LONDON Oct 3 The price paid by wealth managers
to buy up assets from rivals has halved in the last two years,
showing that in a rush to buy market share, buyers can drive
harder bargains, research has found.
A report by specialist consultancy Scorpio Partnership
published on Wednesday shows that during 2011 and 2012, wealth
management companies spent $9.42 billion on rich investors'
assets or investment managers that run wealthy clients' money.
This represents $635 billion run on behalf of wealthy
investors, or 4 percent of the total amount managed by the
global wealth industry, Scorpio said.
The boom in demand to buy up wealth management businesses
followed the 2008-2009 financial crisis, when many financial
institutions looked to this sector as a source of steady revenue
to offset more volatile areas, driving up their price tags.
But the going rate for buying wealth management assets
stands at around 2 percent of the funds, having halved since
Scorpio's previous report in 2010, according to the research.
Seb Dovey, Scorpio's managing partner said valuations are now
falling further and the most recent deals have been valued at
around 1.5 percent of assets.
"The business of buying rich assets is getting cheaper, or
at least becoming more realistic. Paying 4 percent of assets is
just bonkers," Dovey told Reuters, noting that assets change
hands between institutional asset management firms for closer to
In August, Swiss bank Julius Baer said it had
agreed to acquire Bank of America's Merrill Lynch wealth
management business outside the United States for 860 million
Swiss francs, or 1.2 percent of 72 billion francs of assets.
Dovey said the headline valuation in Scorpio's research for
wealth assets would be even lower if the average was not boosted
by strong demand for funds in emerging markets such as Asia
where wealth management companies are seeking to expand by
Continental Europe, including private banking hub
Switzerland, accounted for much of the deal volumes, Scorpio
said, representing $337.9 billion of assets coming under new
Britain was also a centre of activity - with $80 billion of
assets changing hands ahead of new regulations covering how
financial products are sold that promise to squeeze profits for
smaller investment managers.
Asian deals amounted to $102.5 billion changing ownership.