Wealth Management in Italy 2008

Wealth Management in Italy 2008

Introduction

This report focuses on the onshore liquid wealth of affluent individuals and the liquid assets they hold, sizing, segmenting and forecasting the affluent population across 10 liquid asset bands. It also presents detailed HNW demographic and decision trigger analysis, and strategies to drive revenue growth based on large scale survey of the main players.

Scope

*HNW demographic and attitudinal attributes based on our Wealth Management Market Leaders Survey 2008

*Sizes, segments and forecasts the number of affluent invididuals across 10 liquid asset bands from EUR50k

*Extensive primary research from 20 wealth management companies highlights thier strategies for revenue growth, acquiring and keeping clients

*Aggregated data covers onshore liquid assets including cash and deposits, mutual funds, direct investment in equities and direct investment in bonds.

Highlights

The average Italian HNW is 48 years old, and has made his wealth through business ownership or entrepreneurship. He is less financially sophisticated than his European peers and very focused on protecting his asset base.

Italian wealth managers do not have long-lasting relationships with HNWs and generally have to share them with other banks. Their focus in terms of revenue growth is on winning new clients, rather than increasing their share of wallet, and they are hoping their colleagues in other parts of the bank will refer new clients to them.

Last year was a year of mega-mergers in the Italian banking market, which created two titans in the private banking arena in the form of Intesa Sanpaolo and the enlarged UniCredit. These mergers have changed the competitive landscape, but Datamonitor believes that it is possible for wealth managers to exploit the mergers and take market share.

Reasons to Purchase

*Understand the HNW population's investments by sector and geography, appetite for risk, and reasons for choosing/leaving their wealth service

*Assess market attractiveness by reviewing size and growth forecasts for the potential wealthy client base through 2012

*Assess the threats and opportunities for wealth managers by understanding how peers are planning to grow revenues, acquire and keep clients

Overview 1
Catalyst 1
Summary 1
Methodology 1
Executive Summary 2
The mega-mergers have created threats and opportunities for smaller wealth managers 2
Investment returns are driving the growth in Italy's wealth 2
Italy's HNWs are young, entrepreneurial and playing safe with their wealth 2
Wealth managers in Italy do not have enduring relationships with their clients 2
Table of Contents 3
Table of tables 4
THE MEGA-MERGERS HAVE CREATED THREATS AND OPPORTUNITIES FOR SMALLER WEALTH MANAGERS 5
Mega-mergers have fundamentally changed the competitive environment 5
2007 saw the creation of two dominant players in the Italian banking market 5
The Italian mega-mergers follow global themes 5
The stated rationale behind these mega-mergers is fairly traditional 5
The mergers consolidated the private banking market 6
Intesa Sanpaolo and UniCredit have staked out powerful positions in private banking 6
Both Intesa Sanpaolo and UniCredit are moving ahead quickly with their plans for Private Banking 6
Neither of the banks see significant risks attached to the mergers 7
Navigating a new private banking market 7
Threats and opportunities will result from the mega-mergers 7
The little banks will still be able to compete 7
Key implication: wealth managers must make sure they offer a personalized service 9
Key implication: small banks must concentrate on retaining clients 9
Key implication: small banks must become more efficient and cost-competitive 9
Dealing with specific threats from the mega-merger 10
Integration update: so far, there appear not to be major integration problems 10
ITALY'S WEALTH 12
Investment returns are driving the growth in Italy's wealth 12
The Italian stock exchange has been a consistent performer over the past few years 12
Bond yields and interest rates have contributed steadily to returns 13
Italy's property investment sector has enjoyed rapid growth 14
Italy's onshore investment market has repositioned towards safe havens 15
Italian investors put €40 billion into deposits in 2007 15
The number of affluent individuals in Italy is declining and is only expected to increase in 2010 16
2007 saw a decrease in the number of affluent Italians 16
The number of wealthy individuals is forecast to decrease in the short term 17
Data tables 18
THE ITALIAN HIGH NET WORTH INVESTOR 21
Italy's HNWs are young, entrepreneurial and playing safe with their wealth 21
Italian HNWs are the youngest in Europe 21
A disproportionate amount of HNWs' wealth comes from business/entrepreneurship 22
Wealth management service implication: target the entrepreneurs 23
Innovative example from the UK: Coutts banks in excess of 18,000 of the UK's entrepreneurs 24
Italy HNWs have transferred their wealth into safe havens 24
Wealth management service implication: concentrate on maximizing returns 25
Innovative example from North America: using the downturn to strengthen client relations 26
HNW portfolio allocation will shift towards alternative investments 26
Italy's HNWs' overseas investments follow European patterns 27
Wealth management service implication: look globally for investment opportunities 29
Innovative example from UK: Julius Baer launches North African fund 29
Italian HNWs want to protect their asset base, and are less financially sophisticated than their European peers 29
Italy's HNW investors are risk averse 29
Wealth management service implication: find the right balance between risk and return 30
Innovative example from UK: Barclays Wealth targets cash with enhanced Defined Returns Plan rates 31
Italy's HNWs aren't particularly knowledgeable about financial products, but have a high understanding of risk 31
Italy's HNWs are interested in commercial property investment opportunities 32
Innovative example from Benelux: Fortis Private Bank offers direct real estate investment 34
HNW clients are demanding more face-to-face contact 34
Wealth management service implication: wealth managers need to get up close and personal with HNWs 35
Innovative example from the UK: private banks are moving closer to important regional business hubs 36
THE ITALIAN WEALTH MANAGER'S VIEW 37
Wealth managers in Italy do not have enduring relationships with their clients 37
Italian wealth managers have to share their clients with at least one other bank 37
Italian wealth managers are focused on capturing new clients, leveraging CRM and providing alternative investment products 38
Wealth managers in Italy are focused on winning new customers 38
Better leverage of CRM is seen as the most effective means of increasing share of wallet 40
Wealth managers see alternative investments as the hot new product area 42
The key to attracting clients will be personal relationships 44
Italian wealth managers can best attract new clients by leveraging personal relationships 44
Referrals are key to catching new clients 46
Understanding client needs and servicing HNWs' families are key to better retention 48
A variety of manageable factors are contributing towards client losses 48
Providing better service to HNW families is important for client retention 50
APPENDIX 53
The drivers of growth in the wealthy population 53
Income growth (combined with inflation, changes in GDP by sector, household savings rates and debt levels) 53
Investment returns (market capitalization, interest rates and bond yields) 53
The following measures are not, in themselves, drivers of wealthy population growth 53
Market capitalization 53
GDP 53
The following measures are not drivers of wealthy population growth except under very restricted circumstances 54
Primary residence value growth 54
Inheritance 54
Methodology 54
Wealth Management Market Leaders Survey 2008 54
Global wealth Model 54
The UK sub-model 54
Global sub-model (for all other countries) 55
Forecasting methodology 55
Continuous refinement to the understanding of liquid wealth distribution 55
Datamonitor's wealth numbers compared with other wealth numbers 55
Bibliography 56
Definitions 58
Western Europe 58
Further reading 58
Ask the analyst 58
Datamonitor consulting 58
Disclaimer 58
List of Tables
Table 1: Number of affluent individuals in Italy by liquid asset band, 000s, 2003-07 19
Table 2: Number of affluent individuals in Italy by liquid asset band, 000s, 2008-12 19
Table 3: Aggregate onshore liquid assets of affluent individuals in Italy by liquid asset band, €bn, 2003-07 20
Table 4: Aggregate onshore liquid assets of affluent individuals in Italy by liquid asset band, €bn, 2008-12 20
Table 5: What proportion of the HNW customer base in Italy is in each age band? 22
Table 6: What proportion of the HNW customer base in Italy accumulated their wealth through (source)? 23
Table 7: What proportion of HNW customers' portfolios in Italy is allocated to (product)? 25
Table 8: HNW customers' portfolio allocation now versus in two years' time 27
Table 9: What proportion of the HNW customers' portfolio in Italy is allocated to (region)? 29
Table 10: What are HNW customers in Italy most interested in today? 30
Table 11: HNW customer attributes in Italy on a scale of one to four (knowledge) 32
Table 12: For which investment opportunities is there a lot of demand from HNW in Italy? 34
Table 13: HNW customer attributes in Italy (customer contact) 35
Table 14: How many wealth managers do HNW customers in Italy have on average? 38
Table 15: What will most determine revenue growth in Italy's wealth management market in the next two years? 40
Table 16: What is the most effective means of increasing wealthy clients' share of wallet in Italy? 42
Table 17: From the product areas just mentioned, which three will wealth managers focus most resources on in the next two years? 44
Table 18: What are the key influences that determine a client's choice of wealth management service in Italy? 46
Table 19: What are the most effective wealth management customer acquisition techniques in Italy? 47
Table 20: What are the most likely reasons for clients in Italy to leave a wealth management service? 50
Table 21: What is the best way to retain wealthy clients in Italy? 52
List of Figures
Figure 1: Reasons why HNWs choose a wealth management service 8
Figure 2: Reasons why HNWs leave a wealth management service 9
Figure 3: Focusing in on the various parts of the wealth manager's value 10
Figure 4: Italy's index has enjoyed slow but steady growth 13
Figure 5: Italy's average short-term interest rates have tracked upwards 14
Figure 6: Deposits and bonds grew as investors shifted out of mutual funds 15
Figure 7: Italians' shift into the traditional safe havens benefited from rising interest rates 16
Figure 8: Italy has over seven million affluent individuals 17
Figure 9: 2010 should see a return to growth 18
Figure 10: The 31-50 age band accounts for the greatest share of HNW customers in Italy at 44% 22
Figure 11: Business/entrepreneurship is the main source of wealth in Italy accounting for 43% of all HNWs 23
Figure 12: 31% of HNW portfolios in Italy are invested in fixed income 25
Figure 13: In Italy over the next two years HNW customers will increasingly look to the "real estate investment" category which will grow its share of HNW investors' portfolios from 20% to 23% 27
Figure 14: HNW investors in Italy have 62% of their portfolios invested in Europe 28
Figure 15: Protecting their current asset base is a key priority for 59% of HNW investors in Italy 30
Figure 16: HNW investors in Italy are less knowledgeable than the average European HNW investor 32
Figure 17: Direct investment in commercial property is the investment opportunity most in demand from HNW clients in Italy 33
Figure 18: Clients are demanding more face-to-face contact with their wealth manager now than two years ago in Italy 35
Figure 19: 4% of HNW investors in Italy have just one wealth manager 38
Figure 20: Obtaining new clients will be the key driver of revenue growth in the next two years for wealth managers in Italy 39
Figure 21: Better leverage of CRM is the most effective means of increasing share of HNW wallet in Italy 41
Figure 22: 55% of wealth managers in Italy are planning to focus resources on the "alternative investments" product area over the next two years 43
Figure 23: "Personal relationship" is the key influence that determines a client's choice of wealth manager in Italy 45
Figure 24: Referrals from the investment bank are the most effective customer acquisition technique for wealth managers in Italy 47
Figure 25: Failure to understand client needs is the most likely reason for clients to leave a wealth manager in Italy 49
Figure 26: Providing services for their family is the most effective means of retaining HNW customers in Italy 51