Wealth slipping

MANY wealth managers who have reported modest or negative growth in operating income over the past year are also struggling under uncontrolled operating costs.

On average, operating costs have increased 7.8 per cent compared with average revenue growth of only 0.4 per cent, according to international research by independent market analyst Datamonitor.

“While personnel costs will clearly vary depending on operating models, those wealth managers at the top of the range should consider the options that exist for bringing down personnel expense,” Datamonitor financial services analyst Callum Dyce said. “Nevertheless, although the high proportion of costs represented by personnel make them an obvious target for potential cost savings, wealth managers must consider the revenue generating capacity and differentiation provided by quality staff.”

A sample of 30 international wealth managers researched by Datamonitor found Close Wealth Management was the strongest performer in terms of revenues, with operating income increasing 70 per cent in 2001.

The research found that RBS’s Wealth Management division alone increased margins through declining costs and increased revenue.

Several other competitors, including Dexia Investment Management Services and SG Private Banking, have managed to achieve significant growth in revenues but have suffered from costs escalating at a faster rate.

Trading incomes for most of the managers were down heavily during the year, while commission and fee income had with-stood the downward pressure. On average, commission and fee income fell 3.6 per cent. By comparison, those wealth managers relying on interest income experienced an average decline of 0.7 per cent.