Rich pickings for distributors
Yuri Bender notes that more sophisticated investment products are needed to serve the four categories of Europe’s “rich”. “The rich, the rich, we’ve got to get rid of the rich!” So used to run the chant of self-styled student “socialists” in the 1980s. The would-be revolutionaries obviously didn’t do a very good job. Today there are so many rich people that the European banks have split them into four categories. The “affluent” have $100,000 of assets to invest, then come the high net worth individuals (HNWIs), the very HNWIs, and the Ultras, who have $50m or more to spare. With this demographic shift and the extension of product offerings to all four bands has emerged the concept of wealth management: running assets for the affluent, with the hope that they climb the ladder into the upper brackets. According to PricewaterhouseCoopers (PwC), which recently published a landmark survey on European private banking/wealth management, the broader range of potential clients has led to increasing competition in the market from new participants such as insurance companies and investment banks. These opportunities have been fuelled by information technology developments allowing improved client communications including Internet and e-banking facilities. But the key development highlighted in the report is the one of democratisation, with clients in 2001 being offered the best products from all institutions for their needs, rather than just the in-house chestnuts. This open architecture concept means a much stronger focus on the quality and design of products and particularly on the monitoring of external investment managers. A more holistic approach to managing clients’ wealth also signifies the need for more sophisticated products. It is these last two developments in particular, which have established the need for a new pan-European market title such as Professional Wealth Management (PWM), with its focus on product design, application and distribution. According to the PwC research, 58 per cent of chief executives of private banks and wealth management institutions in Europe are planning to focus on differentiating their services by concentrating on distribution channels over the next three years. This means new alliances in the industry will present a key route to attracting and retaining clients. The latest such European alliance gives Deutsche Bank access to over three million clients of financial adviser network DVAG, predominantly in Germany and Austria. Product complexity is increasing in Germany in response to the Government’s pension reforms. It is the mission of PWM to explain the nature of these products to all key players in the distribution chain.
