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Inside magazine issue 12 | Part 03 - From a corporate perspective Product profitability in Wealth management and Private Banking Unlocking profit opportunities with enhanced reporting capacity Pierre Masset Partner Corporate Finance & CFO Services Lead Deloitte François Gilles Director Strategy, Regulatory & Corporate Finance Deloitte Justin Morel de Westgaver Consultant Strategy, Regulatory & Corporate Finance Deloitte In light of ongoing industry challenges, managing profitability remains a priority for wealth managers. Product mix optimization stands out as a key enabler for top and bottom-line improvement. To unlock its potential, best-in-class wealth managers are developing methodologies for monitoring and steering profitability across the product portfolio. In our view, given shift driven by MiFID II and evolution in clients’ expectations, Product Profitability should be top priority on the agenda of Wealth Management CFOs. 84
Inside magazine issue 12 | Part 03 - From a corporate perspective Profit in the wealth management industry remains under pressure Client wealth levels suffered significant decreases following the recession in 2007-2008 that led to significant declines in wealth managers’ Assets under Management (AuM) and profitability. However, despite notable recovery in AuM since then, wealth managers are struggling to recapture the high profit margins they experienced in the past. Indeed, as illustrated in Figure 1, pre-tax profit margins remained between 17bps and 19bps while AuM grew by approximately 70 percent between 2008 and 2015. Figure 1: AuM and pre-tax margin evolution 100 81 84 84 17 78 77 75 77 14 17 82 19 18 18 18 19 67 67 65 61 59 57 58 100 115 124 131 142 157 169 169 AuM (indexed at 2008) Cost margin (in bps) Revenue margin (in bps) Pre-tax profit margin (in bps) 85
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Inside Triannually insights from De
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Inside magazine issue 12 | Contents
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Inside magazine issue 12 | Foreword
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Inside magazine issue 12 | Part 01
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Inside magazine issue 12 | Contacts
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Our expert authors, who are brimmin
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