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Wealth management : revenues up, but costs and new customers are declining



May 28, 2018 11:30

Photo : Freepik

Despite an increase in revenues and assets under management, the costs and the number of new customers have fallen among counsellors in the area of wealth management by 2017, according to a report from McKinsey & Company on the market status of the management of heritage.

The assets under management of the advisers has increased by 15 % during the year, to reach $ 106 million ($M), benefiting from the good performance of the markets. This increase in assets has led to a growth of revenue, after several years of decline. The median income per adviser was $ 655,000, up 12 % compared to 2016.

Less new customers

The report, however, noted a difficulty for these advisors to add new clients, particularly younger investors, in addition to presenting a lower cost. In 2017, the number of new customers amounted to 7.6 per advisor, compared to 7.5 in 2016, continuing a downward trend.

Families in which the portfolio totals $ 1 M$ 1.5 M$ have seen costs drop from 1.13% in 2016 to 1.08% in 2017, for both new customers and existing customers. Although the costs for new customers are already lower, they still fell to 1.04 per cent, compared to 1.07 %.

A strategy as “ineffective”

In addition, 30 % of advisors have lowered their fees, while the rest was maintained or increased. McKinsey explains that the first is experiencing a growth that is less important than the second and that they have attracted fewer new assets.

“Reduce the costs to add assets and to stimulate growth is not generally an effective strategy,” the report concludes.

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