The Deloitte International Wealth Management Centre Ranking 2018
The winding road to future value creation
The third Deloitte International Wealth Management Centre Ranking shines light on the competitiveness between international private wealth management centres and analyses their market volume, growth performance, profitability and efficiency over the past years. While the challenges international wealth management centres face have been increasing, the leading hubs have largely risen to them, leaving others behind.
The study highlights nine wealth management centres. Results of the 2018 edition show findings for Switzerland, Singapore, Hong Kong, the US, the UK, the UAE, Luxembourg, Bahrain as well as Panama and the Caribbean. Below are the key findings.
The business environment for international wealth management centres has become more challenging over the last years. The focus for competitiveness has shifted towards provider capability and digital maturity. Between 2010 and 2017, there has been a fall in international market volume (IMV) as well as net new assets (NNA) of the leading centres. Cost competitiveness remains an ongoing challenge.
Leading centres: Switzerland still on top, others closely behind
Switzerland is still the leading centre in terms of competitiveness, size and performance. However, Switzerland is losing ground in IMV, while others are catching up. Hong Kong has the highest growth rate in IMV (+122% in the last 7 years), and the US (+48%) is also gaining ground. The leading centres are mostly rising to the cost challenges that banks are facing in today’s increasingly regulated environment. Digital capabilities have improved, and the most competitive centres are setting the standards for in terms of provider capability.
Most challenged centre: Panama & the Caribbean
Switzerland has lost some IMV, but it remains the biggest centre. Panama and the Caribbean have lost the most ground. There is a clear divide between the best and the rest. The lowest ranked of the nine centres, especially Panama and the Caribbean, are worst by almost every measure. Hong Kong is something of an exception: it has experienced the largest NNA growth, its IMV is rising, and it is among the best for competitiveness; however, it has an increasing cost-income ratio, so growth is coming at a price.
Hong Kong fourth-largest wealth management centre globally
Hong Kong's wealth management centre has prospered in recent years, gaining more new assets than any other centre (+11% between 2015 and 2017E). This has been driven largely by its strategic geographical location for attracting Chinese clients and its prime position for brokering renminbi transactions (China's high-net-worth individual (HNWI) population grew by an average annual rate of 14% between 2013 and 2017E). Today, Hong Kong is the fourth-largest wealth management centre in the world in terms of assets under management and administration (AMA).
In summary, Hong Kong has experienced a stagnation of the profitability of market players. In order for Hong Kong to grow from its status as an emerging wealth management centre - while client demand and asset potential will obviously help with this - much may depend on the extent to which Chinese politics continue to tolerate further development. This is particularly of interest as locations in mainland China such as Shanghai and Beijing are gaining importance in onshore wealth management and - even more so - as China is considered today's go-to place for global asset managers.