Trends Investment Summit 2019 : The evolution of the Belgian and Western European HNWI Industry
Updated: Jan 13, 2021
This week I had the opportunity to be present at the Trends Investment Summit in Brussels. The Belgian international fair for fund and wealth managers.
During that convention I had the opportunity to listen to different fund managers and finance experts. Since the financial crisis in 2008 the european fund market increased exponentially from approximatively 2.900 Bil EUR to 8.000 Bil EUR end of 2018 (X 2,75 in 10 years time). Event though the market decreased by 100 BIl EUR in 2018.
What about the specificity of the belgian market?
Regarding the Belgian Private Banking sector we were invited with other Private Bankers and Wealth managers to listen to the presentation of Peter Van der Smissen Secretary General of the Private Banking association Belgium.
Peter enlighted us with some important figures. Today 5.000 people are active in the Private Banking sector in Belgium and among them 3.000 people meet their clients face to face in a market that represent 400 Bil EUR of Assets Under Management including deposit accounts and custody.
The secretary general informed us that our belgian High Net Worth Individual market is still in a growth period (+3,3 growth %/year). Actually, the market has more than doubled since 2008 when the total assets under management touched a bottom line at 150 Bil AUM during the financial crisis.
The number of HNWI also increased since then from 50.000 people to 122.000 people having a moving heritage above 1 MM EUR (the average is around 2,5 MM EUR).
Who are the main actors in the belgian wealth market?
The 24 members of the belgian private banking associdation are divided in 3 main categories. For those who knows our country, first of all you have the big4 club called Universal Banks : BNP Paribas Fortis, KBC, ING and Belfius representing 280 Bil EUR, which means 70% of the market.
Besides the big 4, the Challengers who represent 100 Bil EUR (25% market share) and among them Degroof-Petercam (35 Bil EUR) - Delen (30 Bil EUR) - Deutsche Bank (15 BIL EUR).
The belgian market attract also Private banking boutiques for a total of 25 Bil EUR. In this segment you'll find Van Lanschot (4,1 Bil Eur) - Banque du Luxembourg (3,9 Bil) or Capital at Work (3,8 Bil EUR).
What are the main issues for the belgian and Western Private Baking market?
The Private Banking Association thanks to McKinsey's survey pointed out a continious revenue decrease passing from 100 basis points to 77 basis points in 10 years time. Why? because of those 3 factors : Lower net interest income - lower revenue margin for mandates and change in the wealth band mix. During the same period, the Western Private Banking sector reduced their costs from 61 basis points to 52 basis points.
The private banking sector is of course highly impacted by the asset performance and net inflows as you can observe it in the following chart:
Revenues and cost conclusion :
On average this sector as a profit margin of 25 bps (35 in 2007) and a ROE around 13%.
In the coming years, what will be the main challenges for the Private Banking sector?
Through the voice of Peter Vander Smissen, the PBA association is convinced that the management in the Private Banking sector even in a struggling period will find positive answers to this changing world through smart pricing. Which means price realization, price architecture and product bundeling.
After a business model based on value for money*, (which means to receive more for less) a consequence of the financial crisis and the pressure on costs, are we shifting to a smart pricing model through premium packages for Private Banking customers focusing on revenues more than on costs?
Lexicon:
*High Net Worth Individuals : The most commonly quoted figure for membership in the high net worth club is $1 million in liquid financial assets. An investor with less than $1 million but more than $100,000 is considered to be "affluent" or perhaps "sub-HNWI." ... More than $30 million in wealth classifies a person as "ultra HNWI source - Investopedia
Information about HNWI in Belgium : The PBA underlined that in Belgium the Private banking entrance level for some banks starts at 250.000 EUR (wich means that's it's difficult to compare the figures).
Sources :
Morningstar (www.morningstar.com)
The belgian Private Banking Association (PBA) : http://www.pba-b.be/?lang=fr
https://www.zonebourse.com/actualite-bourse/Morningstar-les-actifs-sous-gestion-des-fonds-europeens-ont-atteint-8000-milliards-d-euros-en-2016--23794714/
http://www.morningstar.fr/fr/news/165045/collecte-nouveau-record-pour-la-gestion-dactifs-en-europe-en-2017.aspx
https://www.mckinsey.com/industries/financial-services/our-insights/european-private-banking-in-2018-running-for-sca
*Value for money strategies -Harvard Business Review by Peter J.Williamson and Ming Zeng (Alibaba) https://hbr.org/2009/03/value-for-money-strategies-for-recessionary-times