Emerging Markets Wealth Expected to Grow at 8 Percent Annually Over Next 5 Years According to New Oliver Wyman and Deutsche Bank Report
May 21, 2019
Singapore – Oliver Wyman and Deutsche Bank today released their fourth annual Wealth Management report titled “Out of the pit stop - into the fast lane.” In 2018, Wealth Managers faced growing headwinds.
The report finds that global high-net worth (HNW) wealth growth slowed to 4 percent in 2018. Lower assets under management (AuM) growth, more challenging markets and continued fee compression led to declining Wealth Management business valuations. The revenue pressure felt by Wealth Managers in late 2018 highlights the continued vulnerability of operating models to market stress. The rebound in early 2019 brought short-term relief for some, but further pressure is inevitable as the end of the cycle approaches.
Kai Upadek, Head of Wealth Management at Oliver Wyman, said: “To realize above average growth, serving developed markets will not be sufficient. Emerging Markets are the engine for growth going forward as the industry continues to face fee margin and cost pressures in developed markets.”
Kinner Lakhani, Head of European Equity Research & European Banks Strategist at Deutsche Bank said: ‘The key differentiator for wealth managers will come from leveraging the APAC growth engine. Within this growth story we expect Emerging Market net new money growth of 8 percent per year, more than twice that of Developed Markets. Put differently, while Emerging Markets represent one-third of wealth stock today, we expect them to contribute to more than one-half of future growth’.
The report highlights the following priorities for the C-suite:
- Rethink footprint in Emerging Markets – More than half of HNW wealth growth will originate in Emerging Markets vs one third of stock today. Wealth Managers need to rethink their positioning in Asia-Pacific and Latin America.
- Asia-Pacific – Wealth Managers must be alert to developments in offshore hubs Hong Kong and Singapore while the challenge to build scale is growing. Based on structural changes, now is the time to assess entry into Mainland China. Additionally, Wealth Managers must place decentralized bets on select South East Asia onshore markets to react to regulatory reforms while considering various market entry models to optimise cost of entry.
- Latin America – Wealth Managers need focus on solving operational, technical and regulatory challenges to provide a seamless onshore and offshore experience for clients. In addition, they must guide clients on their path towards more sophisticated investment strategies and better understanding of risk, given the low interest environment.
- Simplify the operating model -- The Q1 2019 market rebound has given Wealth Managers a last chance to improve efficiency of their operating model and adjust their cost base before an eventual downturn.
- To increase efficiency in the front office, Wealth Managers must free up advisor capacity for revenue generating activities by automating and digitizing processes, particularly in client onboarding, KYC/AML, and lending. Embedding different service levels and greater automation in the investment engine is still a largely underutilized lever. Wealth Managers need to align their offering with client needs in an industrialized, mass personalized offering.
- Allocated costs remain stubbornly high and should be tackled by lowering group services consumption. Wealth Managers need to focus on understanding and steering cost allocations as well as establishing a culture of cost ownership to get into the driver’s seat for allocated costs.
You can view a full version of the report online here.
About Oliver Wyman
Oliver Wyman is a global leader in management consulting. With offices in 60 cities across 29 countries, Oliver Wyman combines deep industry knowledge with specialized expertise in strategy, operations, risk management, and organization transformation. The firm has more than 5,000 professionals around the world who work with clients to optimize their business, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is a wholly owned subsidiary of Marsh & McLennan Companies [NYSE: MMC]. For more information, visit www.oliverwyman.com. Follow Oliver Wyman on Twitter @OliverWyman.
About Deutsche Bank
Deutsche Bank provides commercial and investment banking, retail banking, transaction banking and asset and wealth management products and services to corporations, governments, institutional investors, small and medium-sized businesses, and private individuals. Deutsche Bank is Germany’s leading bank, with a strong position in Europe and a significant presence in the Americas and Asia Pacific.
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