The Deloitte International Wealth Management Centre Rankings 2013
Measuring competitiveness of international private wealth management in Switzerland
The competitive landscape for international private wealth management has changed over the past five years or so. The high standards of service provided by wealth managers were not enough to protect clients from the ravages of the global financial crisis. Moreover, the crisis and the subsequent slowdown in the US and Europe have widened the gap in economic growth rates between these mature economies and fast-growing economies of Asia. The crisis has also accelerated initiatives by western governments, especially in the US, to eliminate opportunities for their citizens to hold undisclosed wealth offshore.
All these factors have changed the market shares of competing wealth management centres. Continuing shifts in the competitive landscape point to further changes ahead.
These developments mean that Switzerland’s wealth managers face a challenging future. In addition to the global economic slowdown, new regulations and increasing demands from clients are eroding both revenues and profit margins for cross-border wealth management.
Switzerland’s competitive position in this demanding global environment will be determined by a combination of policy choices, by regulators and supervisors on the one hand, and by the actions of wealth managers themselves on the other. Maintaining Switzerland’s traditional strength in this area will require both political vision and corporate action. Only by defining and implementing a shared agenda can Switzerland ensure the future for one of its most important industries; an industry that will design innovative products and services, attract client assets, generate employment and so continue to create a significant share of Swiss national income.
This report identifies the areas for improvement by the Swiss authorities and wealth managers, to strengthen Switzerland’s leading position as a wealth management centre and meet the competitive challenge from both established and emerging centres. This report will answer the following three key questions:
What are the key success factors for a wealth management centre?
How does Switzerland rank on these criteria against its main competitors?
What are the strenghts ans weaknesses of Switzerland as a wealth management centre?
This report also looks at the current rankings of wealth management centres by assets under management and administration.
Leading international wealth management centres by assets und management and administration
The Deloitte analysis shows that the rankings of the leading wealth management centres according to the total amount of client assets under management and administration (AMA) remained fairly stable over the period 2007 – 2011.
- Switzerland maintained its position as the world’s leading wealth management centre. However the country’s competitive position is weaker. The amount of cross-border assets under management and administration fell by 27% over the period; this is slightly below the average decrease across all centres (-29%).
- The United Kingdom retained its number two slot in the rankings, but this disguises a 23% fall in its assets under management and administration.
- Panama and the Caribbean retained third place over the period but their cross-border assets under management and administration fell by more than a quarter.
- Similarly, the United States suffered a fall of almost one quarter over the period, while retaining its fourth place in the rankings.
- Fifth-placed Singapore’s client asset size also fell, but by only 14% over the period.
- In contrast, sixth-placed Hong Kong increased the amount of client assets under management and administration by 5% over the five years, in spite of suffering a setback at the beginning of the financial crisis.
- Should these observed growth trends continue in the future, Hong Kong could overtake Switzerland in the rankings as early as 2019!
Competitiveness across the leading wealth management centres
The new Deloitte international wealth management centre rankings show that the leading centres are very close rivals in terms of competitiveness:
- Switzerland comes top when assessed on a range of 47 success indicators, grouped into four main areas: business environment; provider capability; stability; and tax and regulatory factors.
- However Singapore, which is currently less than a third of the size of Switzerland in terms of cross-border assets under management and administration, runs the wealth management giant a very close second for competitiveness. This hints at future gains in market share to come. The island state scores well on financial and political stability, tax and regulation.
- Hong Kong, the fastest-growing wealth management centre over the five-year period, achieved third place in the Deloitte international wealth management centre rankings, just ahead of the UK. Hong Kong benefits from relative strength in financial stability, tax and regulation.
- The UK scores well on a number of competitiveness criteria, as one might expect given London’s millennium-long history as a trading and financial centre. It compares well in terms of business environment, provider efficiency, capital markets and financial education, but compares badly with other centres for provider capability, stability and tax.
- Panama and the Caribbean shows the biggest disparity between the amount of assets under management and administration (currently ranked third) and its position in the Deloitte wealth management centre rankings. It ranks below the other eight centres in almost every broad category of competitiveness. This suggests that it could be vulnerable should bigger countries, such as the US or UK, adopt a less supportive stance.
- Deloitte’s international wealth management centres rankings show that as many as 60% of the drivers of competitiveness are the sole responsibility of the public sector; whereas just 19% are the sole responsibility of the private sector. The remaining 21% are the joint responsibility of the public and private sectors. The significant role of the public sector means that the Swiss authorities must get involved if the country is to preserve and enhance its competitive position.
- Making advances in competitiveness will take time. Wealth managers can deliver short-term tactical advantages, such as efficiency improvements or better quality of service. However, longer-term strategic improvements in financial stability, tax, the legal framework and regulation will require a partnership between Swiss public and private sectors.