BCG: 5 characteristics of successful wealth managers

13 July 2015

While global private financial wealth grew significantly in 2014 to $164.3 trillion and is expected to grow even more in the coming years, reaching $222.1 trillion by 2019, wealth managers must ‘raise their games’, research by the Boston Consulting Group shows. The research identifies the so-called ‘top performing’ wealth managers that, according to the consulting firm, all possess five key characteristics.

The ‘Global Wealth 2015: Winning the Growth Game’ report, released by the Boston Consulting Group (BCG) examines the global private financial wealth*; its size and growth, the distribution, and its managers. The study covers 62 countries that, together account for 94% of global GDP in 2014.

In 2014, global financial wealth increased with almost 12% to $164.3 trillion, up from $146.8. In the report, the consulting firm forecasts a compound annual growth rate (CAGR) of 6.2% for the coming five years, which will result in a global wealth of $222.1 trillion by 2019.

Global wealth growth in 2014

Wealth managers
While global private wealth grew with a steady pace in 2014, the researchers stress that wealth managers must raise their games on numerous fronts. “Potentially disruptive forces are everywhere,” explains Brent Beardsley, a BCG Senior Partner and co-author of the report. “The tightening regulatory climate, a more complex investing environment, highly demanding clients, technological evolution, and other trends are straining traditional models. As the pace and magnitude of change intensifies, wealth managers need to think more strategically.”

In the report, BCG identifies what it calls successful** wealth managers, which according to the consulting firm, “all clearly stand out in generating high revenues per relationship manager (RM), acquiring new assets, achieving best-in-class revenue and cost margins, and doing all of this with a lean organisation.”

Top performing wealth managers

Top performers
The differences between the top performers and average players are significantly. So, what sets these successful wealth managers apart? According to BCG, all successful managers possess five key characteristics:

1. Segment-specific value propositions and coverage models
In today’s wealth-management arena, as described by the researchers, a ‘one-size-fits-all approach’ is no longer a viable option as customers will not tolerate paying too much for services that they do not need or understand, or for insufficient guidance and advice. Dedicated coverage models for each segment are also key, models that that clearly define who interacts with the client for which needs at which times.

2. Rigorous price realisation in target client segments
Top performers realise higher revenue margins than average performers across all client segments and type of players, with the biggest difference seen with lower high net worth clients in the old world onshore segment.  According to BCG, as the most successful wealth managers have clearly defined their target client segments, these clients are less inclined to ask for discounts when the value proposition of the bank’s services is evident. 

Revenue margins by client segment

3. A differentiated advisory offering
In the difficult investment climate, with clients losing confidence in their wealth manager’s ability to achieve superior returns on discretionary mandates, high-performing wealth managers have invested in building a truly value-adding advisory package. The research highlights that on average 30% of assets are under management from advisory services, for top performers this is almost half (48%).

4. A focus on front-office excellence
For wealth managers, optimising front-office operating excellence proves to be something they struggle with. Top performing managers have focussed on improving their front-office performance, by making leaders accountable for the team, by fostering cross-functional approaches to clients, by developing a client-centric sales culture and by complementing the sales-management system with activity-based measures.

Ability to measure and manage profitability

5. The ability to measure and manage profitability
Of the managers benchmarked, very few steer their businesses on the basis of profitability, as the proportion of them that can measure revenues per RM net of direct costs is very low. Only 7% of the top performers do so, while the global average stands even lower at 3%. According to BCG, the top performers aim for full transparency on cost to serve. This enables them to prioritise activities and investments on the basis of profitability. As a result of this, top performers achieve lower costs relative to assets and liabilities than average players.

Top players achieve lower costs

* BCG’s definition of wealth includes cash deposits, the net amount of listed securities held either directly or indirectly through managed funds, and life and pension assets.

** These managers are identified in a study comprising more than 200 managers and involving more than 1,000 data points concerning growth, financial performance, operating models, sales excellence, employee efficiency, client segments, products, and trends along a number of dimensions, including locations, markets, client domiciles, and different peer groups.


Despite industry disruption televised sport still draws audiences

24 April 2019

Despite the disruption wrought on most areas of traditional broadcasting by streaming challengers, sports remains a major draw for audiences of television networks. This is particularly true of viewers who bet money on sporting events, with those that have skin in the game considerably more likely to follow the event on a television screen.

Arguably the true opiate of the masses, for centuries organised sports have been a major draw for hordes of fanatical spectators, from the grand coliseums of Ancient Rome to the more understated greens of local cricket grounds. The advent of television in the 20th century took this to a new level, allowing for widespread visual access to major sporting events, and sowing the seeds of a multi-billion industry in the process. Yet while watching sport remains a key pastime for many, changing consumer preferences and new technologies are affecting the traditional sport distribution channel of TV.

To better understand trends in the sporting broadcast market, Deloitte recently released an article titled ‘Does TV Sports have a Future?’ as part of its wider ‘Technology, Media, and Telecommunications Predictions 2019’ report into telecommunications trends. The conclusions in the piece are based on the firm’s own survey of 1,062 US-based respondents.

More men than women watch sport

Traditional television has in recent years begun to lose out to streaming and on demand services, resulting in a generation that is watching considerably less television. The shift in consumer sentiment has caused traditional TV companies consternation as well as shifts in business models. The average Millennial now watches 42% fewer minutes per week of TV in 2018 than they did in 2010. Yet not all areas of the traditional television market have been as hard hit by the shift, and sport is one of them. This contradicts previous studies which may have suggested that Millennials were abandoning ‘old’ media for their sport viewing.

One reason for this could well be sports betting, which means that many of the people watching the event are keen to see how their punt is faring, in play. According to Deloitte, 78% of male sport viewers, and 64% of their female counterparts would be more likely to tune in to a live event if they had bet on it.

The study found that sport gambling remains a key fixture in the gambling industry as a whole in the UK. In the United Kingdom in 2017, sports betting had £14 billion in turnover. In the four Nordic countries, meanwhile legal gambling of all kinds was an approximate €6 billion industry in 2015. In the US, meanwhile, the industry as a whole is worth around a quarter of a trillion dollars – with sports betting figuring at around 40% of that total. The industry is projected to see growth of 9% over the coming three years.

Betting on sports is associated with watching sports on TV for more than five hours on a typical weekday

However, while the gambling industry does indeed seem to have some impact on television engagement, it would be dangerous to overstate this as a positive, and such a conclusion might also put the cart before the horse. Deloitte’s study found that ‘super-superfans’ – those who watched more than five hours on a typical weekday – were more likely to gamble than average viewers.

Of those who watch more than five hours of sport per day, only 4% do not bet. Of those, 2% do not currently bet, or have never bet, respectively. Again, it could be asserted that these people are engaging with televised sport, and thus keeping the advertising-based industry afloat, due to the betting they participate in. However, it could equally be argued that they are exhibiting compulsive behaviour in spending such a large amount of time viewing sport in the first place – behaviour which would leave them as easy prey for gambling firms, who can now milk them for profit.

But where is all this set to lead? According author Duncan Stewart, the potential profitability of this model means it is likely to be exported from the UK in the coming years.

Steward concluded, “As a thought experiment, one can imagine a 30-year-old American man in the year 2025… watching a football game on the TV set, smartphone in hand. He can bet on the match at any point, modify his wager, buy back a losing wager, bet on the outcome of individual plays or individual stats such as the number of passing yards by the quarterback—all in real time, and all tailored to him. Ads could be served that are customised for him, informed by his betting and attention, and watching would have to be 100% live. The broadcaster or betting site could not only charge more for ads seen by such an involved viewer, but even have a share in (or own outright) the profits from the betting/video stream … at margins much higher than the usual for TV broadcasting. To an American, this sounds like science fiction, but in the United Kingdom, these solutions (or variations of them) are available today.”