The US wealth management business had better roll its sleeves up.
That was the unmistakable message from yesterday’s eagerly anticipated Capgemini/RBC Wealth Management World Wealth Report 2012.
Although North America remained the world’s largest region for aggregate wealth held by high net worth individuals with over $1 million in investable assets ($11.4 trillion compared to $10.7 trillion in the Asia-Pacific region), the number of those individuals declined by 1 per cent in 2011 to 3.35 million, and their aggregate wealth also represented a decline of 2.3 per cent.
Nor is the trend likely to change much this year, said Capgemini and RBC executives at a press briefing in New York yesterday.
Low interest rates have been particularly detrimental to the US wealth management business, George Lewis, group head of RBC Wealth Management said in an interview with Family Wealth Report.
As clients abandon equities and flock to fixed income investments despite near record low yields, wealth managers are unable to make money on a yield spread or asset growth, resulting in a “disproportionate [negative] impact on business performance,” Lewis said.
Indeed, wealth managers around the world are facing an unusual dilemma, said Jean Lassignardie, corporate vice president for Capgemini Global Financial Services: while the host of problems they face, including increased regulations, rising costs (the cost of operations has risen at a faster rate than income growth since 2008), diminished profitability and heightened market volatility are not new, “firms have never before had to deal with them all at once.”
What’s more, Lassignardie pointed out, these conditions have become “the new normal. We are already in the fifth year of the financial crisis and there is no end in sight.”