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Private banking and wealth management: the one sector that has positively benefited as a consequence of 2008's Great Financial Crisis
14/09/2018 , Ian Orton

The jury is almost certainly still out as far as coming up with a definitive verdict on the Great Financial Crisis (GFC) of 2008 and its impact on the global banking and financial services sector, the economy and life in general.
 
One sector that appears to have done very well, however, is private banking and wealth management.
 
The reality is that the sector’s clientele, the rich and very rich, have experienced a significant uplift in their personal wealth.
 
Just how much this is due to the measures introduced by governments - and perhaps more importantly central banks - will no doubt be debated by an army of economists and econometricians for years to come.
 
But the basic data looks fairly conclusive.
 
At the end of 2007 there were 10.1 million US dollar millionaires with collective financial assets of $40.7 trillion, according to the 2008 Capgemini World Wealth Report. 
 
Ten years later the number of US dollar millionaires had increased to 18.1 million. These collectively owned $70.00 trillion of financial assets.
 
Notwithstanding the impact of the GFC the population of US dollar millionaires and their financial assets had grown at annual compound rates of 8.79 percent and 6.81 percent respectively when economies floundered.
 
This almost certainly reflected a big surge in the price of financial and real assets.
 
Global equities are currently trading at around three times the prices they slumped to at the trough of the GFC and around 60 percent higher than when central banks around the world inflated their balance sheets through extraordinary monetary policy, i.e. quantitative easing.
 
Global bonds have experienced cumulative returns of around 50 percent with high yield bonds doubling. 
 
Of course all of this additional wealth didn’t necessarily come within the ambit of the private banking and wealth management sector.
 
The likelihood is, however, that a significant portion did.
 
Take the UK, for example.
 
According to Compeer, a London based research firm that focus on the sector, the UK wealth management sector had £362.1 billion of client assets under administration and management and generated revenues of £4.25 billion at the end of 2008.
 
Nine years later, at the end of 2017 it had £957.80 billion of assets under management and administration and revenues of £6.78 billion.
 
In other words notwithstanding the GFC and its aftermath it has grown these metrics at a compound rate of 11.41 percent and 5.33 percent respectively.
 
These are far higher rates of growth experienced by both the global and UK economies.
 
Of course this doesn’t necessarily mean that all wealth management firms have generated similar increases in profits and margins. They almost certainly haven’t.
 
But profits and margins are still very healthy notwithstanding all the regulations introduced by the UK government in the interim.
 
The reality is that the private banking and wealth management sector has done very nicely as a consequence of the GFC. 

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