Transparency is the New Gold Standard: U.S. Wealth Managers Must Redefine Role to...

Transparency is the New Gold Standard: U.S. Wealth Managers Must Redefine Role
to Regain Trust in Current Environment, Says PricewaterhouseCoopers

NEW YORK, June 29, 2009 (GLOBE NEWSWIRE) -- Private banks and wealth managers
have seen their profits plummet in the wake of unprecedented financial turmoil,
investment scandals and the decline in world wealth, according to a new report
published today by PricewaterhouseCoopers LLP. Damage has been done to the
critical element of trust at the heart of the relationship between high net
worth clients and their wealth managers. With increasing demand for transparency
around all aspects of the investment process and in performance, a growing
regulatory compliance burden and the need to control costs, wealth managers face
enormous challenges as they try to redefine their role and regain "trusted
advisor" status.

PricewaterhouseCoopers' report, entitled "A New Era: Redefining the Way to
Deliver Trusted Advice," identifies significant changes affecting wealth
managers, how they are responding with changes in their business and what senior
private bankers and wealth managers see happening in the industry in the future.
The report also looks at the qualitative impacts of the financial crisis over
the first quarter of 2009. Based on survey responses from nearly 240 private
banks and wealth managers, this year's report is the latest installment in a
global survey first conducted in 1993.

Among the conclusions discussed in the report:

-- The era of absolute banking secrecy is over. Through international
pressure for increased transparency, the era of absolute banking
secrecy has evolved into a new world of "compliant
confidentiality". With a wave of new treaties and cross border
cooperation around increased government demands for tax
transparency the private banking and wealth management world will
continue to become more open in the years ahead. This could signal
an end to the competitive advantages of some jurisdictions. Wealth
managers will simply not want to risk their reputations by
operating in 'non-transparent' or 'non-cooperative' jurisdictions.
While certain clients from troubled or unstable jurisdictions will
always seek professional offshore management of their assets
transparency is forcing a much more complementary and open
operating model.

-- The Middle East and Asia-Pacific remain top targets for expansion
abroad. Private banks and wealth managers say their top five
markets for global expansion are the Middle East and Asia, in
particular Hong Kong, Singapore and China. Yet only 32 percent of
wealth managers plan to open new operations abroad in the next two
years, down from 52 percent in this survey in 2007. The decline is
driven largely by waning interest in Europe, where only 29 percent
of wealth managers have plans to expand abroad. There continues to
be interest in global expansion in the Americas, particularly to
serve the top tier of the wealth pyramid.

-- Further consolidation and a period of inorganic growth appear
inevitable. Some 88 percent of wealth managers surveyed expect
further consolidation in the sector in the next two years, with 34
percent expecting substantial consolidation. Sixty-three percent
regard acquisitions as crucial to their own growth strategy, more
than double the projected rate of acquisition just two years ago.
This is driven by the cost of increasing regulation, and new
technologies and infrastructure to provide clients with the kind of
information they are demanding.

-- A ruthless drive for operational efficiency and cost reduction.
While enabling growth is the top priority for chief operating
officers (COOs), short-term cost-cutting is their second-highest
priority. Thirty-six percent of CEOs believe there is room to
eliminate 10 percent to 20 percent of their costs, and another 18
percent believe they can cut costs by more than 20 percent.
Transformational change, including techniques learned from
industries outside of financial services, is key to securing
productivity gains, process improvements and cost reductions.

-- Wealth managers will need to invest in advanced technology to
survive. The CEOs of wealth managers regard technology as the
weakest element of their organizational capabilities, and 63
percent expect to increase their IT spend in the next two years,
including 82 percent who plan to undertake some form of major core
system upgrade. COOs predict that online client service platforms
will become a top-five operational priority over the next two
years. Those organizations able to provide innovative, high-quality
online client interfaces through, for example, handheld devices,
may be able to increase client loyalty and, importantly, free their
customer relationship managers (CRMs) to focus on higher-value
client interactions. Clients are demanding aggregated reporting and
access to information across multiple providers.

"The financial crisis and the breach of trust by some managers has had a
profound impact on investor confidence. While the client and asset attrition
phase of the crisis will eventually pass, the industry will be very different in
the future. The DNA of world wealth has changed in terms of what clients want,
demand and expect from wealth managers and service providers," said John Garvey,
U.S. leader, financial services advisory practice, PricewaterhouseCoopers. "The
winners will be the firms that can provide investors acceptable performance
coupled with extraordinary levels of insight and transparency around their
assets, investment strategies and products. These firms will once again become
trusted advisors to the wealthy. This is a challenge that will require
investments in technology, talent plus discipline and ruthless execution."

Wealth Managers Need to Regain "Trusted-Advisor" Status

Clients have raised the bar and are now demanding more from their wealth
managers, including peace of mind. More than half (53 percent) of the private
banking clients surveyed by PricewaterhouseCoopers say that their primary source
of financial advice is now their own research capabilities and independent
knowledge, an indication of their skepticism about the quality of the advice
they have been getting.

"Transparency is the new gold standard of wealth management," said C. Steven
Crosby, U.S. leader, private banking and wealth management practice,
PricewaterhouseCoopers. "How managers and service providers keep clients
informed regarding performance of their assets and integrity, financial health
and processing status will be brand-differentiating."

Additional highlights:

-- Boutiques and smaller client ratios will play a significant role.
PricewaterhouseCoopers found no direct link between size and
profitability in terms of cost/income ratios, making small,
well-run boutique firms particularly well-positioned to thrive.
Client service and brand differentiation now trumps history and
brand awareness. The days of simply pushing product alone are over.
Quality of advice is now a crucial differentiator. The focus has
shifted from client acquisition to client retention through
increased interaction and better relationship building. The most
profitable wealth managers were found to have significantly lower
ratios of clients per client relationship manager across all wealth
segments, allowing the managers to embrace advice and financial
planning as core relationship offerings.

-- Clients demand transparency and due diligence. High net worth
clients now want much more transparent product offerings, product
suitability, robust due diligence and real-time, customized
reporting with proactive risk/reward analysis versus a
point-in-time snapshot of their wealth and holdings. They also want
more information about how their holdings are being transacted,
processed and managed. Private clients are looking for answers
about the integrity surrounding their wealth and personal data, as
well as the soundness of the institutions and processing
counterparties who serve them. Wealth managers face increased
challenges in how they manage the cost and efficiency of different
service delivery options, given the increased demand by clients for
information and proactive risk analysis.

-- Stick to the core segment. Nearly half (46 percent) of wealth
managers provide services across all levels of wealth, a reflection
of an opportunistic, catch-all strategy of client segmentation. But
profitability among the various segments of wealth varies widely.
The mass affluent (less than $500,000) and the very high net worth
(over $20 million) clients and ultra high net worth (over $50
million) clients have proven less profitable in the current
environment, and wealth managers seeking to operate in these
segments must have the necessary scale, systems and product mix,
together with the appropriate CRM skills, to do so profitably.
Coupled with tailoring to specific client groups, changes in fees
schedules and enhanced assessments of client profitability are
required.

-- Opportunities exist to capture inter-generational wealth transfers.
Eighty-seven percent of wealth managers say they regard
inter-generational products and services as their top priority.
There is clearly room for improvement in capturing
inter-generational wealth transfers, since just 38 percent of
wealth managers surveyed are able to retain more than half of their
clients' assets when faced with an inter-generational transfer
event. Family office offerings and holistic perspectives on family
relationships with the appropriate tools and channels are critical
to avoid asset attrition across generations. A significant factor
in delivering this is improving the skills of CRMs, who rank
inter-generational wealth transfers as their third-highest priority
area for additional training.

-- Green investment is good. Fifty-five percent of wealth managers now
say they view sustainability and socially conscious investment
products as important to their business over the next five years.
This is reflects the longer time horizon the wealthy tend to bring
to their investments, which gives rise to a multi-generational
perspective on the environment.

About the PricewaterhouseCoopers Global Private Banking / Wealth Management
Survey

The PricewaterhouseCoopers Global Wealth Survey was first conducted in 1993 and
continues to be one of PwC's most widely read publications. The latest survey
was conducted between December 2008 and March 2009 and included participation
from nearly 240 private bank and wealth management firms. It is one of the
largest surveys in the industry, reflecting views of senior management and
client-facing relationship managers from global banks, private client groups at
leading broker-dealers, family offices, boutiques and individual wealthy
investors. The survey is not sponsored by any firm or vendor and is part of
PricewaterhouseCoopers thought leadership provided as a service to the financial
services industry. .

About PricewaterhouseCoopers PricewaterhouseCoopers (www.pwc.com) provides
industry-focused assurance, tax and advisory services to build public trust and
enhance value for its clients and their stakeholders. More than 155,000 people
in 153 countries across our network share their thinking, experience and
solutions to develop fresh perspectives and practical advice.
"PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP, or as the context
requires, the PricewaterhouseCoopers global network of other member firms of the
network, each of which is a separate and independent legal entity.

Note to Editors/Reporters: A full copy of the report is available for download
at www.pwc.com/wealth

Reminder: U.S. Global Wealth Management Web Cast scheduled for Monday, June 29,
2009 at 11:00am EST.

Preregistration required:
www.seeuthere.com/PrivateBankingWealthManagementForumWebcast2009

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CONTACT: PricewaterhouseCoopers LLP
Laura Schooler
(646) 471-3229
laura.schooler@us.pwc.com
The Hubbell Group, Inc.
Mary Ellen Higgins
mhiggins@hubbellgroup.com
Steve Maguire
smaguire@hubbellgroup.com
(781) 878-8882