Switzerland remains the leading international wealth management centre, beating eight other major centres in competitiveness, size and performance, as Deloitte’s International Wealth Management Centre Ranking 2018 shows. Competition is fierce, however, and Switzerland might yet lose the leading position. The Swiss first place is especially precarious in terms of size, with the UK now barely behind.

Competitiveness

Switzerland remains in first place for competitiveness among international wealth management centres (IWMC). Singapore and Hong Kong follow closely behind. Deloitte uses a multi-dimensional approach to measuring competitiveness. It consists of four broad success drivers, namely business environment, provider capability, stability and tax & regulation.

Switzerland scores well across the board for all the competitiveness success factors, but with business environment a slight exception, where it scores just above average. Singapore and Hong Kong also perform well, with slight weaknesses in provider capability, and also in the case of Hong Kong in stability. ’Business environment’ is the biggest advantage of the US and the UK, both are weaker in stability. Differences in scores in the middle competitiveness ranking are very small. The scores of the UAE, US and Luxembourg differ only marginally, so that they can be seen as being basically on the same level.

Size

The business environment for IWMC has become more challenging, leading to significant shifts among the ranking by size. Between 2010 and 2017, there has been a fall in international market volume (IMV) as well as net new assets (NNA) in the leading nine centres.

Switzerland remains the largest IWMC (with US $1.84 tn in IMV), but the UK follows closely behind (with US $1.79 tn). Other centres such as Panama and the Caribbean, Bahrain, and the United Arab Emirates are falling behind.

The US saw the largest absolute gain since 2010 (US $426 bn in IMV, a 41 % increase), and Hong Kong the largest growth rate (+122 %). In terms of net new assets, the biggest ’winner’ since 2010 has been Hong Kong (US $410 bn), the biggest loser Panama and the Caribbean (a fall of US $1,241 bn).

Performance

Increasing competition has put pressure on revenue margins, especially in the US and the UK. Enhanced transparency and comparability have led to increased price sensitivity and triggered a drop in fee levels. Some market players have been more successful (e.g. in Switzerland and Singapore) and some less so (the UK and Luxembourg) in counteracting this.

Cost levels of private banks in mature centres have stabilised, with only Hong Kong experiencing higher cost margins. Market consolidation has helped, enabling economies of scale to be achieved. Cost reductions remain a strategic objective, however.

Wealth management providers better managed to stabilise their performance and profitability in the recent past, with cost income ratio down in the US, UK, Switzerland and Singapore (but rising in Hong Kong and Luxembourg). Nevertheless, this might be deceptive as client behaviour and expectations have changed. To succeed in the future, private banks should shift their strategic focus towards re-thinking and innovating their business model.

For more information on the ranking, please visit our webpage. We will publish additional blog posts soon, highlighting different aspects of the ranking.