A Look At Changes In Wealth Management Revenues For The Industry’s Largest Players

The global wealth management industry has been upbeat over recent years as an increase in the number of high net-worth individuals (HNIs), as well as an increase in their assets, has driven growth in total investible assets around the world. While this has helped wealth managers report handsome inflows of new cash, improving asset valuations have boosted the total client assets managed by them – in turn leading revenues higher. This is evident from the table below, which shows the notable increase in revenues for the world’s six largest wealth managers.

We capture the impact of changes in wealth management revenues on the share price of the six largest wealth managers in the world –Bank of America-Merrill Lynch, UBS, Morgan Stanley, Wells Fargo, JPMorgan Chase and Credit Suisse – in a series of interactive dashboards.

The figures above have been compiled from the annual reports of each of these global banking giants. UBS and Credit Suisse report their wealth management revenues in Swiss Francs (CHF), which we converted to US Dollars (USD) using the average exchange rate for each year. The red-to-green shading along a row highlights the trend in wealth management revenues for each of these banks over the five-year period.

It should be noted that the wealth management divisions at each of these banks form an integral part of their business models. So the revenues they report for their wealth management operations usually include some revenues from associated activities from their other divisions. This would explain the difference in relative rankings of these banks in terms of wealth management revenues compared to the total size of the client assets.

But the really interesting thing among these banks is the relative importance of the wealth management divisions to their long-term growth strategy. This is captured in the table below, which shows the proportion of wealth management revenues in each bank’s total revenues for a year.

As seen here, UBS makes more than half of its total revenues from wealth management. The Swiss banking giant has reorganized its business model around its cornerstone wealth management division and has slashed its investment banking operations considerably over recent years (especially its FICC trading unit). Morgan Stanley also reorganized its business model along similar lines – choosing to acquire Smith Barney’s wealth management business from Citigroup and to integrate it with its own. In comparison, Credit Suisse chose to retain a full-fledged investment bank, because of which wealth management revenues form roughly one-third of its top line.

At the other end of the spectrum, JPMorgan’s wealth management operations account for only 6% of the bank’s total revenues (despite it being the fourth fifth largest wealth manager in the world in terms of client assets). This demonstrates the significant amount of diversification in the bank’s business model.

Weak market conditions over the last three months, coupled with the ongoing trend of a shift towards fee-based accounts (in favor of accounts with performance-linked fees for wealth managers), have had a negative impact on wealth management revenues. But we expect client assets to continue to grow in the latter half of 2018 – helping these revenues nudge higher than the already elevated levels for 2017.

Details about how changes to Wealth Management revenues affect the share price of these banks can be found in our interactive model for Bank of America-Merrill Lynch | UBS | Morgan Stanley | Wells Fargo | JPMorgan Chase | Credit Suisse

What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs
For CFOs and Finance Teams | Product, R&D, and Marketing Teams
More Trefis Research
Like our charts? Explore example interactive dashboards and create your own