table 17: Core HNWIs Lower Tier Millionaires Market Overview, 2007-16... 60 Table 18: HNWIs HNWI Holdings Growth (%), 2007-16... 63 Table 19: HNWIs Liquid Asset Composition (%), 2007-16... 64 Table 20: HNWIs Trends of Investments in Alternative Assets (%), 2007-16... 66 Table 21: HNWIs Alternative Asset Composition (%), 2007-16... 66 Table 22: HNWIs Trends in Art, Wine and Wheels, 2006-11... 67 Table 23: HNWIs Residential real estate index per city, 2011... 70 Table 24: HNWIs Commercial real estate rental prices per city, 2011... 71 Table 25: HNWIs Prime International Cities, 2007-2011... 71 Table 26: HNWIs % Foreign Allocation, 2007-16 X Axis... 76 Table 27: UHNWIs Allocations and Share of HNWI Assets, 2011... 81 Table 28: UHNWIs Allocations and Share of HNWI Assets, 2011... 82 Table 29: Private bank branches by city, 2011... 83 Table 30: Other major Private Banks, 2011... 83 Table 31: Wealth Managers per City... 84 Table 32: Emerging cities in Wealth Management... 85 Table 33: WealthInsight City Ratings of Private Banking Potential... 86 Table 34: Asset Allocation of Typical European Single Family Office, 2011... 87 Table 35: German Family Offices by city... 88 Table 36: Family Offices in Germany... 88 Table 37: Wealth Management Industry in Germany Recent Deal Activity... 89 Table 38: Largest 10 Cities in Germany, 2010... 96 Table 39: HNWIs Inheritance tax bands... 100 Table 40: Euro to USD Moving Annual Average Exchange Rate, 2006 16... 102 Table 41: Real GDP Growth Rate, 2006 16... 103 Table 42: GDP Per Capita, 2006 16... 104 WealthInsight. This report is a licensed product and is not to be photocopied. Page 4

TABLE OF CONTENTS Table 43: Gross Savings as a % of Real GDP, 2006 2016... 105 Table 44: Domestic Market Capitalization, 2006 11... 106 Table 45: Housing Price Index, 2006 11... 107 Table 46: Commodity Indices, 2006 16... 108 Table 47: Foreign Direct Investments, 2006 2016... 109 Table 48: Investments of FIIs in Equity Products, 2006 10... 110 Table 49: Inflation Rate, 2006 16... 111 Table 50: Money Market Rate, 2006 16... 112 Table 51: Balance of Payments, 2006-11... 113 Table 52: Government Debt to GDP, 2006 16... 114 Table 53: Stock Market Performance, 2006 11... 115 Table 54: HNWI Wealth vs. GDP Ratio, 2006 16... 116 Table 55: Capital Formation as % of GDP, 2006-16... 117 Table 56: Disposable Income as % of GDP, 2006-16... 118 Table 57: Patent applications by country, 2010... 124 Table 58: Appendix 1... 125 Table 59: Appendix 2... 126 WealthInsight. This report is a licensed product and is not to be photocopied. Page 5

TABLE OF CONTENTS LIST OF FIGURES Figure 1: HNWI Wealth Band Definitions... 10 Figure 2: Map of Germany... 11 Figure 3: Asset Price Performance, 2007-11... 21 Figure 4: German HNWI Performance, 2007-15... 22 Figure 5: HNWI Germany vs. the World... 23 Figure 6: HNWIs Growth Factor Correlation, 2007-11... 24 Figure 7: HNWIs Volume by Wealth Band, 2007-16... 25 Figure 8: HNWIs Wealth by Wealth Band (in US$ Billion), 2007-16... 26 Figure 9: HNWIs Per Capita Net Worth (in US$ Million), 2007-16... 27 Figure 10: HNWIs Volume Distribution Wealth Pyramid, 2011... 28 Figure 11: HNWIs Wealth Distribution Wealth Pyramid, 2011... 29 Figure 12: HNWIs Age Distribution, 2011... 30 Figure 13: UHNWIs Wealth Share vs. Volume Growth... 31 Figure 14: UHNWIs Volume by Wealth Band, 2007-16... 32 Figure 15: UHNWIs Wealth by Wealth Band (in US$ Billion), 2007-16... 33 Figure 16: UHNWIs Age Distribution, 2011... 34 Figure 17: UHNWIs Job Titles, 2007-2011... 35 Figure 18: UHNWIs Distribution by Industry, 2011... 36 Figure 19: UHNWIs Sector Performance, 2007 2011... 37 Figure 20: UHNWIs Sector Forecasts, 2011 2016... 38 Figure 21: UHNWIs Importance of Entrepreneurship, 2011... 39 Figure 22: UHNWIs Human Capital Development Index by Region, 2011... 41 Figure 23: UHNWIs Regional Performance, 2007-2011... 42 Figure 24: UHNWIs Regional Forecasts, 2011-2016... 44 Figure 25: Billionaires Market Overview, 2007-16... 47 Figure 26: UHNWIs Centimillionaires Market Overview, 2007-16... 51 Figure 27: UHNWIs The Affluent Millionaires Market Overview, 2007-16... 53 Figure 28: Core HNWIs Volume by Wealth Band, 2007-16... 56 Figure 29: Core HNWIs Wealth by Wealth Band (in US$ Billion), 2007-16... 57 Figure 30: Core HNWIs Mid Tier Millionaires Market Overview, 2007-16... 58 Figure 31: Core HNWIs Lower Tier Millionaires Market Overview, 2007-16... 61 Figure 32: HNWIs Asset Class Composition, 2007-16... 62 Figure 33: HNWIs Changing Trends in Total Liquid Assets (as % of Total Assets), 2007-16... 63 Figure 34: HNWIs Liquid Assets Composition (US$ Billions), 2007-16... 64 Figure 35: HNWIs Trends of Investments in Alternative Assets (in US$ Billion), 2007-16... 66 Figure 36: HNWIs Trends in Art, Wine and Wheels, 2006-11... 67 Figure 37: HNWIs Foreign Asset Allocation vs. Growth, 2011-2016... 76 Figure 38: HNWIs Global Distribution of Foreign Investments, 2007-16... 78 Figure 39: UHNWIs Asset Class Composition, 2007-16... 80 Figure 40: Wealth Management Industry in Germany Maturity level of players... 91 Figure 41: German Wealth Management Industry Behavioral Mapping, 2011... 92 Figure 42: GBP to USD Moving Annual Average Exchange Rate, 2006 16... 102 WealthInsight. This report is a licensed product and is not to be photocopied. Page 6

TABLE OF CONTENTS Figure 43: Real GDP Growth (%), 2006 16... 103 Figure 44: GDP Per Capita, 2006 16... 104 Figure 45: Gross Savings as a % of Real GDP, 2006 2016... 105 Figure 46: Domestic Market Capitalization, 2006 11... 106 Figure 47: Housing Price Index, 2006 11... 107 Figure 48: Commodity Indices, 2006 16... 108 Figure 49: Foreign Direct Investments, 2006 2016... 109 Figure 50: Investments of FIIs in Equity Products, 2006 10... 110 Figure 51: Inflation Rate, 2006 16... 111 Figure 52: Money Market Rate, 2006-16... 112 Figure 53: Balance of Payments, 2006-11... 113 Figure 54: Government Debt to GDP, 2006 16... 114 Figure 55: Stock Market Performance, 2006 11... 115 Figure 56: HNWI Wealth vs. GDP Ratio, 2006 16... 116 Figure 57: Capital Formation as % of GDP, 2006-16... 117 Figure 58: Disposable Income as % of GDP, 2006-16... 118 WealthInsight. This report is a licensed product and is not to be photocopied. Page 7

INTRODUCTION 1 Introduction 1.1 What is this Report About? This report is the result of WealthInsight s extensive research covering the high-net-worth individual (HNWI) population and wealth management industry in Germany. It provides a market overview and forecast of the HNWI population and HNWI wealth across asset classes. By utilizing the WealthInsight HNWI Database, it provides key demographic breakdowns. The phrase coverage period refers to the period 2007 2016, whereas the review period relates to the years 2007 2011 and the forecast period to the years 2011 2016. This report segments the German HNWI population across five wealth bands (defined in Table 1) and HNWI wealth investments across asset classes and regions. In order to provide a fully comprehensive analysis of HNWI wealth, wealth is defined as the net value of assets, including both financial holdings and tangible assets. Financial holdings and tangible assets include alternative assets, real estate (excluding the primary residence), cash and deposits, fixedincome, equities and business interests. WealthInsight. This report is a licensed product and is not to be photocopied. Page 8

INTRODUCTION Table 1: HNWI Wealth Band and Group Definitions Wealth Band Billionaires Centimillionaires Affluent Millionaires Mid-Tier Millionaires Lower-Tier Millionaires Wealth Group HNWIs UHNWIs Core HNWIs Source: WealthInsight Definition Billionaires are those HNWIs holding investable assets of US$1 billion or more, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. Centimillionaires are those HNWIs holding assets between US$100 million and less than US$1 billion, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. Affluent millionaires are those HNWIs holding assets between US$30 million and less than US$100 million, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. Mid-tier millionaires are those HNWIs holding assets between US$5 million and less than US$30 million, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. Lower-tier millionaires are those HNWIs holding assets between US$1 million and less than US$5 million, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. Definition The high-net-worth individuals (HNWIs) wealth group comprises all wealth bands. It represents those individuals holding assets of US$1 million or more, including equities, bonds, cash and deposits, fixedincome products, real estate, alternative assets and business interests. The ultra-high-net-worth individuals (UHNWIs) wealth group comprises the billionaire, centimillionaire and affluent millionaire wealth bands. It represents those individuals holding assets of US$30 million or more, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. The core HNWIs group comprises the mid-tier millionaire and lower-tier millionaire wealth bands. It represents those individuals holding assets between US$1 million and less than US$30 million, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. WealthInsight WealthInsight. This report is a licensed product and is not to be photocopied. Page 9

INTRODUCTION Figure 1: HNWI Wealth Band Definitions Source: WealthInsight WealthInsight WealthInsight. This report is a licensed product and is not to be photocopied. Page 10

INTRODUCTION Figure 2: Map of Germany Source: CIA Factbook WealthInsight WealthInsight. This report is a licensed product and is not to be photocopied. Page 11

EXECUTIVE SUMMARY 2 Executive Summary HNWIs Slow rebound from the financial crisis and moderate growth forecast Germany has the 4 th highest number of HNWIs in the world after the US, Japan and China. As of 2011, there are just over 1,253,000 HNWIs in Germany, with a combined wealth of US$3.9 trillion, accounting for roughly 36% of Germany s total wealth (US$11.0 trillion). The total number of HNWIs in Germany declined by 8.4% over the review period (2007 to 2011), while HNWI wealth dropped by 12.5%. The wealth of HNWIs in Germany was negatively influenced by a large decline in German stock markets in 2008 and a slow stock market recovery since the crisis. Growth in HNWI wealth and volumes over the forecast period will be moderate as projections are constrained by ongoing concerns of a double dip recession in European markets. Growth of the number of HNWIs in Germany, however, is expected to be greater than in other major EU markets such as the UK and France. Over the forecast period, HNWI volumes will increase by 16.5% at a CAGR of 3.1% to reach just over 1,460,000 individuals in 2016. This is well above the level of 1,367,000 reached at the end of 2007. Total wealth of Germany s HNWIs is forecast to grow by 20% at a CAGR of 3.8%, to reach US$4.7 trillion in 2016. Asset classes HNWIs will move away from real estate and towards alternatives and fixed income offerings In 2011, equities are the largest asset class for HNWIs in Germany, accounting for 24% of total HNWI assets, followed by real estate (23%), business interests (22%), fixed income (16.0%), alternatives (8.8%) and cash (6.4%). Fixed income, alternative assets and cash holdings were the best performing asset classes over the review period, driven by a flight to safety during and after the global financial crisis. Against international norms, the share of HNWIs assets held in real estate also increased substantially over the review period, as the German real estate market outperformed global markets. Alternative asset allocations were boosted by a strong commodities market the commodity holdings of German HNWIs increased significantly over the review period, from 1.7% of total assets in 2007 to 3.3% in 2011. Over the forecast period, WealthInsight expects a movement away from real estate and towards alternatives and fixed income products. Alternative allocations are forecast to rise by the highest margin, as HNWIs seek to take advantage of the development of alternative asset products geared towards taking advantage of growth in Asia, especially in China. WealthInsight. This report is a licensed product and is not to be photocopied. Page 12

EXECUTIVE SUMMARY The geographic distribution of HNWI investments Allocations to Europe will decrease as allocations to Asia and the emerging world increase In 2011, Europe accounts for 55.1% of the foreign asset held by German HNWIs, followed by North America with 23.5%, Asia-Pacific with 11.8% and Latin America with 6.3%. Led by increases in investments into Hong Kong and Singapore, the share of foreign assets that German HNWIs allocated to the Asia-Pacific region rose substantially over the review period from 8.2% in 2007 to 11.8% in 2011. Of the assets German HNWIs hold abroad, the share allocated to the rest of Europe increased slightly over the review period from 54.8% in 2007 to over 55.1% in 2011. This was despite a significant drop in investments into Spain and Italy, in particular. Over the forecast period, WealthInsight expects that, of the share of wealth German HNWIs hold abroad, the share they allocate to the Asia-Pacific will increase to 13.8% of foreign holdings, while the allocation to the rest of Europe will decline to 53.1% of foreign holdings. Core millionaires Volume and wealth trends There are 1,241,632 core millionaires in Germany, with combined wealth of US$2,583 billion and an average wealth of US$2.1 million. Over the review period, the number of core HNWIs decreased by 8.4% which was in line with the HNWI average. According to WealthInsight s projections, the number of core HNWIs in Germany will grow by 16.5% over the forecast period to reach 1,446,895 by 2016. UHNWIs Volume and wealth trends Germany has the third highest number of UHNWIs in the world, behind the US and Japan. There are 11,392 Ultra HNWIs in Germany, with an average wealth of US$118 million per person and a combined wealth of US$1.3 trillion. There are currently 81 billionaires, 2529 centimillionaires and 8,782 affluent millionaires in Germany as of year-end 2011. During the review period, the number of Ultra HNWIs increased by 0.7% compared to the decline of 8.4% for all HNWIs. This was due to the particularly strong performance of affluent millionaires. There was a wide range of performance between the different Ultra bands: the number of billionaires dropped by 24%, while the number of centimillionaires decreased by 4.9%. Affluent millionaires, by contrast, grew by 2.8% over the period. Over the forecast period, WealthInsight expects the number of Ultra HNWIs to rise by 17.9%, to reach 13,426 individuals in 2016. Billionaire volumes will grow by 21%, the most of any UHNWI wealth band, while centimillionaire and affluent millionaire volumes are set to increase by 18.0% and 17.8%, respectively. WealthInsight. This report is a licensed product and is not to be photocopied. Page 13

EXECUTIVE SUMMARY Over the coverage period, 2007 to 2016, Billionaires are the only ultra wealth band forecast to register negative growth in terms of volumes, declining by 8.0%, from 106 individuals in 2007 to 97 individuals in 2016. On the other extreme, the number of affluent millionaires is expected to increase by 21%, the largest percentage growth of all wealth bands over the coverage period. UHNWIs Demographic and sector trends The average age of UHNWIs in Germany is 61 years. Billionaires have the highest average age of 67 years, while the average age of centimillionaires and affluent millionaires is 63 years and 60 years, respectively. Manufacturing (including automotive) and retail & fashion are the two main industries in which UHNWIs have accumulated their wealth, serving as the source of wealth for 19.5% and 15.5% of UHNWIs, respectively. Other important industries in which German UHNWIs have made their fortunes include FMCG (12.7%), diversified (9.6%) and financial services (8.4%). Over the review period, the number of UHNWIs who have acquired their wealth through retail & fashion grew by 19.2% more than any other major sector. UHNWIs who acquired their wealth in manufacturing the most important sector for UHNWI wealth creation were more severely impacted by the global financial crisis, with their total number rising by a lower 2.7% over the review period. However, this is still above the overall growth in the number of Germany s UHNWIs of 0.7% over the period. The number of UHNWIs who acquired their wealth in the technology sector declined by more than for any other sector 23% over the period. UHNWIs Regional trends Frankfurt is home to the largest portion of Germany s UHNWIs (16.4% or 1,868 UHNWIs). This is above Paris (1,501 UHNWIs), but still well below London (4,224 UHNWIs). There are also sizable German UHNWI populations in Munich (1,113 UHNWIs), Hamburg (843 UHNWIs), Düsseldorf (524 UHNWIs), Berlin (464 UHNWIs) and Stuttgart (382 UHNWIs). Among Germany s top 10 cities, Munich and Essen were the top performing cities for UHNWIs over the review period, with number of UHNWIs in each city increasing by 30% and 23%, respectively. The population of UHNWIs in Berlin and Stuttgart fared less well, with their number decreasing over the review period by 16.5% and 13.2%, respectively. UHNWIs in Frankfurt also saw their number decline over the review period, but by a less severe 6.2%. WealthInsight. This report is a licensed product and is not to be photocopied. Page 14

EXECUTIVE SUMMARY Private Banking Well developed wealth management market The wealth management sector in Germany is well developed and had AuM of US$1.1 trillion as of year-end 2011. This is 28% of the total wealth of Germany s HNWIs, a ratio that is well above the global average of 20%. German HNWIs account for 57%, or US$630 billion, of the total AuM of Germany s wealth management sector, meaning that 16% of total German HNWI wealth is managed by the German wealth management sector. There are over 50 private banks and over 300 wealth managers currently operating in Germany. The top ten private banks control 40% of the wealth management market in Germany and have AuM of over US$440 billion. Frankfurt is home to 115 wealth management head offices, followed by Munich with 75, Hamburg with 28 and Berlin with 24. Among top 10 cities for UHNWIs: Essen, Bonn, Hannover and Stuttgart have the lowest number of wealth managers per UHNWI. These cities may therefore offer the greatest potential for the wealth management sector going forward. There are 112 multi-family offices with a presence in Germany. Sixty-one of these are German based institutions, 38 are Swiss and six are British multi-family offices also operating in the country. The remainder are based in Luxemburg and other offshore centers. WealthInsight. This report is a licensed product and is not to be photocopied. Page 15

ABOUT WEALTHINSIGHT 3 About WealthInsight WealthInsight provides detailed data and insightful analysis on the world's High Net Worth Individuals (HNWI) and wealth sector. With decades of experience providing business information, WealthInsight helps organizations to make informed decisions and win new business. At WealthInsight's core is our proprietary HNWI Database of the world's wealthiest individuals. Around this database we have built a number of valuable research based products and services that make WealthInsight much more than just a rich contact list. We work with and provide solutions for: Wealth Managers Private Banks Family Offices Technology Providers Professional Services - Consultants, Accountants, Lawyers and Real Estate Professionals Fund Managers, Hedge Fund Managers, Asset Managers, Venture Capitalists Nonprofits and Educational Institutions WealthInsight s corporate headquarters are located in London, with offices in New York, San Francisco, Sydney, Seoul and Hong Kong. For more information on WealthInsight please visit www.wealthinsight.com Reports WealthInsight publishes high quality research reports focused on the wealth sector. The reports provide comprehensive analysis of countries, regions and special topics. With the High Net Worth Individual (HNWI) Database as the foundation for its primary research and analysis, WealthInsight is able to obtain an unsurpassed level of granularity, insight and authority on the HNWI universe in each of the countries and regions covered. All reports are available as a part of the WealthInsight Intelligence Centre. purchased on a subscription or one-off basis. Reports can also be Every WealthInsight report is uniquely formulated for the region, country or topic covered. Some of the key features of the reports include: Market Sizing Forecasting Benchmarking HNWI Asset Allocation Behavioural Mapping Family Offices WealthInsight. This report is a licensed product and is not to be photocopied. Page 16

ABOUT WEALTHINSIGHT Methodology WealthInsight s team of in-house analysts devise and collect data over a historical period of five years and develop forecasts for a five year forecast period. All WealthInsight Wealth Reports are rigorously sourced and created according to a comprehensive methodological process: Internal Audit Review of in-house databases to gather existing data: Historic market databases and reports High Net Worth Individual (HNWI) Database Wealth management, private bank and family office database Financial deals and news archive Secondary Research Collection of the latest market-specific data from a wide variety of industry sources: Government statistics Industry associations Company filings Broker reports International organizations Primary Research Review of the latest wealth management and private banking industry trends Surveys using panels compiled from across the wealth sector: Wealth management and private banking professionals Financial services experts High net worth individuals Expert Opinion Collation of opinion taken from WealthInsight interviews of leading industry experts Analysis of third-party opinion and forecasts: Broker reports Industry associations Wealth management and private banking media Official government sources Leading academic research and commentary Data Consolidation and Verification Consolidation of data and opinion to create historical datasets Creation of models to benchmark data across sectors, asset classes and geographies Market Forecasts Feed of forecast data into market models: Macroeconomic indicators Industry-specific drivers WealthInsight. This report is a licensed product and is not to be photocopied. Page 17

ABOUT WEALTHINSIGHT Analysis of the WealthInsight HNWI Database and Wealth sector company databases to identify key trends: Latest wealth trends Key drivers of the wealth management industry Report Writing Analysis of market data Discussion of company and industry trends and issues Integration of survey results Annual review of financial deals and wealth management trends Standardization of market definitions using recognized industry classifications Quality Control Peer review Senior-level QC Random spot checks on data integrity Benchmark checks across databases Market data cross-checked for consistency with accumulated data from: Internal databases Company filings WealthInsight. This report is a licensed product and is not to be photocopied. Page 18

ABOUT WEALTHINSIGHT WealthInsight. This report is a licensed product and is not to be photocopied. Page 19