A Tale of Two Millionaires: - Managers of Wealth

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A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market 11 families. McKinsey’s research shows that the industry average ratio of revenue on client assets (ROCA) is 85 basis points for Core Millionaires versus an average of 38 basis points for UHNW clients (Exhibit 5). Moreover, private banking clients with less than $10 million in assets usually expect their private banker to directly manage their assets. On average, less than 5 percent of Core Millionaires’ assets are held in custody, compared to 25 percent to 30 percent of UHNW clients’ assets. Custody assets typically have revenue margins under 10 basis points and sometimes much lower. • Greater use of lending and deposit products. McKinsey’s 2011 benchmarking reflects the important link between banking product penetration and overall revenue margins. In top-quartile private McKinsey’s Global Wealth Sizing McKinsey & Company’s proprietary Global Wealth Distribution database provides current and future projections of high-net-worth assets. The firm’s sizing of the global high-net-worth market includes detailed projections for all regions and over 50 markets (both onshore and offshore assets). Among the highlights for 2011: • Total onshore assets of U.S. high-net-worth households will increase by $3.7 trillion over the next four years, with 955,000 net new households having at least $1 million to invest. • Financial assets of high-net-worth individuals have grown over 24 percent annually since 2008 in Asia (excluding Japan) and are expected to increase at a rate of approximately 19 percent over the next four years. • Despite faster economic growth in emerging markets, over 40 percent of the world’s millionaires reside in North America, and a large majority of their assets are onshore. • Among major regions, Latin America has the highest concentration of wealth in ultra-high-net-worth households with $30 million or more in assets – representing 32 percent of total personal financial assets compared to a global average of 15 percent.
12 A Tale of Two Millionaires: The Best of Times for Private Banks to Look Beyond the Ultra-High-Net-Worth Market Exhibit 6 High yields on Core Millionaires are driven by attractive product mix Composition of U.S. private banking client assets by wealth band Wealth band $ million Share of assets Percent Managed assets Non-managed assets Deposits Loans Ultra-High- Net-Worth >10 >100 47 42 6 5 30-100 59 21 10 10 10-30 67 11 11 11 Core Millionaires 1-10 2.5-10 67 6 12 14 1-2.5 65 3 15 17 Source: McKinsey 2011 Global Private Banking Survey Exhibit 7 Through 2015, new revenue pools created in the Core Millionaire segment will be quadruple those created in the UHNW segment Wealth band $ million Net new revenue pool 2010-2015 (at current private banking revenue margins) $ billion Group total Ultra-High- Net-Worth >10 >30 1.9 5.0 10-30 3.1 Core Millionaires 1-10 2.5-10 10.6 20.4 1-2.5 9.8 Source: McKinsey 2011 Global Private Banking Survey
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A Tale of Two Millionaires: - Managers of Wealth

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