INDEPENDENT ASSET MANAGERS IN SWITZERLAND TREND … · Client advisory services and care come...

Teod

oro

D. C

occa

Ste

fan

Sch

mid

IND

EP

EN

DE

NT

AS

SE

T M

AN

AG

ER

S IN

SW

ITZ

ER

LAN

D

TR

EN

D R

EP

OR

T 20

07 -

201

0

Supported by: FORTUNE Wealth Management Group AG

Head of project: Prof. Dr. Teodoro D. Cocca, Chair for Asset and Wealth Management,

Johannes Kepler University Linz and Lecturer, Swiss Banking Institute, University of Zurich

Co-author:Stefan Schmid, Swiss Banking Institute, University of Zurich

Translation:Textra Consulting GmbH, Zurich

Design:Plasma Design GmbH, Zurich

Printed by:Kyburz AG, Dielsdorf

This study is available free of charge on www.isb.uzh.ch.

AcknowledgementsThe authors would like to sincerely thank Prof. Dr. Christine Hirszowicz and

Prof. Dr. Hans Geiger for their support throughout the project.

INDEPENDENT ASSET MANAGERS IN SWITZERLAND TREND REPORT 2007 -2010

Key findings

Clientadvisoryservicesandcarecomefirst:Theclearcorecompetenceofindependentassetmanagersisadvisoryservicesandcareoftheirclient-eleandtheclientrelationship.

Focusonprivateclients:Over60%ofindependentassetmanagershaveexclusivelyprivateclients.Only2.5%ofindependentassetmanagershaveinstitutionalclientsonly.

Generaldecreaseinclientloyaltyanticipated:Theindustryexpectsclientloyaltyinallclientsegmentstodecreaseoverthenextthreeyears.Additionally,companysizeisnegativelylinkedtoclientloyalty.

Differinggrowthstrategies:Smallindependentassetmanagersgeneral-lyfollowanincreasein“ShareofWallet”astheirprimarygrowthdriver,whereaslargecompaniesconcentrateontheacquisitionofnewclients.

Largegrowthpotential:IncreasingdemandforindependentassetmanagementinSwitzerlandandasimultaneousdecreaseintheageofcustomerspromisehealthygrowthpotential.

Increasingcompanysizeintrend:Thecriticalsizeforindependentassetmanagersseemsnotyetreached,resultinginabove-averageoverheads.

Decreaseinoffshoreassetsexpected:AllregionsofSwitzerlandantici-patearelativereductioninforeignassetsoverthenextthreeyears.

Furtherincreaseintheproblemofsuccessioninindividualcompaniesuntil2010:Smallercompaniesgenerallyfavorotherindependentassetmanagersasbuyers.Largerindependentassetmanagersinparticularseebanksandstrategicinvestorsassuitablepartnersinconnectionwithconti-nuationinbusinessandimplementationofnewbusinessmodels.

Threatoffurtherregulationcauseforconcern:Additionalregulatorymeasureswouldmaketheindependentassetmanagersindustrylessattrac-tive.Alternativeregulationstatuses,e.g.intheformofasecuritiesdealer,arebeingconsideredby5%ofcompanies.


Table of contents

Startingpoint 3

Structureandtypologyoftheindustry 5

Clientcharacteristicsandbehavior 9

Growth 11

Trends 16

Regulation 21

Appendix 23

1

3


Starting point

The Swiss Banking Institute of theUniversity of Zurich carried out a writtenquestionnaire (1391 questionnaires weredistributedinApril2007)tofindoutwhereindependentassetmanagers(IAMs)inSwit-zerlandseetheproblemsandchallengesoftheirindustrybothtodayandinthefutureandthechangestheyanticipate.

ThesamplecoveredalllanguageregionsofSwitzerland.Figure1givesanoverviewoftheresponsesfromwhichtheinformationinthisstudywastaken.

ABB 01

ABB 02

Region Responses Return rate

German-speaking Switzerland 233 24.3 %

French-speaking Switzerland 54 15.7 %

Italian-speaking Switzerland 18 20.2 %

Total Switzerland 305 21.9 %

ABB 04

ABB 05

ABB 06

ABB 03

Client advisory

Customer relationship management

Asset allocation

Personality of employee

Absolute performance

Cost/income structure

Acquisition of new clients

Relative performance

Psychological capabilities

Product creation

100 %

90 %

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %

1.5

German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland

2.0 2.5 … 5 = less loyal1 = loyal

100 %

80 %

60 %

40 %

20 %

0 %

ABB080 % 20 % 40 % 60 % 80 % 100 %

Acquisition of other IAM

ABB 07

0 % 20 % 40 % 60 % 80 % 100 %

Negotiation skills

Foreign clients

Swiss clients

ABB 11

2004 2007 2010

8

6

4

2

0

Other Swiss bank

Major Swiss bank

IAM with no. of personnel = 1

IAM with no. of personnel > 1

Other (as applicable): USA ø 2.375 (8 mentions)

Asia ø 2.1 (5 mentions)

South America ø 1.2 (5 mentions)

Middle-East ø 2.25 (4 mentions)Current value Projected value in 3 years

Number of answers “high”

< 2 employees

2 to < 5 employees

5 and more employees

Mean

Financial knowledge

Information needs

Price sensitivity

Performance awareness


Cross-selling

Increase in “Share of Wallet”

ABB 090 % 20 % 40 % 60 % 80 % 100 %

Personnel recruitment

< 2 employees

2 to < 5 employees


Mean

Critical size

Costs

Market saturation

ABB14

0 % 20 % 40 % 60 % 80 % 100 %

Banks

< 2 employees

2 to < 5 employees


Very important

Important

Unimportant

Individuals

Strategic investors

Financial investors

Other IAMs

ABB 13

30 %

Regulations

2004

2007

2010

Net new money

Critical size

Back-up person

Costs

Investment performance

Market conditions

Growth in general

Succession

Yields

ABB 100 % 20 % 40 % 60 %

< 2 employees

2 to < 5 employees


Administration

Asset management

Efficiency ratio (right scale)

Over-proportional to the market

Proportional to the market

Under-proportional to the market

Total market

ABB 12


100 %

80 %

60 %

40 %

20 %

0 %

8.0 % -5.3 %

11.8 % -5.4 %

2004

2007

2010

-0.5 % -4.6 %

0 % 5 % 10 % 15 % 20 % 25 %

ABB 16

ABB 17

0 % 20 %ø 40 % 60 % 80 % 100 %

ABB15 Client trust/proximity

Less administrative effort

Minimal infrastructure

No organizational regulations

No equity capital and liquidity regulations

No minimal capital requirements

Low auditing costs

No risk distribution regulations

0 % 20 % 40 % 60 % 80 % 100 %

0

2

4

6

8

10

12

0

10

20

30

40

50

60

70

ø

AUM of institutional clients in percent (2007)

Pe

rcen

t of I

AMs

AUM of foreign clients in percent (2007)

Pe

rcen

t of I

AMs

0 % 20 % 40 % 60 % 80 % 100 %

German-speaking Switzerland

French-speaking Switzerland

Italian-speaking Switzerland

N

umbe

r of F

TEs

Ef

ficie

ncy

ratio


2 to < 5 employees

< 2 employees

-3.9 %

-4.3 %

100 %

80 %

60 %

40 %

20 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %


AU

M o

f ins

titut

iona

l clie

nts

in p

erce

nt (2

007)

46 %

38 %

16 %

77 %

75 %

73 %

71 %

69 %

67 %

Institutional clients

Private clients

Swiss clients

European clients

Other clients

Top clients

Small clients


Private clients

Figure1:

Overviewofresponserate

5

ABB 01

ABB 02






ABB 04

ABB 05

ABB 06

ABB 03

Client advisory


Asset allocation







Product creation

100 %

90 %

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %

1.5



100 %

80 %

60 %

40 %

20 %

0 %

ABB080 % 20 % 40 % 60 % 80 % 100 %


ABB 07

0 % 20 % 40 % 60 % 80 % 100 %

Negotiation skills

Foreign clients

Swiss clients

ABB 11

2004 2007 2010

8

6

4

2

0

Other Swiss bank

Major Swiss bank








< 2 employees

2 to < 5 employees


Mean

Financial knowledge

Information needs

Price sensitivity



Cross-selling


ABB 090 % 20 % 40 % 60 % 80 % 100 %


< 2 employees

2 to < 5 employees


Mean

Critical size

Costs

Market saturation

ABB14

0 % 20 % 40 % 60 % 80 % 100 %

Banks

< 2 employees

2 to < 5 employees


Very important

Important

Unimportant

Individuals

Strategic investors

Financial investors

Other IAMs

ABB 13

30 %

Regulations

2004

2007

2010

Net new money

Critical size

Back-up person

Costs


Market conditions

Growth in general

Succession

Yields

ABB 100 % 20 % 40 % 60 %

< 2 employees

2 to < 5 employees


Administration

Asset management





Total market

ABB 12


100 %

80 %

60 %

40 %

20 %

0 %

8.0 % -5.3 %

11.8 % -5.4 %

2004

2007

2010

-0.5 % -4.6 %

0 % 5 % 10 % 15 % 20 % 25 %

ABB 16

ABB 17

0 % 20 %ø 40 % 60 % 80 % 100 %







Low auditing costs


0 % 20 % 40 % 60 % 80 % 100 %

0

2

4

6

8

10

12

0

10

20

30

40

50

60

70

ø


Pe

rcen

t of I

AMs


Pe

rcen

t of I

AMs

0 % 20 % 40 % 60 % 80 % 100 %




N

umbe

r of F

TEs

Ef

ficie

ncy

ratio


2 to < 5 employees

< 2 employees

-3.9 %

-4.3 %

100 %

80 %

60 %

40 %

20 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %


AU

M o

f ins

titut

iona

l clie

nts

in p

erce

nt (2

007)

46 %

38 %

16 %

77 %

75 %

73 %

71 %

69 %

67 %


Private clients

Swiss clients

European clients

Other clients

Top clients

Small clients


Private clients


Structure and typology of the industry

It would seem that a small companysize is in the nature of independent assetmanagement.One thirdof IAMs registeredwith theSwissCommercialRegistryOffice(HR)have less than two full-time employ-ees.AnotherthirdemploystwotolessthanfivepeopleandtherestofIAMshavefiveormorefull-timeworkers.

As regards regional distribution, oneperson companies are most frequentlyfound in German-speaking Switzerlandand larger companies in French-speakingSwitzerland and Italian-speaking Switzer-land(cf.Figure2).

Figure2:

OverviewoftheIAMindustrybycompanysizeandregionaldistribution

6

Ifonepositionscompaniesaccordingtotheir clientportfolio,a ratherclearpictureemerges (cf.Figure3).Businesswith insti-tutional clients seems the exception: Over60%of IAMshaveonlyprivateclients (cf.alsoFigure16,Appendix).

Amorevariedresultisshowninanana-lysisoftheoriginofclients.Around10%ofIAMs have client relationships with eitheronlyforeignoronlySwissclientsrespective-ly.Theaveragepercentageofforeignassetsundermanagement(AUM)is53%,themedi-anis60%(cf.alsoFigure17,Appendix).

Figure3:

Positioningofrespondentsbycompositionofassetsundermanagement

ABB 01

ABB 02






ABB 04

ABB 05

ABB 06

ABB 03

Client advisory


Asset allocation







Product creation

100 %

90 %

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %

1.5



100 %

80 %

60 %

40 %

20 %

0 %

ABB080 % 20 % 40 % 60 % 80 % 100 %


ABB 07

0 % 20 % 40 % 60 % 80 % 100 %

Negotiation skills

Foreign clients

Swiss clients

ABB 11

2004 2007 2010

8

6

4

2

0

Other Swiss bank

Major Swiss bank








< 2 employees

2 to < 5 employees


Mean

Financial knowledge

Information needs

Price sensitivity



Cross-selling


ABB 090 % 20 % 40 % 60 % 80 % 100 %


< 2 employees

2 to < 5 employees


Mean

Critical size

Costs

Market saturation

ABB14

0 % 20 % 40 % 60 % 80 % 100 %

Banks

< 2 employees

2 to < 5 employees


Very important

Important

Unimportant

Individuals

Strategic investors

Financial investors

Other IAMs

ABB 13

30 %

Regulations

2004

2007

2010

Net new money

Critical size

Back-up person

Costs


Market conditions

Growth in general

Succession

Yields

ABB 100 % 20 % 40 % 60 %

< 2 employees

2 to < 5 employees


Administration

Asset management





Total market

ABB 12


100 %

80 %

60 %

40 %

20 %

0 %

8.0 % -5.3 %

11.8 % -5.4 %

2004

2007

2010

-0.5 % -4.6 %

0 % 5 % 10 % 15 % 20 % 25 %

ABB 16

ABB 17

0 % 20 %ø 40 % 60 % 80 % 100 %







Low auditing costs


0 % 20 % 40 % 60 % 80 % 100 %

0

2

4

6

8

10

12

0

10

20

30

40

50

60

70

ø


Pe

rcen

t of I

AMs


Pe

rcen

t of I

AMs

0 % 20 % 40 % 60 % 80 % 100 %




N

umbe

r of F

TEs

Ef

ficie

ncy

ratio


2 to < 5 employees

< 2 employees

-3.9 %

-4.3 %

100 %

80 %

60 %

40 %

20 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %


AU

M o

f ins

titut

iona

l clie

nts

in p

erce

nt (2

007)

46 %

38 %

16 %

77 %

75 %

73 %

71 %

69 %

67 %


Private clients

Swiss clients

European clients

Other clients

Top clients

Small clients


Private clients

7

Independent asset managers know ex-actlywheretheirstrengthslie.Thus,adviso-ryservicesareatthetopofthelistofcorecompetencesmentioned(cf.Figure4).

Insecondplaceiscustomerrelationshipmanagementand in thirdplaceasset allo-cationisgiven.Thelatterisaninvestment-technical aspect which can impact invest-mentperformance.Softskillsdominatethebusiness.

Figure4:

Self-assessmentofentrepreneurialcorecompetencies

ABB 01

ABB 02






ABB 04

ABB 05

ABB 06

ABB 03

Client advisory


Asset allocation







Product creation

100 %

90 %

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %

1.5



100 %

80 %

60 %

40 %

20 %

0 %

ABB080 % 20 % 40 % 60 % 80 % 100 %


ABB 07

0 % 20 % 40 % 60 % 80 % 100 %

Negotiation skills

Foreign clients

Swiss clients

ABB 11

2004 2007 2010

8

6

4

2

0

Other Swiss bank

Major Swiss bank








< 2 employees

2 to < 5 employees


Mean

Financial knowledge

Information needs

Price sensitivity



Cross-selling


ABB 090 % 20 % 40 % 60 % 80 % 100 %


< 2 employees

2 to < 5 employees


Mean

Critical size

Costs

Market saturation

ABB14

0 % 20 % 40 % 60 % 80 % 100 %

Banks

< 2 employees

2 to < 5 employees


Very important

Important

Unimportant

Individuals

Strategic investors

Financial investors

Other IAMs

ABB 13

30 %

Regulations

2004

2007

2010

Net new money

Critical size

Back-up person

Costs


Market conditions

Growth in general

Succession

Yields

ABB 100 % 20 % 40 % 60 %

< 2 employees

2 to < 5 employees


Administration

Asset management





Total market

ABB 12


100 %

80 %

60 %

40 %

20 %

0 %

8.0 % -5.3 %

11.8 % -5.4 %

2004

2007

2010

-0.5 % -4.6 %

0 % 5 % 10 % 15 % 20 % 25 %

ABB 16

ABB 17

0 % 20 %ø 40 % 60 % 80 % 100 %







Low auditing costs


0 % 20 % 40 % 60 % 80 % 100 %

0

2

4

6

8

10

12

0

10

20

30

40

50

60

70

ø


Pe

rcen

t of I

AMs


Pe

rcen

t of I

AMs

0 % 20 % 40 % 60 % 80 % 100 %




N

umbe

r of F

TEs

Ef

ficie

ncy

ratio


2 to < 5 employees

< 2 employees

-3.9 %

-4.3 %

100 %

80 %

60 %

40 %

20 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %


AU

M o

f ins

titut

iona

l clie

nts

in p

erce

nt (2

007)

46 %

38 %

16 %

77 %

75 %

73 %

71 %

69 %

67 %


Private clients

Swiss clients

European clients

Other clients

Top clients

Small clients


Private clients


Structure and typology of the industry

�

TheskillsshowninFigure4areinmostcasesacquiredatSwissbanks–principallymajorSwissbanks.Thus,around�0%ofin-dependentassetmanagersareformerbankemployees(cf.Figure5).OnecanthereforeassumethatthemajorityofIAMclientsusedtohavetheirassetsmanagedbyabank.

Figure5:

Professionalbackgroundofindependentassetmanagers

ABB 01

ABB 02






ABB 04

ABB 05

ABB 06

ABB 03

Client advisory


Asset allocation







Product creation

100 %

90 %

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %

1.5



100 %

80 %

60 %

40 %

20 %

0 %

ABB080 % 20 % 40 % 60 % 80 % 100 %


ABB 07

0 % 20 % 40 % 60 % 80 % 100 %

Negotiation skills

Foreign clients

Swiss clients

ABB 11

2004 2007 2010

8

6

4

2

0

Other Swiss bank

Major Swiss bank








< 2 employees

2 to < 5 employees


Mean

Financial knowledge

Information needs

Price sensitivity



Cross-selling


ABB 090 % 20 % 40 % 60 % 80 % 100 %


< 2 employees

2 to < 5 employees


Mean

Critical size

Costs

Market saturation

ABB14

0 % 20 % 40 % 60 % 80 % 100 %

Banks

< 2 employees

2 to < 5 employees


Very important

Important

Unimportant

Individuals

Strategic investors

Financial investors

Other IAMs

ABB 13

30 %

Regulations

2004

2007

2010

Net new money

Critical size

Back-up person

Costs


Market conditions

Growth in general

Succession

Yields

ABB 100 % 20 % 40 % 60 %

< 2 employees

2 to < 5 employees


Administration

Asset management





Total market

ABB 12


100 %

80 %

60 %

40 %

20 %

0 %

8.0 % -5.3 %

11.8 % -5.4 %

2004

2007

2010

-0.5 % -4.6 %

0 % 5 % 10 % 15 % 20 % 25 %

ABB 16

ABB 17

0 % 20 %ø 40 % 60 % 80 % 100 %







Low auditing costs


0 % 20 % 40 % 60 % 80 % 100 %

0

2

4

6

8

10

12

0

10

20

30

40

50

60

70

ø


Pe

rcen

t of I

AMs


Pe

rcen

t of I

AMs

0 % 20 % 40 % 60 % 80 % 100 %




N

umbe

r of F

TEs

Ef

ficie

ncy

ratio


2 to < 5 employees

< 2 employees

-3.9 %

-4.3 %

100 %

80 %

60 %

40 %

20 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %


AU

M o

f ins

titut

iona

l clie

nts

in p

erce

nt (2

007)

46 %

38 %

16 %

77 %

75 %

73 %

71 %

69 %

67 %


Private clients

Swiss clients

European clients

Other clients

Top clients

Small clients


Private clients

9


Client characteristics and behavior

Figure6:

Trendsinclientloyalty

ABB 01

ABB 02






ABB 04

ABB 05

ABB 06

ABB 03

Client advisory


Asset allocation







Product creation

100 %

90 %

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %

1.5



100 %

80 %

60 %

40 %

20 %

0 %

ABB080 % 20 % 40 % 60 % 80 % 100 %


ABB 07

0 % 20 % 40 % 60 % 80 % 100 %

Negotiation skills

Foreign clients

Swiss clients

ABB 11

2004 2007 2010

8

6

4

2

0

Other Swiss bank

Major Swiss bank








< 2 employees

2 to < 5 employees


Mean

Financial knowledge

Information needs

Price sensitivity



Cross-selling


ABB 090 % 20 % 40 % 60 % 80 % 100 %


< 2 employees

2 to < 5 employees


Mean

Critical size

Costs

Market saturation

ABB14

0 % 20 % 40 % 60 % 80 % 100 %

Banks

< 2 employees

2 to < 5 employees


Very important

Important

Unimportant

Individuals

Strategic investors

Financial investors

Other IAMs

ABB 13

30 %

Regulations

2004

2007

2010

Net new money

Critical size

Back-up person

Costs


Market conditions

Growth in general

Succession

Yields

ABB 100 % 20 % 40 % 60 %

< 2 employees

2 to < 5 employees


Administration

Asset management





Total market

ABB 12


100 %

80 %

60 %

40 %

20 %

0 %

8.0 % -5.3 %

11.8 % -5.4 %

2004

2007

2010

-0.5 % -4.6 %

0 % 5 % 10 % 15 % 20 % 25 %

ABB 16

ABB 17

0 % 20 %ø 40 % 60 % 80 % 100 %







Low auditing costs


0 % 20 % 40 % 60 % 80 % 100 %

0

2

4

6

8

10

12

0

10

20

30

40

50

60

70

ø


Pe

rcen

t of I

AMs


Pe

rcen

t of I

AMs

0 % 20 % 40 % 60 % 80 % 100 %




N

umbe

r of F

TEs

Ef

ficie

ncy

ratio


2 to < 5 employees

< 2 employees

-3.9 %

-4.3 %

100 %

80 %

60 %

40 %

20 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %


AU

M o

f ins

titut

iona

l clie

nts

in p

erce

nt (2

007)

46 %

38 %

16 %

77 %

75 %

73 %

71 %

69 %

67 %


Private clients

Swiss clients

European clients

Other clients

Top clients

Small clients


Private clients

The general prognosis regarding deve-lopmentsinclientloyaltyisrathergloomy.Theindustryanticipatesadecreaseinclientloyaltyinallsegmentsoverthenextthreeyears (cf. Figure 6). In principle it can beshownthatone-personcompaniesconsidertheirclientsmoreloyalthandolargercom-panies.

ThisisnosurpriseasIAMclientsseemmostinterestedinaone-to-onerelationshipand personal advisory services. However,whether one could venture a theory thatwithincreasingcompanysize,clientloyaltyisgenerallyonthedecreaseisquestionable.

It is prudent at this point tomention thatdata is based on respondents’ qualitativeestimates.

Institutional clients are consideredleast loyal. On the one hand, these clientrelationshipscanbecharacterizedbymorequantitative elements such as investmentperformanceorpricing.Ontheotherhand,mostIAMsclearlyfocusonwealthyprivateclients and therefore have limited know-howwhichwouldallowthemtoaddressandserviceinstitutionalclientneeds.

Ofinterestisthediscoverythattopcli-ents(thewealthiest20%ofIAMclients)areconsideredmoreloyalthanlesswealthycli-ents(theleastwealthy20%ofIAMclients).Thiscandoubtlessbeexplainedbythehig-hercostsinvolvedinachange.Atthesame

timeonecansaythatclientswithincreasingconfidenceinservicesseemtoincreasetheir“ShareofWallet”withtheirIAM.Thus,long-term these clients become top clients. TheIAM‘s top clients are generally givenmostattentionwhichalsoincreasesconfidence.

10

Figure7showshowcertainclientseg-ments are assessed according to variouseconomiccharacteristics.Itishardlysurpri-singthatinstitutionalclientsdominateotherclientsegmentsasregardsthesecharacteris-tics.Thecharacteristicwhereforeignclientstake the lead is with financial knowledge.

The latter are also less price-sensitive. Itseemsthatinmostcaseslucrativenetyieldscanbeearnedwithtaxadvantagesdespitehighadministrativecosts.

Figure7:

IAMassessmentofvariousclientsegments

ABB 01

ABB 02






ABB 04

ABB 05

ABB 06

ABB 03

Client advisory


Asset allocation







Product creation

100 %

90 %

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %

1.5



100 %

80 %

60 %

40 %

20 %

0 %

ABB080 % 20 % 40 % 60 % 80 % 100 %


ABB 07

0 % 20 % 40 % 60 % 80 % 100 %

Negotiation skills

Foreign clients

Swiss clients

ABB 11

2004 2007 2010

8

6

4

2

0

Other Swiss bank

Major Swiss bank








< 2 employees

2 to < 5 employees


Mean

Financial knowledge

Information needs

Price sensitivity



Cross-selling


ABB 090 % 20 % 40 % 60 % 80 % 100 %


< 2 employees

2 to < 5 employees


Mean

Critical size

Costs

Market saturation

ABB14

0 % 20 % 40 % 60 % 80 % 100 %

Banks

< 2 employees

2 to < 5 employees


Very important

Important

Unimportant

Individuals

Strategic investors

Financial investors

Other IAMs

ABB 13

30 %

Regulations

2004

2007

2010

Net new money

Critical size

Back-up person

Costs


Market conditions

Growth in general

Succession

Yields

ABB 100 % 20 % 40 % 60 %

< 2 employees

2 to < 5 employees


Administration

Asset management





Total market

ABB 12


100 %

80 %

60 %

40 %

20 %

0 %

8.0 % -5.3 %

11.8 % -5.4 %

2004

2007

2010

-0.5 % -4.6 %

0 % 5 % 10 % 15 % 20 % 25 %

ABB 16

ABB 17

0 % 20 %ø 40 % 60 % 80 % 100 %







Low auditing costs


0 % 20 % 40 % 60 % 80 % 100 %

0

2

4

6

8

10

12

0

10

20

30

40

50

60

70

ø


Pe

rcen

t of I

AMs


Pe

rcen

t of I

AMs

0 % 20 % 40 % 60 % 80 % 100 %




N

umbe

r of F

TEs

Ef

ficie

ncy

ratio


2 to < 5 employees

< 2 employees

-3.9 %

-4.3 %

100 %

80 %

60 %

40 %

20 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %


AU

M o

f ins

titut

iona

l clie

nts

in p

erce

nt (2

007)

46 %

38 %

16 %

77 %

75 %

73 %

71 %

69 %

67 %


Private clients

Swiss clients

European clients

Other clients

Top clients

Small clients


Private clients

11


Growth

AnincreaseinmanagedassetsintheIAMindustryisgenerallystrivedforbyincreasingthe “Share ofWallet” of existing clients orvia client acquisition (cf. Figure �). Furtherdevelopment and thedeepeningof existingclient relationships is the dominant growthstrategyof smaller IAMs inparticular.Costadvantages in comparison with alternativegrowthopportunitiesseemtoplayanimpor-

tantrolehere,acquisitionofnewclientsisofcoursesignificantlymoreexpensive.

GrowthbyacquisitionofotherIAMsisanimportant alternative particularly for largerIAMs. Through acquisition, the latter strivetowardsaconsolidationoftheindustry.

Figure�:

Assessmentofstrategicimportanceofspecificgrowthdrivers

ABB 01

ABB 02






ABB 04

ABB 05

ABB 06

ABB 03

Client advisory


Asset allocation







Product creation

100 %

90 %

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %

1.5



100 %

80 %

60 %

40 %

20 %

0 %

ABB080 % 20 % 40 % 60 % 80 % 100 %


ABB 07

0 % 20 % 40 % 60 % 80 % 100 %

Negotiation skills

Foreign clients

Swiss clients

ABB 11

2004 2007 2010

8

6

4

2

0

Other Swiss bank

Major Swiss bank








< 2 employees

2 to < 5 employees


Mean

Financial knowledge

Information needs

Price sensitivity



Cross-selling


ABB 090 % 20 % 40 % 60 % 80 % 100 %


< 2 employees

2 to < 5 employees


Mean

Critical size

Costs

Market saturation

ABB14

0 % 20 % 40 % 60 % 80 % 100 %

Banks

< 2 employees

2 to < 5 employees


Very important

Important

Unimportant

Individuals

Strategic investors

Financial investors

Other IAMs

ABB 13

30 %

Regulations

2004

2007

2010

Net new money

Critical size

Back-up person

Costs


Market conditions

Growth in general

Succession

Yields

ABB 100 % 20 % 40 % 60 %

< 2 employees

2 to < 5 employees


Administration

Asset management





Total market

ABB 12


100 %

80 %

60 %

40 %

20 %

0 %

8.0 % -5.3 %

11.8 % -5.4 %

2004

2007

2010

-0.5 % -4.6 %

0 % 5 % 10 % 15 % 20 % 25 %

ABB 16

ABB 17

0 % 20 %ø 40 % 60 % 80 % 100 %







Low auditing costs


0 % 20 % 40 % 60 % 80 % 100 %

0

2

4

6

8

10

12

0

10

20

30

40

50

60

70

ø


Pe

rcen

t of I

AMs


Pe

rcen

t of I

AMs

0 % 20 % 40 % 60 % 80 % 100 %




N

umbe

r of F

TEs

Ef

ficie

ncy

ratio


2 to < 5 employees

< 2 employees

-3.9 %

-4.3 %

100 %

80 %

60 %

40 %

20 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %


AU

M o

f ins

titut

iona

l clie

nts

in p

erce

nt (2

007)

46 %

38 %

16 %

77 %

75 %

73 %

71 %

69 %

67 %


Private clients

Swiss clients

European clients

Other clients

Top clients

Small clients


Private clients

12

A particular threat to the sustainablegrowthoftheindustryappearstobethedif-ficultyofdrawingtalentwithattractivewor-king conditions and pecuniary incentives,andbeingable tokeep them (cf. Figure9).However,thiscouldbeacyclicalphenome-nonas thealternativeemployer–thebank–iscurrentlyinapositiontomakeveryat-tractive remuneration packages due to theexcellentdevelopmentofstockmarkets.

Perceived market saturation is deemedan indicator foranemergingconsolidation.

Additionally,theperceivedzenithwhichtheSwissfinancialcentreseesinitsskillinat-tractingforeignmoneywouldmakeitselffeltonthemarket(cf.alsoFigure12).

Also striking is that critical size isper-ceivedasagrowthimpediment.Investmentswhichwouldinmanycasesbenecessaryfora growth strategy do not seem financiallyviable formany IAMs. Seen from this per-spective,providerswiththeadvantageofsizecouldtapintoattractivegrowthpotential.

Figure9:

AssessmentoftherelevanceofcertaingrowthimpedimentsfortheindividualIAMs

ABB 01

ABB 02






ABB 04

ABB 05

ABB 06

ABB 03

Client advisory


Asset allocation







Product creation

100 %

90 %

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %

1.5



100 %

80 %

60 %

40 %

20 %

0 %

ABB080 % 20 % 40 % 60 % 80 % 100 %


ABB 07

0 % 20 % 40 % 60 % 80 % 100 %

Negotiation skills

Foreign clients

Swiss clients

ABB 11

2004 2007 2010

8

6

4

2

0

Other Swiss bank

Major Swiss bank








< 2 employees

2 to < 5 employees


Mean

Financial knowledge

Information needs

Price sensitivity



Cross-selling


ABB 090 % 20 % 40 % 60 % 80 % 100 %


< 2 employees

2 to < 5 employees


Mean

Critical size

Costs

Market saturation

ABB14

0 % 20 % 40 % 60 % 80 % 100 %

Banks

< 2 employees

2 to < 5 employees


Very important

Important

Unimportant

Individuals

Strategic investors

Financial investors

Other IAMs

ABB 13

30 %

Regulations

2004

2007

2010

Net new money

Critical size

Back-up person

Costs


Market conditions

Growth in general

Succession

Yields

ABB 100 % 20 % 40 % 60 %

< 2 employees

2 to < 5 employees


Administration

Asset management





Total market

ABB 12


100 %

80 %

60 %

40 %

20 %

0 %

8.0 % -5.3 %

11.8 % -5.4 %

2004

2007

2010

-0.5 % -4.6 %

0 % 5 % 10 % 15 % 20 % 25 %

ABB 16

ABB 17

0 % 20 %ø 40 % 60 % 80 % 100 %







Low auditing costs


0 % 20 % 40 % 60 % 80 % 100 %

0

2

4

6

8

10

12

0

10

20

30

40

50

60

70

ø


Pe

rcen

t of I

AMs


Pe

rcen

t of I

AMs

0 % 20 % 40 % 60 % 80 % 100 %




N

umbe

r of F

TEs

Ef

ficie

ncy

ratio


2 to < 5 employees

< 2 employees

-3.9 %

-4.3 %

100 %

80 %

60 %

40 %

20 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %


AU

M o

f ins

titut

iona

l clie

nts

in p

erce

nt (2

007)

46 %

38 %

16 %

77 %

75 %

73 %

71 %

69 %

67 %


Private clients

Swiss clients

European clients

Other clients

Top clients

Small clients


Private clients

13

A large number of respondents see agrowingdemandforindependentassetma-nagement in Switzerland from private cli-ents.Latentmarketpotentialhasevidentlybeendetected.Growthopportunitiesarecer-tainly identifiable;however, itwouldseemthatitislargeIAMsinparticularwhothinktheirskillssufficienttobeabletoseizetheseopportunities. These IAMs are thus expec-tingabove-averagegrowth.SmallIAMs,ontheotherhand,assesstheirgrowthpotentialmuchmorepessimisticallyandassumelessthanaveragegrowth(cf.Figure10).

Adichotomousdevelopmentwouldap-pear to result: Small companies will staysmallandlargecompanieswillbecomelar-ger. It is important to note, however, thatthe nature of asset management enablesexistencewithoutgrowth.Thisisduetothespecialpricemodel(fixedfeedependentonportfoliovolume)whichguaranteesacons-tantsourceofincome.ThereforegrowthintheIAMindustryisnotasvitalasinothersectorsaslongasaminimalclientvolumeisreached.

Figure10:

AssessmentofgrowthintheindividualIAMsincomparisontoentiremarket

ABB 01

ABB 02






ABB 04

ABB 05

ABB 06

ABB 03

Client advisory


Asset allocation







Product creation

100 %

90 %

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %

1.5



100 %

80 %

60 %

40 %

20 %

0 %

ABB080 % 20 % 40 % 60 % 80 % 100 %


ABB 07

0 % 20 % 40 % 60 % 80 % 100 %

Negotiation skills

Foreign clients

Swiss clients

ABB 11

2004 2007 2010

8

6

4

2

0

Other Swiss bank

Major Swiss bank








< 2 employees

2 to < 5 employees


Mean

Financial knowledge

Information needs

Price sensitivity



Cross-selling


ABB 090 % 20 % 40 % 60 % 80 % 100 %


< 2 employees

2 to < 5 employees


Mean

Critical size

Costs

Market saturation

ABB14

0 % 20 % 40 % 60 % 80 % 100 %

Banks

< 2 employees

2 to < 5 employees


Very important

Important

Unimportant

Individuals

Strategic investors

Financial investors

Other IAMs

ABB 13

30 %

Regulations

2004

2007

2010

Net new money

Critical size

Back-up person

Costs


Market conditions

Growth in general

Succession

Yields

ABB 100 % 20 % 40 % 60 %

< 2 employees

2 to < 5 employees


Administration

Asset management





Total market

ABB 12


100 %

80 %

60 %

40 %

20 %

0 %

8.0 % -5.3 %

11.8 % -5.4 %

2004

2007

2010

-0.5 % -4.6 %

0 % 5 % 10 % 15 % 20 % 25 %

ABB 16

ABB 17

0 % 20 %ø 40 % 60 % 80 % 100 %







Low auditing costs


0 % 20 % 40 % 60 % 80 % 100 %

0

2

4

6

8

10

12

0

10

20

30

40

50

60

70

ø


Pe

rcen

t of I

AMs


Pe

rcen

t of I

AMs

0 % 20 % 40 % 60 % 80 % 100 %




N

umbe

r of F

TEs

Ef

ficie

ncy

ratio


2 to < 5 employees

< 2 employees

-3.9 %

-4.3 %

100 %

80 %

60 %

40 %

20 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %


AU

M o

f ins

titut

iona

l clie

nts

in p

erce

nt (2

007)

46 %

38 %

16 %

77 %

75 %

73 %

71 %

69 %

67 %


Private clients

Swiss clients

European clients

Other clients

Top clients

Small clients


Private clients


Growth

Itmustcomeasasurprisetotheindustrytodiscoverthatthemostsignificantantici-pated increase in personnel is expected inadministration(particularlyregulation)andonlytoasmallextentinassetmanagement(cf. Figure 11). Such a developmentwouldrather result in a significant worsening of

IAM operating efficiency and thereforeunderpinstheapprehensionthatincreasingregulationwould increase (administrative)costs. The industry assumes that in 2010an IAM has on average 6.7 employees(FTEs) of which 4.� employees (FTEs) arecrediteddirectlytoassetmanagement.

Figure11:

DevelopmentofnumberofemployeesandoperatingefficiencyofanaverageIAM(FTE:Fulltimeequivalent)

ABB 01

ABB 02






ABB 04

ABB 05

ABB 06

ABB 03

Client advisory


Asset allocation







Product creation

100 %

90 %

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %

1.5



100 %

80 %

60 %

40 %

20 %

0 %

ABB080 % 20 % 40 % 60 % 80 % 100 %


ABB 07

0 % 20 % 40 % 60 % 80 % 100 %

Negotiation skills

Foreign clients

Swiss clients

ABB 11

2004 2007 2010

8

6

4

2

0

Other Swiss bank

Major Swiss bank








< 2 employees

2 to < 5 employees


Mean

Financial knowledge

Information needs

Price sensitivity



Cross-selling


ABB 090 % 20 % 40 % 60 % 80 % 100 %


< 2 employees

2 to < 5 employees


Mean

Critical size

Costs

Market saturation

ABB14

0 % 20 % 40 % 60 % 80 % 100 %

Banks

< 2 employees

2 to < 5 employees


Very important

Important

Unimportant

Individuals

Strategic investors

Financial investors

Other IAMs

ABB 13

30 %

Regulations

2004

2007

2010

Net new money

Critical size

Back-up person

Costs


Market conditions

Growth in general

Succession

Yields

ABB 100 % 20 % 40 % 60 %

< 2 employees

2 to < 5 employees


Administration

Asset management





Total market

ABB 12


100 %

80 %

60 %

40 %

20 %

0 %

8.0 % -5.3 %

11.8 % -5.4 %

2004

2007

2010

-0.5 % -4.6 %

0 % 5 % 10 % 15 % 20 % 25 %

ABB 16

ABB 17

0 % 20 %ø 40 % 60 % 80 % 100 %







Low auditing costs


0 % 20 % 40 % 60 % 80 % 100 %

0

2

4

6

8

10

12

0

10

20

30

40

50

60

70

ø


Pe

rcen

t of I

AMs


Pe

rcen

t of I

AMs

0 % 20 % 40 % 60 % 80 % 100 %




N

umbe

r of F

TEs

Ef

ficie

ncy

ratio


2 to < 5 employees

< 2 employees

-3.9 %

-4.3 %

100 %

80 %

60 %

40 %

20 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %


AU

M o

f ins

titut

iona

l clie

nts

in p

erce

nt (2

007)

46 %

38 %

16 %

77 %

75 %

73 %

71 %

69 %

67 %


Private clients

Swiss clients

European clients

Other clients

Top clients

Small clients


Private clients

14

15

Ofparamountimportanceforthefinan-cialcentrearequestionsrelatingtothede-velopmentoftheforeignclientsegment.Fi-gure12illustratesthisimportanceforIAMs,although also here one cannot speak of ahomogenousindustry–thereareIAMsforwhichthenumberofforeignclientsisofnoimportance(cf.Figure17,Appendix).

IAMs in the Italian-speaking part ofSwitzerlandareparticularlydependentonfo-reignmoney.Here90%ofclientscomefromoutsideSwitzerland.Strikingisthereforethatonewouldgenerallyanticipateareductioninthe importanceof foreignclients.Althoughthis should not lead directly to a drain onfunds, a continuous inflow of money fromabroadcannolongerbeexpected.

Figure12:

DevelopmentofforeignAUMagainstentireAUMofanaverageIAM

ABB 01

ABB 02






ABB 04

ABB 05

ABB 06

ABB 03

Client advisory


Asset allocation







Product creation

100 %

90 %

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %

1.5



100 %

80 %

60 %

40 %

20 %

0 %

ABB080 % 20 % 40 % 60 % 80 % 100 %


ABB 07

0 % 20 % 40 % 60 % 80 % 100 %

Negotiation skills

Foreign clients

Swiss clients

ABB 11

2004 2007 2010

8

6

4

2

0

Other Swiss bank

Major Swiss bank








< 2 employees

2 to < 5 employees


Mean

Financial knowledge

Information needs

Price sensitivity



Cross-selling


ABB 090 % 20 % 40 % 60 % 80 % 100 %


< 2 employees

2 to < 5 employees


Mean

Critical size

Costs

Market saturation

ABB14

0 % 20 % 40 % 60 % 80 % 100 %

Banks

< 2 employees

2 to < 5 employees


Very important

Important

Unimportant

Individuals

Strategic investors

Financial investors

Other IAMs

ABB 13

30 %

Regulations

2004

2007

2010

Net new money

Critical size

Back-up person

Costs


Market conditions

Growth in general

Succession

Yields

ABB 100 % 20 % 40 % 60 %

< 2 employees

2 to < 5 employees


Administration

Asset management





Total market

ABB 12


100 %

80 %

60 %

40 %

20 %

0 %

8.0 % -5.3 %

11.8 % -5.4 %

2004

2007

2010

-0.5 % -4.6 %

0 % 5 % 10 % 15 % 20 % 25 %

ABB 16

ABB 17

0 % 20 %ø 40 % 60 % 80 % 100 %







Low auditing costs


0 % 20 % 40 % 60 % 80 % 100 %

0

2

4

6

8

10

12

0

10

20

30

40

50

60

70

ø


Pe

rcen

t of I

AMs


Pe

rcen

t of I

AMs

0 % 20 % 40 % 60 % 80 % 100 %




N

umbe

r of F

TEs

Ef

ficie

ncy

ratio


2 to < 5 employees

< 2 employees

-3.9 %

-4.3 %

100 %

80 %

60 %

40 %

20 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %


AU

M o

f ins

titut

iona

l clie

nts

in p

erce

nt (2

007)

46 %

38 %

16 %

77 %

75 %

73 %

71 %

69 %

67 %


Private clients

Swiss clients

European clients

Other clients

Top clients

Small clients


Private clients

ThisdevelopmenthitsIAMsharder,forinstance,thanthebankingworld.Thelattermake up for part of these losses with on-shoreactivitiesinthehomemarketsofcli-ents.Inthiscasethelackofsizeisfatalfor

IAMs:Expansionstrategiesabroadwiththeassociatedcostsandenormousrisksarenotwithinthereachofmostcompanies.


Growth

Trends

Issues thatwill increasinglyattract theattentionof IAMs in thecomingyearsareclearly identifiable: Regulation, costs andsuccession.

Theregulatoryaspectisdoubtlessclose-lyconnectedtothecostissue,wherebythelatter is intensifiedbydevelopments in IT.Many IAMsmayhavedelayedmaking thenecessary investments (even a Web pres-ence,nowconsideredanecessity,isfarfromprofessional formost IAMs) and are facedwith significant investments. For portfoliomanagement, reportingoronlineaccess toaccounts, technically mature solutions areavailableandexpectedbyclientsbutrequiremassive investment. Additionally, multifa-cetedsolutions for theentireareaofbusi-nessprocessoutsourcingareavailabletodaywhich, however, would require long-termplanning(whetherallIAMshavetheneces-sarytimelefttoamortizesuchinvestmentsisdoubtful).Oneshouldalsonotdisregardthestealthydevelopmentofincreasingcom-plexity inproducts, systemsandsolutions,whichleadtosustainedcostpressure.

Regulation is still considered a stumb-lingblockby IAMsand the restof thefi-nancial sector. Three quarters of IAMs as-sumethattheindustrywilllosesomeofitsattractionbecauseoffurtherregulationover

thenextyears.Thefactthatrequirementsinthis areahave increasedover thepast fewyearsshouldnotbedismissed.However,oneshouldnotdisregard the fact that thishasalsooccurredtoprotect the industry itself.Acertainamountofdiscomfortisunavoid-able. Important seems that the surge inregulationshouldnotbecomeapermanentcondition.Anaccentuation in the increaseofregulatoryrequirementscarriesthedan-gerthattheIAMbusinessbecomeslastinglyunattractive. The authors detect sensitivityintheregulatorstotheseproblems;howeverrespondentsviewthis(still)asdoubtful.

Figure13showsanoverviewofthemostfrequentlynamedproblemsintheindustryovertime.Tokeepthebalancebetweentheoptimistsandpessimists,respondentswhereaskedtonamethreeissuesforeachyeargi-ven.Regulationiscurrentlythemostpres-singsubject.Theindustryalsoassumesthatthe problem will not lessen over the nextthreeyearswhichisthecase,forexample,forcriticalsize.

16

17

Figure13:

OverviewofcertainproblemsandchallengesintheIAMindustryovertime

ABB 01

ABB 02






ABB 04

ABB 05

ABB 06

ABB 03

Client advisory


Asset allocation







Product creation

100 %

90 %

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %

1.5



100 %

80 %

60 %

40 %

20 %

0 %

ABB080 % 20 % 40 % 60 % 80 % 100 %


ABB 07

0 % 20 % 40 % 60 % 80 % 100 %

Negotiation skills

Foreign clients

Swiss clients

ABB 11

2004 2007 2010

8

6

4

2

0

Other Swiss bank

Major Swiss bank








< 2 employees

2 to < 5 employees


Mean

Financial knowledge

Information needs

Price sensitivity



Cross-selling


ABB 090 % 20 % 40 % 60 % 80 % 100 %


< 2 employees

2 to < 5 employees


Mean

Critical size

Costs

Market saturation

ABB14

0 % 20 % 40 % 60 % 80 % 100 %

Banks

< 2 employees

2 to < 5 employees


Very important

Important

Unimportant

Individuals

Strategic investors

Financial investors

Other IAMs

ABB 13

30 %

Regulations

2004

2007

2010

Net new money

Critical size

Back-up person

Costs


Market conditions

Growth in general

Succession

Yields

ABB 100 % 20 % 40 % 60 %

< 2 employees

2 to < 5 employees


Administration

Asset management





Total market

ABB 12


100 %

80 %

60 %

40 %

20 %

0 %

8.0 % -5.3 %

11.8 % -5.4 %

2004

2007

2010

-0.5 % -4.6 %

0 % 5 % 10 % 15 % 20 % 25 %

ABB 16

ABB 17

0 % 20 %ø 40 % 60 % 80 % 100 %







Low auditing costs


0 % 20 % 40 % 60 % 80 % 100 %

0

2

4

6

8

10

12

0

10

20

30

40

50

60

70

ø


Pe

rcen

t of I

AMs


Pe

rcen

t of I

AMs

0 % 20 % 40 % 60 % 80 % 100 %




N

umbe

r of F

TEs

Ef

ficie

ncy

ratio


2 to < 5 employees

< 2 employees

-3.9 %

-4.3 %

100 %

80 %

60 %

40 %

20 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %


AU

M o

f ins

titut

iona

l clie

nts

in p

erce

nt (2

007)

46 %

38 %

16 %

77 %

75 %

73 %

71 %

69 %

67 %


Private clients

Swiss clients

European clients

Other clients

Top clients

Small clients


Private clients


1�

Looking back in time shows that newmoneyand investmentperformance in theyearsfollowingtheInternetbubblewerethedominantissues.Theextremelypoorperfor-mancefiguresduringthistimenotonlyledtoageneraldisgruntlementinclients.Froma psychological perspective, the problemswere also a challenge for asset managersbecause of their close relationship to theirclients.Newmoneyacquisitionwas extre-mely difficult in this phase (as it was fortheentirefinancialsector)andtheprospectof new clients was overshadowed. Invest-mentperformanceisnotcurrentlyanissue(hardlysurprisinginoneofthelongestbullmarketsofthelastfewdecades),butwillofcoursequicklyreappearinworseningmar-ketconditions.

Succession is the real “leader” of theproblem areas. In the coming three years,thisaspectisoneoftheseriouschallenges.Inanindustrystronglycharacterizedbyin-dividuals,wheretheproblemofsuccessionposesa“natural”challenge,itisonlysurpri-singthattheproblemwasnotconsideredan

issueearlier.Towhatextentapsychologicalcrowding-outeffectplaysarolecanonlybeguessedat.

Thefactisthatthisproblemisonacol-lisioncoursewiththeindustryandwillleadtoafundamentalchangeinitsstructure.Astheproblemofsuccessionwillsoonaccumu-lateintheindustry,earlysolutionstothesequestions will bring important advantagesto“earlymovers”:Whathappensonmarketswheneveryonewantstousethesamedooratthesametimeisplainlydemonstratedtoinvestorstimeandtimeagain.

19


Trends

Figure14:

OverviewofpreferredbuyersbysizeofindividualIAM

ABB 01

ABB 02






ABB 04

ABB 05

ABB 06

ABB 03

Client advisory


Asset allocation







Product creation

100 %

90 %

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %

1.5



100 %

80 %

60 %

40 %

20 %

0 %

ABB080 % 20 % 40 % 60 % 80 % 100 %


ABB 07

0 % 20 % 40 % 60 % 80 % 100 %

Negotiation skills

Foreign clients

Swiss clients

ABB 11

2004 2007 2010

8

6

4

2

0

Other Swiss bank

Major Swiss bank








< 2 employees

2 to < 5 employees


Mean

Financial knowledge

Information needs

Price sensitivity



Cross-selling


ABB 090 % 20 % 40 % 60 % 80 % 100 %


< 2 employees

2 to < 5 employees


Mean

Critical size

Costs

Market saturation

ABB14

0 % 20 % 40 % 60 % 80 % 100 %

Banks

< 2 employees

2 to < 5 employees


Very important

Important

Unimportant

Individuals

Strategic investors

Financial investors

Other IAMs

ABB 13

30 %

Regulations

2004

2007

2010

Net new money

Critical size

Back-up person

Costs


Market conditions

Growth in general

Succession

Yields

ABB 100 % 20 % 40 % 60 %

< 2 employees

2 to < 5 employees


Administration

Asset management





Total market

ABB 12


100 %

80 %

60 %

40 %

20 %

0 %

8.0 % -5.3 %

11.8 % -5.4 %

2004

2007

2010

-0.5 % -4.6 %

0 % 5 % 10 % 15 % 20 % 25 %

ABB 16

ABB 17

0 % 20 %ø 40 % 60 % 80 % 100 %







Low auditing costs


0 % 20 % 40 % 60 % 80 % 100 %

0

2

4

6

8

10

12

0

10

20

30

40

50

60

70

ø


Pe

rcen

t of I

AMs


Pe

rcen

t of I

AMs

0 % 20 % 40 % 60 % 80 % 100 %




N

umbe

r of F

TEs

Ef

ficie

ncy

ratio


2 to < 5 employees

< 2 employees

-3.9 %

-4.3 %

100 %

80 %

60 %

40 %

20 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %


AU

M o

f ins

titut

iona

l clie

nts

in p

erce

nt (2

007)

46 %

38 %

16 %

77 %

75 %

73 %

71 %

69 %

67 %


Private clients

Swiss clients

European clients

Other clients

Top clients

Small clients


Private clients

Asregardsthenotionofanidealorsui-tablebuyerforindependentassetmanagers,it can be seen that with small companiesemotionalreasonsareoftendominant,orthatholdingontoconventionalbusinessstrate-gies is a priority. These companies there-fore prefer individuals or other IAMs asbuyers. This stands in contrastwith larger

companieswhofavorbanksorstrategicin-vestors.Figure14showsthetypeofsucces-sorpreferredbytheindividualcompanies.

20

The industry is therefore looking to-wards a phase of increasing competition,competitionwhichwillprobably intensifyassoonas thecurrentstabilityoncapitalmarketsdecreases.Thequestionofcriticalcompanysizeinthefutureispossiblymorecomplexthanevenindustryrepresentativesanticipate.Thetrendheretoanincreaseincriticalcompanysizeshouldevolveoutoftheoperatingconstantsjustwiththeincre-ase in fix costs. However, striking is thatamongst the IAMs heterogeneous modelsdoexist.

Incertaincases,itseemsthatitissmallstructures which are most efficient. Thus,theIAMindustryisrathercharacterizedbyadichotomoustendencyof“awayfromthemiddle”.Ontheonehand,thiswouldspeakin favorofacontinuationof small struc-turesand,ontheotherhand,foranincre-aseinsizeformiddle-sizedstructures.Theanticipatedconsolidationwouldthencomeaboutformiddle-sizedIAMsinparticular.

21


Regulation

Regulation has emerged as the largestcurrentproblemareaforIAMs.Forthisre-ason,anumberofmoredetailedquestionswereasked.Ofparticularinterestistowhatextendtheadvantagesordisadvantagesofalternativesareassessed,e.g. thechoiceofsecuritiesdealerstatus(thestatusclosesttothatoftheIAM).Inprinciplethemaindif-ferenceincomparisonwithasecuritiesdea-lerisseenasthemoreintenserelationshiptotheclientwhichisfarmoredominantinIAMs(cf.Figure15).

Thisis,however,aquestionofstrategicpositioningwhichisnotgivenpersebytheregulatorystatus.Asalsobecameclearfromotheranswersinthisstudy,theclientrela-tionship is the fundament from which theindustrytakesitsimage.

On a more factual-quantitative level,responsessuggestthattheregulatorycorsetwornbythesecuritiesdealer isnotattrac-tive for IAMs. In particular, the increasedadministrative and organizational effort isviewedasobstructive.

Figure15:

AssessmentofvariousregulatoryadvantagesoftheIAMcomparedwiththesecuritiesdealer

ABB 01

ABB 02






ABB 04

ABB 05

ABB 06

ABB 03

Client advisory


Asset allocation







Product creation

100 %

90 %

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %

1.5



100 %

80 %

60 %

40 %

20 %

0 %

ABB080 % 20 % 40 % 60 % 80 % 100 %


ABB 07

0 % 20 % 40 % 60 % 80 % 100 %

Negotiation skills

Foreign clients

Swiss clients

ABB 11

2004 2007 2010

8

6

4

2

0

Other Swiss bank

Major Swiss bank








< 2 employees

2 to < 5 employees


Mean

Financial knowledge

Information needs

Price sensitivity



Cross-selling


ABB 090 % 20 % 40 % 60 % 80 % 100 %


< 2 employees

2 to < 5 employees


Mean

Critical size

Costs

Market saturation

ABB14

0 % 20 % 40 % 60 % 80 % 100 %

Banks

< 2 employees

2 to < 5 employees


Very important

Important

Unimportant

Individuals

Strategic investors

Financial investors

Other IAMs

ABB 13

30 %

Regulations

2004

2007

2010

Net new money

Critical size

Back-up person

Costs


Market conditions

Growth in general

Succession

Yields

ABB 100 % 20 % 40 % 60 %

< 2 employees

2 to < 5 employees


Administration

Asset management





Total market

ABB 12


100 %

80 %

60 %

40 %

20 %

0 %

8.0 % -5.3 %

11.8 % -5.4 %

2004

2007

2010

-0.5 % -4.6 %

0 % 5 % 10 % 15 % 20 % 25 %

ABB 16

ABB 17

0 % 20 %ø 40 % 60 % 80 % 100 %







Low auditing costs


0 % 20 % 40 % 60 % 80 % 100 %

0

2

4

6

8

10

12

0

10

20

30

40

50

60

70

ø


Pe

rcen

t of I

AMs


Pe

rcen

t of I

AMs

0 % 20 % 40 % 60 % 80 % 100 %




N

umbe

r of F

TEs

Ef

ficie

ncy

ratio


2 to < 5 employees

< 2 employees

-3.9 %

-4.3 %

100 %

80 %

60 %

40 %

20 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %


AU

M o

f ins

titut

iona

l clie

nts

in p

erce

nt (2

007)

46 %

38 %

16 %

77 %

75 %

73 %

71 %

69 %

67 %


Private clients

Swiss clients

European clients

Other clients

Top clients

Small clients


Private clients

22

Itisthereforehardlysurprisingthatonly5%of IAMswouldconsider thepossibilityofa change to securitiesdealer statusandonly3%thetransformationtothestatusofabank.Althoughfromaregulatorypointofview,closersupervisionappearspreferable,itcanbedeterminedthatIAMscurrentlyseenosuitableandrealisticalternativetotheirregulatory status. From a business policyperspective, the incentives fora changeofstatus seem too small: IAMs do not see abetterreputationwithclientsthroughstricter

supervisionasasecuritiesdealer.Onlybeingsubjecttothebankingandprofessionalsec-recyactandeasieraccesstoEuropeancli-entsareseenasbeingclearadvantagesforsecuritiesdealersandbanks.

23


Appendix

Figure16:

DistributionofIAMsbyAUMofinstitutionalclients

ABB 01

ABB 02






ABB 04

ABB 05

ABB 06

ABB 03

Client advisory


Asset allocation







Product creation

100 %

90 %

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %

1.5



100 %

80 %

60 %

40 %

20 %

0 %

ABB080 % 20 % 40 % 60 % 80 % 100 %


ABB 07

0 % 20 % 40 % 60 % 80 % 100 %

Negotiation skills

Foreign clients

Swiss clients

ABB 11

2004 2007 2010

8

6

4

2

0

Other Swiss bank

Major Swiss bank








< 2 employees

2 to < 5 employees


Mean

Financial knowledge

Information needs

Price sensitivity



Cross-selling


ABB 090 % 20 % 40 % 60 % 80 % 100 %


< 2 employees

2 to < 5 employees


Mean

Critical size

Costs

Market saturation

ABB14

0 % 20 % 40 % 60 % 80 % 100 %

Banks

< 2 employees

2 to < 5 employees


Very important

Important

Unimportant

Individuals

Strategic investors

Financial investors

Other IAMs

ABB 13

30 %

Regulations

2004

2007

2010

Net new money

Critical size

Back-up person

Costs


Market conditions

Growth in general

Succession

Yields

ABB 100 % 20 % 40 % 60 %

< 2 employees

2 to < 5 employees


Administration

Asset management





Total market

ABB 12


100 %

80 %

60 %

40 %

20 %

0 %

8.0 % -5.3 %

11.8 % -5.4 %

2004

2007

2010

-0.5 % -4.6 %

0 % 5 % 10 % 15 % 20 % 25 %

ABB 16

ABB 17

0 % 20 %ø 40 % 60 % 80 % 100 %







Low auditing costs


0 % 20 % 40 % 60 % 80 % 100 %

0

2

4

6

8

10

12

0

10

20

30

40

50

60

70

ø


Pe

rcen

t of I

AMs


Pe

rcen

t of I

AMs

0 % 20 % 40 % 60 % 80 % 100 %




N

umbe

r of F

TEs

Ef

ficie

ncy

ratio


2 to < 5 employees

< 2 employees

-3.9 %

-4.3 %

100 %

80 %

60 %

40 %

20 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %


AU

M o

f ins

titut

iona

l clie

nts

in p

erce

nt (2

007)

46 %

38 %

16 %

77 %

75 %

73 %

71 %

69 %

67 %


Private clients

Swiss clients

European clients

Other clients

Top clients

Small clients


Private clients

Figure17:

DistributionofIAMsbyAUMofforeignclients

ABB 01

ABB 02






ABB 04

ABB 05

ABB 06

ABB 03

Client advisory


Asset allocation







Product creation

100 %

90 %

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %

1.5



100 %

80 %

60 %

40 %

20 %

0 %

ABB080 % 20 % 40 % 60 % 80 % 100 %


ABB 07

0 % 20 % 40 % 60 % 80 % 100 %

Negotiation skills

Foreign clients

Swiss clients

ABB 11

2004 2007 2010

8

6

4

2

0

Other Swiss bank

Major Swiss bank








< 2 employees

2 to < 5 employees


Mean

Financial knowledge

Information needs

Price sensitivity



Cross-selling


ABB 090 % 20 % 40 % 60 % 80 % 100 %


< 2 employees

2 to < 5 employees


Mean

Critical size

Costs

Market saturation

ABB14

0 % 20 % 40 % 60 % 80 % 100 %

Banks

< 2 employees

2 to < 5 employees


Very important

Important

Unimportant

Individuals

Strategic investors

Financial investors

Other IAMs

ABB 13

30 %

Regulations

2004

2007

2010

Net new money

Critical size

Back-up person

Costs


Market conditions

Growth in general

Succession

Yields

ABB 100 % 20 % 40 % 60 %

< 2 employees

2 to < 5 employees


Administration

Asset management





Total market

ABB 12


100 %

80 %

60 %

40 %

20 %

0 %

8.0 % -5.3 %

11.8 % -5.4 %

2004

2007

2010

-0.5 % -4.6 %

0 % 5 % 10 % 15 % 20 % 25 %

ABB 16

ABB 17

0 % 20 %ø 40 % 60 % 80 % 100 %







Low auditing costs


0 % 20 % 40 % 60 % 80 % 100 %

0

2

4

6

8

10

12

0

10

20

30

40

50

60

70

ø


Pe

rcen

t of I

AMs


Pe

rcen

t of I

AMs

0 % 20 % 40 % 60 % 80 % 100 %




N

umbe

r of F

TEs

Ef

ficie

ncy

ratio


2 to < 5 employees

< 2 employees

-3.9 %

-4.3 %

100 %

80 %

60 %

40 %

20 %

0 %

0 % 20 % 40 % 60 % 80 % 100 %


AU

M o

f ins

titut

iona

l clie

nts

in p

erce

nt (2

007)

46 %

38 %

16 %

77 %

75 %

73 %

71 %

69 %

67 %


Private clients

Swiss clients

European clients

Other clients

Top clients

Small clients


Private clients

INDEPENDENT ASSET MANAGERS IN SWITZERLAND TREND … · Client advisory services and care come...

Documents

Transcript of INDEPENDENT ASSET MANAGERS IN SWITZERLAND TREND … · Client advisory services and care come...