Managing the estimated $50 trillion-plus assets of wealthy families and individuals is a huge business for banks, especially now that they are severely limited in investing their own money in financial markets. And despite the growing competition for wealth management, there's no sign that revenues are slowing.
Large U.S. and European banks like Bank of America (BAC) , Wells Fargo (WFC) , JPMorgan Chase (JPM) and UBS (UBS) have long been in the business of managing other people's money, but their interest in doing so has intensified since the 2008 financial crisis.
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Partly responsible are new rules such saw the 2010 Volcker Rule that place limits on activities like proprietary trading and private equity investing. Another factor is a social shift in which workers are increasingly responsible for saving and investing for their retirement rather than being able to count on pension plans.
"Fee-based businesses with low capital requirements are attractive -- I mean they're just attractive for large banks," says Srini Venkateswaran, a director at Marakon, a consulting firm. Among such businesses the two standouts with "strong secular positive trends towards growth" are wealth management and payments, Venkateswaran says.
That has made the business "a lot more competitive for everyone," says Peter Shriver, CEO of Barrett Asset Management, a $1.6 billion investment advisor based in New York.
Shriver and his colleague, Barrett Managing Director Christina Bater, say fees have come down from 3% to 1.5% or even 1.25% at large firms, though they don't feel threatened because they have always been at the low end of that scale.