By Paul Hoskins
GENEVA (Reuters) - Bank of Ireland (BKIR.I: Quote, Profile, Research, Stock Buzz) sees plenty of room for new entrants in the fast-growing Irish wealth management market given vast amounts of capital tied up in fixed assets, it's private banking chief said on Monday.
Established players in the rarefied world of wealth management will have to adapt, however, if they are to access new money held by the swelling ranks of Irish millionaires, Mark Cunningham, Managing Director of Bank of Ireland Private Banking, said at the Reuters Wealth Management Summit.
"HSBC have come in, Barclays, RBS, Goldmans and Deutsche are in and the two Swiss banks UBS and Credit Suisse are looking to come in, but I suppose there's two problems for banks coming into the market," Cunningham said.
Newcomers may struggle to understand a market where there was no wealth in Ireland 10 years ago and where many have made their fortunes themselves. These clients want to continue growing their wealth and have very strong ideas about how it should be done.
"It is really very, very new money and unlike other countries ... Ireland is still very much in the wealth creation phase, as opposed wealth preservation," Cunningham said.
"When you're dealing with first-generation wealth, they're people who have made the money themselves and actually think they know what they want to invest in to make money."
Cunningham said the other stumbling block for new entrants would be finding staff in Ireland's tight labor market.
"There's a huge shortage of qualified people. Let's say there's a 1,000 professionals needed, well there's probably only three or four hundred in the market," he said.
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With much wealth tied up in family businesses, land and property -- which may be monetized down the road -- there was still plenty of room for growth. Therefore there's room for competition in Ireland's wealth management market even if recent rapid rates of economic growth moderate.
"We're seeing pressure on talent, undoubtedly, and we're seeing pressure on the whole question of remuneration but not yet pressure on the margin front," he said.
"The key reason for the optimism relates not just to the growth in the Irish economy but the monetization opportunity that exists ... that's the hidden opportunity that's perhaps what the international banks are seeing and recognizing."
Another problem in handling new money was the need for private bankers to contend with higher risk appetites and less diversified pools of assets than they might be used to.
Cunningham said Irish wealth was "hugely exposed" to property following a decade-long domestic real estate boom.
Investors had also fallen victim to "significant turmoil" in Irish equity markets in recent months as the credit crunch compounded jitters over a fast cooling property market. The response, though, has been mixed. Continued...
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