The World Wealth Report 2012 Spotlight from Capgemini and RBC Wealth Management looks at scalability as the key factor in hitting growth targets and improving client relationships.
A range of firm-specific and industry-wide trends are converging to undermine the profitability of wealth management operations today. When combined, these trends are clearly creating stress on wealth management business models. For instance, firms are faced with market volatility and gun-shy investors, so need to create products that appropriately cater to client needs and risk profiles, while generating margins. Key findings:
- Wealth management firms that integrate and leverage scalability in their existing business models will be best equipped to deal with the new industry landscape
- Firms need to address cost and revenue challenges including rising client demands and advisor remunerations, compliance costs and a lack of operational scalability which increases expansion-related expenses
- Technology can help enable selective scalability in wealth management business models. The Report highlights that hurdles to scalability are lower and deliver the most value in providing advisory and wealth management services
Exhibit: Industry estimates suggest that while total AuM has grown since 2008, the costs associated with managing those assets have risen faster than the growth in income.
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