Wealth And Asset Management Quarterly - Edition 1

Welcome to the latest edition of Wealth & Asset Management Quarterly


Are you ready for LIBOR transition?

It is almost two years since Andrew Bailey, CEO of the Financial Conduct Authority (FCA), announced that the FCA would not compel panel banks to submit to LIBOR beyond 2021. While progress has been made for the transition since then, there is still much to do. Our new report on replacing LIBOR outlines why the speed of change needs to accelerate ahead of 2021, before laying out actions for banks, regulators, and market infrastructure to take.

Our new report on the LIBOR transition argues that while banks with large LIBOR-based exposures have used the time since the FCA’s announcement in 2017 to assess their exposure, develop transition plans, and begin moving certain new transactions to Risk Free Rates (RFRs), additional risks and complexities have emerged.

Progress has been held back by uncertainties around where and whether term RFRs or alternative credit sensitive benchmarks will be available. Smaller banks with less exposure appear to be planning to rely predominantly on the existing fallback clauses in contracts to bring about the transition away from LIBOR – an approach which regulators have explicitly advised against.

Activity now needs to shift from fallbacks to new product development and transition, and the speed of change needs to accelerate sharply to meet the 2021 deadline. This requires action by both market participants and regulators to avoid a major market disruption.


Why Wealth Managers Need To Look East For Growth 

The 2019 edition of our annual Deutsche Bank Oliver Wyman Wealth Management Report provides an overview of recent industry trends and an outlook on future developments.

In 2018, Wealth Managers faced growing headwinds. Global high-net worth (HNW) wealth growth slowed to 4 percent in 2018. Lower 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 – Wealth Managers must take action.

We have outlined two key priorities for Wealth Managers to consider:

• Rethink the footprint in Emerging Markets – Wealth Managers need to rethink their positioning across Emerging Markets, which will constitute over half of global wealth growth – APAC and LatAm are of particular relevance

• Simplify the operating model – Wealth Managers need to demonstrate their ability to prepare their operating models for an approaching downturn by simplifying their front-office operations and getting into the driver’s seat for allocated costs

Achieving success along both dimensions will be the single most important factor in determining future winners and losers.