The global wealth management sector showed lavish growth last year, with assets under management rising 14 percent, a survey showed, but the bonanza might be over if stock markets turned.
A boost in equity markets, which form the main source of income for wealth managers, was one key reason for the sector to thrive, said Scorpio Partnership, which undertook the survey, as well as new money put in by rich clients.
There is a feeling that there is easy money to make at the moment, but our research shows that long-term successes are only built on sensible strategies, the London-based consultancy group said in a statement on Wednesday.
Numerous banks have started or expanded their wealth management business, a sector that is estimated to sit on more than $30 trillion in client assets worldwide and is one of the fastest growing financial industries.
A market downturn would lower fee income in wealth management, however, which could in turn cause clients to shun their banks because their high correlation with markets might make them look unsafe, Scorpio said.
Three banks held more than $1 trillion in client assets at the end of 2006, the survey showed, with Switzerland's UBS the world's largest player with $1.6 trillion in assets, followed by Citigroup with $1.4 trillion and Merrill Lynch and Co. Inc. with $1.2 trillion.
Scorpio uses its own methodology and Merrill Lynch said that its reported assets under management are $1.6 trillion.
Scorpio's ranking is widely used in the industry, although the data are not public, offering a rate independent benchmark for size in the often secretive world of private banking.
The survey, which included 180 banks, showed the high degree of industry fragmentation, with the top three players holding market shares of 4.5 percent, 4.0 percent and 3.3 percent, respectively. The top-10 players together held only 20 percent of the market.
The top-3 players were followed by Credit Suisse Group , JP Morgan Chase & Co. , Morgan Stanley , HSBC Holdings Plc , Deutsche Bank AG , Wachovia Corp. and Pictet, a tradition-steeped privately owned Swiss bank.