independent asset managers in switzerland trend … · client advisory services and care come...
TRANSCRIPT
Teod
oro
D. C
occa
Ste
fan
Sch
mid
IND
EP
EN
DE
NT
AS
SE
T M
AN
AG
ER
S IN
SW
ITZ
ER
LAN
D
TR
EN
D R
EP
OR
T 20
07 -
201
0
Teod
oro
D. C
occa
Ste
fan
Sch
mid
IND
EP
EN
DE
NT
AS
SE
T M
AN
AG
ER
S IN
SW
ITZ
ER
LAN
D
TR
EN
D R
EP
OR
T 20
07 -
201
0
Supported by: FORTUNE Wealth Management Group AG
Head of project: Prof. Dr. Teodoro D. Cocca, Chair for Asset and Wealth Management,
Johannes Kepler University Linz and Lecturer, Swiss Banking Institute, University of Zurich
Co-author:Stefan Schmid, Swiss Banking Institute, University of Zurich
Translation:Textra Consulting GmbH, Zurich
Design:Plasma Design GmbH, Zurich
Printed by:Kyburz AG, Dielsdorf
This study is available free of charge on www.isb.uzh.ch.
AcknowledgementsThe authors would like to sincerely thank Prof. Dr. Christine Hirszowicz and
Prof. Dr. Hans Geiger for their support throughout the project.
INDEPENDENT ASSET MANAGERS IN SWITZERLAND TREND REPORT 2007 -2010
Key findings
Clientadvisoryservicesandcarecomefirst:Theclearcorecompetenceofindependentassetmanagersisadvisoryservicesandcareoftheirclient-eleandtheclientrelationship.
Focusonprivateclients:Over60%ofindependentassetmanagershaveexclusivelyprivateclients.Only2.5%ofindependentassetmanagershaveinstitutionalclientsonly.
Generaldecreaseinclientloyaltyanticipated:Theindustryexpectsclientloyaltyinallclientsegmentstodecreaseoverthenextthreeyears.Additionally,companysizeisnegativelylinkedtoclientloyalty.
Differinggrowthstrategies:Smallindependentassetmanagersgeneral-lyfollowanincreasein“ShareofWallet”astheirprimarygrowthdriver,whereaslargecompaniesconcentrateontheacquisitionofnewclients.
Largegrowthpotential:IncreasingdemandforindependentassetmanagementinSwitzerlandandasimultaneousdecreaseintheageofcustomerspromisehealthygrowthpotential.
Increasingcompanysizeintrend:Thecriticalsizeforindependentassetmanagersseemsnotyetreached,resultinginabove-averageoverheads.
Decreaseinoffshoreassetsexpected:AllregionsofSwitzerlandantici-patearelativereductioninforeignassetsoverthenextthreeyears.
Furtherincreaseintheproblemofsuccessioninindividualcompaniesuntil2010:Smallercompaniesgenerallyfavorotherindependentassetmanagersasbuyers.Largerindependentassetmanagersinparticularseebanksandstrategicinvestorsassuitablepartnersinconnectionwithconti-nuationinbusinessandimplementationofnewbusinessmodels.
Threatoffurtherregulationcauseforconcern:Additionalregulatorymeasureswouldmaketheindependentassetmanagersindustrylessattrac-tive.Alternativeregulationstatuses,e.g.intheformofasecuritiesdealer,arebeingconsideredby5%ofcompanies.
INDEPENDENT ASSET MANAGERS IN SWITZERLAND TREND REPORT 2007 -2010
Table of contents
Startingpoint 3
Structureandtypologyoftheindustry 5
Clientcharacteristicsandbehavior 9
Growth 11
Trends 16
Regulation 21
Appendix 23
1
3
INDEPENDENT ASSET MANAGERS IN SWITZERLAND TREND REPORT 2007 -2010
Starting point
The Swiss Banking Institute of theUniversity of Zurich carried out a writtenquestionnaire (1391 questionnaires weredistributedinApril2007)tofindoutwhereindependentassetmanagers(IAMs)inSwit-zerlandseetheproblemsandchallengesoftheirindustrybothtodayandinthefutureandthechangestheyanticipate.
ThesamplecoveredalllanguageregionsofSwitzerland.Figure1givesanoverviewoftheresponsesfromwhichtheinformationinthisstudywastaken.
ABB 01
ABB 02
Region Responses Return rate
German-speaking Switzerland 233 24.3 %
French-speaking Switzerland 54 15.7 %
Italian-speaking Switzerland 18 20.2 %
Total Switzerland 305 21.9 %
ABB 04
ABB 05
ABB 06
ABB 03
Client advisory
Customer relationship management
Asset allocation
Personality of employee
Absolute performance
Cost/income structure
Acquisition of new clients
Relative performance
Psychological capabilities
Product creation
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
1.5
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
2.0 2.5 … 5 = less loyal1 = loyal
100 %
80 %
60 %
40 %
20 %
0 %
ABB080 % 20 % 40 % 60 % 80 % 100 %
Acquisition of other IAM
ABB 07
0 % 20 % 40 % 60 % 80 % 100 %
Negotiation skills
Foreign clients
Swiss clients
ABB 11
2004 2007 2010
8
6
4
2
0
Other Swiss bank
Major Swiss bank
IAM with no. of personnel = 1
IAM with no. of personnel > 1
Other (as applicable): USA ø 2.375 (8 mentions)
Asia ø 2.1 (5 mentions)
South America ø 1.2 (5 mentions)
Middle-East ø 2.25 (4 mentions)Current value Projected value in 3 years
Number of answers “high”
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Financial knowledge
Information needs
Price sensitivity
Performance awareness
Acquisition of new clients
Cross-selling
Increase in “Share of Wallet”
ABB 090 % 20 % 40 % 60 % 80 % 100 %
Personnel recruitment
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Critical size
Costs
Market saturation
ABB14
0 % 20 % 40 % 60 % 80 % 100 %
Banks
< 2 employees
2 to < 5 employees
5 and more employees
Very important
Important
Unimportant
Individuals
Strategic investors
Financial investors
Other IAMs
ABB 13
30 %
Regulations
2004
2007
2010
Net new money
Critical size
Back-up person
Costs
Investment performance
Market conditions
Growth in general
Succession
Yields
ABB 100 % 20 % 40 % 60 %
< 2 employees
2 to < 5 employees
5 and more employees
Administration
Asset management
Efficiency ratio (right scale)
Over-proportional to the market
Proportional to the market
Under-proportional to the market
Total market
ABB 12
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
100 %
80 %
60 %
40 %
20 %
0 %
8.0 % -5.3 %
11.8 % -5.4 %
2004
2007
2010
-0.5 % -4.6 %
0 % 5 % 10 % 15 % 20 % 25 %
ABB 16
ABB 17
0 % 20 %ø 40 % 60 % 80 % 100 %
ABB15 Client trust/proximity
Less administrative effort
Minimal infrastructure
No organizational regulations
No equity capital and liquidity regulations
No minimal capital requirements
Low auditing costs
No risk distribution regulations
0 % 20 % 40 % 60 % 80 % 100 %
0
2
4
6
8
10
12
0
10
20
30
40
50
60
70
ø
AUM of institutional clients in percent (2007)
Pe
rcen
t of I
AMs
AUM of foreign clients in percent (2007)
Pe
rcen
t of I
AMs
0 % 20 % 40 % 60 % 80 % 100 %
German-speaking Switzerland
French-speaking Switzerland
Italian-speaking Switzerland
N
umbe
r of F
TEs
Ef
ficie
ncy
ratio
5 and more employees
2 to < 5 employees
< 2 employees
-3.9 %
-4.3 %
100 %
80 %
60 %
40 %
20 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
AUM of foreign clients in percent (2007)
AU
M o
f ins
titut
iona
l clie
nts
in p
erce
nt (2
007)
46 %
38 %
16 %
77 %
75 %
73 %
71 %
69 %
67 %
Institutional clients
Private clients
Swiss clients
European clients
Other clients
Top clients
Small clients
Institutional clients
Private clients
Figure1:
Overviewofresponserate
5
ABB 01
ABB 02
Region Responses Return rate
German-speaking Switzerland 233 24.3 %
French-speaking Switzerland 54 15.7 %
Italian-speaking Switzerland 18 20.2 %
Total Switzerland 305 21.9 %
ABB 04
ABB 05
ABB 06
ABB 03
Client advisory
Customer relationship management
Asset allocation
Personality of employee
Absolute performance
Cost/income structure
Acquisition of new clients
Relative performance
Psychological capabilities
Product creation
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
1.5
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
2.0 2.5 … 5 = less loyal1 = loyal
100 %
80 %
60 %
40 %
20 %
0 %
ABB080 % 20 % 40 % 60 % 80 % 100 %
Acquisition of other IAM
ABB 07
0 % 20 % 40 % 60 % 80 % 100 %
Negotiation skills
Foreign clients
Swiss clients
ABB 11
2004 2007 2010
8
6
4
2
0
Other Swiss bank
Major Swiss bank
IAM with no. of personnel = 1
IAM with no. of personnel > 1
Other (as applicable): USA ø 2.375 (8 mentions)
Asia ø 2.1 (5 mentions)
South America ø 1.2 (5 mentions)
Middle-East ø 2.25 (4 mentions)Current value Projected value in 3 years
Number of answers “high”
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Financial knowledge
Information needs
Price sensitivity
Performance awareness
Acquisition of new clients
Cross-selling
Increase in “Share of Wallet”
ABB 090 % 20 % 40 % 60 % 80 % 100 %
Personnel recruitment
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Critical size
Costs
Market saturation
ABB14
0 % 20 % 40 % 60 % 80 % 100 %
Banks
< 2 employees
2 to < 5 employees
5 and more employees
Very important
Important
Unimportant
Individuals
Strategic investors
Financial investors
Other IAMs
ABB 13
30 %
Regulations
2004
2007
2010
Net new money
Critical size
Back-up person
Costs
Investment performance
Market conditions
Growth in general
Succession
Yields
ABB 100 % 20 % 40 % 60 %
< 2 employees
2 to < 5 employees
5 and more employees
Administration
Asset management
Efficiency ratio (right scale)
Over-proportional to the market
Proportional to the market
Under-proportional to the market
Total market
ABB 12
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
100 %
80 %
60 %
40 %
20 %
0 %
8.0 % -5.3 %
11.8 % -5.4 %
2004
2007
2010
-0.5 % -4.6 %
0 % 5 % 10 % 15 % 20 % 25 %
ABB 16
ABB 17
0 % 20 %ø 40 % 60 % 80 % 100 %
ABB15 Client trust/proximity
Less administrative effort
Minimal infrastructure
No organizational regulations
No equity capital and liquidity regulations
No minimal capital requirements
Low auditing costs
No risk distribution regulations
0 % 20 % 40 % 60 % 80 % 100 %
0
2
4
6
8
10
12
0
10
20
30
40
50
60
70
ø
AUM of institutional clients in percent (2007)
Pe
rcen
t of I
AMs
AUM of foreign clients in percent (2007)
Pe
rcen
t of I
AMs
0 % 20 % 40 % 60 % 80 % 100 %
German-speaking Switzerland
French-speaking Switzerland
Italian-speaking Switzerland
N
umbe
r of F
TEs
Ef
ficie
ncy
ratio
5 and more employees
2 to < 5 employees
< 2 employees
-3.9 %
-4.3 %
100 %
80 %
60 %
40 %
20 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
AUM of foreign clients in percent (2007)
AU
M o
f ins
titut
iona
l clie
nts
in p
erce
nt (2
007)
46 %
38 %
16 %
77 %
75 %
73 %
71 %
69 %
67 %
Institutional clients
Private clients
Swiss clients
European clients
Other clients
Top clients
Small clients
Institutional clients
Private clients
INDEPENDENT ASSET MANAGERS IN SWITZERLAND TREND REPORT 2007 -2010
Structure and typology of the industry
It would seem that a small companysize is in the nature of independent assetmanagement.One thirdof IAMs registeredwith theSwissCommercialRegistryOffice(HR)have less than two full-time employ-ees.AnotherthirdemploystwotolessthanfivepeopleandtherestofIAMshavefiveormorefull-timeworkers.
As regards regional distribution, oneperson companies are most frequentlyfound in German-speaking Switzerlandand larger companies in French-speakingSwitzerland and Italian-speaking Switzer-land(cf.Figure2).
Figure2:
OverviewoftheIAMindustrybycompanysizeandregionaldistribution
6
Ifonepositionscompaniesaccordingtotheir clientportfolio,a ratherclearpictureemerges (cf.Figure3).Businesswith insti-tutional clients seems the exception: Over60%of IAMshaveonlyprivateclients (cf.alsoFigure16,Appendix).
Amorevariedresultisshowninanana-lysisoftheoriginofclients.Around10%ofIAMs have client relationships with eitheronlyforeignoronlySwissclientsrespective-ly.Theaveragepercentageofforeignassetsundermanagement(AUM)is53%,themedi-anis60%(cf.alsoFigure17,Appendix).
Figure3:
Positioningofrespondentsbycompositionofassetsundermanagement
ABB 01
ABB 02
Region Responses Return rate
German-speaking Switzerland 233 24.3 %
French-speaking Switzerland 54 15.7 %
Italian-speaking Switzerland 18 20.2 %
Total Switzerland 305 21.9 %
ABB 04
ABB 05
ABB 06
ABB 03
Client advisory
Customer relationship management
Asset allocation
Personality of employee
Absolute performance
Cost/income structure
Acquisition of new clients
Relative performance
Psychological capabilities
Product creation
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
1.5
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
2.0 2.5 … 5 = less loyal1 = loyal
100 %
80 %
60 %
40 %
20 %
0 %
ABB080 % 20 % 40 % 60 % 80 % 100 %
Acquisition of other IAM
ABB 07
0 % 20 % 40 % 60 % 80 % 100 %
Negotiation skills
Foreign clients
Swiss clients
ABB 11
2004 2007 2010
8
6
4
2
0
Other Swiss bank
Major Swiss bank
IAM with no. of personnel = 1
IAM with no. of personnel > 1
Other (as applicable): USA ø 2.375 (8 mentions)
Asia ø 2.1 (5 mentions)
South America ø 1.2 (5 mentions)
Middle-East ø 2.25 (4 mentions)Current value Projected value in 3 years
Number of answers “high”
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Financial knowledge
Information needs
Price sensitivity
Performance awareness
Acquisition of new clients
Cross-selling
Increase in “Share of Wallet”
ABB 090 % 20 % 40 % 60 % 80 % 100 %
Personnel recruitment
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Critical size
Costs
Market saturation
ABB14
0 % 20 % 40 % 60 % 80 % 100 %
Banks
< 2 employees
2 to < 5 employees
5 and more employees
Very important
Important
Unimportant
Individuals
Strategic investors
Financial investors
Other IAMs
ABB 13
30 %
Regulations
2004
2007
2010
Net new money
Critical size
Back-up person
Costs
Investment performance
Market conditions
Growth in general
Succession
Yields
ABB 100 % 20 % 40 % 60 %
< 2 employees
2 to < 5 employees
5 and more employees
Administration
Asset management
Efficiency ratio (right scale)
Over-proportional to the market
Proportional to the market
Under-proportional to the market
Total market
ABB 12
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
100 %
80 %
60 %
40 %
20 %
0 %
8.0 % -5.3 %
11.8 % -5.4 %
2004
2007
2010
-0.5 % -4.6 %
0 % 5 % 10 % 15 % 20 % 25 %
ABB 16
ABB 17
0 % 20 %ø 40 % 60 % 80 % 100 %
ABB15 Client trust/proximity
Less administrative effort
Minimal infrastructure
No organizational regulations
No equity capital and liquidity regulations
No minimal capital requirements
Low auditing costs
No risk distribution regulations
0 % 20 % 40 % 60 % 80 % 100 %
0
2
4
6
8
10
12
0
10
20
30
40
50
60
70
ø
AUM of institutional clients in percent (2007)
Pe
rcen
t of I
AMs
AUM of foreign clients in percent (2007)
Pe
rcen
t of I
AMs
0 % 20 % 40 % 60 % 80 % 100 %
German-speaking Switzerland
French-speaking Switzerland
Italian-speaking Switzerland
N
umbe
r of F
TEs
Ef
ficie
ncy
ratio
5 and more employees
2 to < 5 employees
< 2 employees
-3.9 %
-4.3 %
100 %
80 %
60 %
40 %
20 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
AUM of foreign clients in percent (2007)
AU
M o
f ins
titut
iona
l clie
nts
in p
erce
nt (2
007)
46 %
38 %
16 %
77 %
75 %
73 %
71 %
69 %
67 %
Institutional clients
Private clients
Swiss clients
European clients
Other clients
Top clients
Small clients
Institutional clients
Private clients
7
Independent asset managers know ex-actlywheretheirstrengthslie.Thus,adviso-ryservicesareatthetopofthelistofcorecompetencesmentioned(cf.Figure4).
Insecondplaceiscustomerrelationshipmanagementand in thirdplaceasset allo-cationisgiven.Thelatterisaninvestment-technical aspect which can impact invest-mentperformance.Softskillsdominatethebusiness.
Figure4:
Self-assessmentofentrepreneurialcorecompetencies
ABB 01
ABB 02
Region Responses Return rate
German-speaking Switzerland 233 24.3 %
French-speaking Switzerland 54 15.7 %
Italian-speaking Switzerland 18 20.2 %
Total Switzerland 305 21.9 %
ABB 04
ABB 05
ABB 06
ABB 03
Client advisory
Customer relationship management
Asset allocation
Personality of employee
Absolute performance
Cost/income structure
Acquisition of new clients
Relative performance
Psychological capabilities
Product creation
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
1.5
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
2.0 2.5 … 5 = less loyal1 = loyal
100 %
80 %
60 %
40 %
20 %
0 %
ABB080 % 20 % 40 % 60 % 80 % 100 %
Acquisition of other IAM
ABB 07
0 % 20 % 40 % 60 % 80 % 100 %
Negotiation skills
Foreign clients
Swiss clients
ABB 11
2004 2007 2010
8
6
4
2
0
Other Swiss bank
Major Swiss bank
IAM with no. of personnel = 1
IAM with no. of personnel > 1
Other (as applicable): USA ø 2.375 (8 mentions)
Asia ø 2.1 (5 mentions)
South America ø 1.2 (5 mentions)
Middle-East ø 2.25 (4 mentions)Current value Projected value in 3 years
Number of answers “high”
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Financial knowledge
Information needs
Price sensitivity
Performance awareness
Acquisition of new clients
Cross-selling
Increase in “Share of Wallet”
ABB 090 % 20 % 40 % 60 % 80 % 100 %
Personnel recruitment
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Critical size
Costs
Market saturation
ABB14
0 % 20 % 40 % 60 % 80 % 100 %
Banks
< 2 employees
2 to < 5 employees
5 and more employees
Very important
Important
Unimportant
Individuals
Strategic investors
Financial investors
Other IAMs
ABB 13
30 %
Regulations
2004
2007
2010
Net new money
Critical size
Back-up person
Costs
Investment performance
Market conditions
Growth in general
Succession
Yields
ABB 100 % 20 % 40 % 60 %
< 2 employees
2 to < 5 employees
5 and more employees
Administration
Asset management
Efficiency ratio (right scale)
Over-proportional to the market
Proportional to the market
Under-proportional to the market
Total market
ABB 12
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
100 %
80 %
60 %
40 %
20 %
0 %
8.0 % -5.3 %
11.8 % -5.4 %
2004
2007
2010
-0.5 % -4.6 %
0 % 5 % 10 % 15 % 20 % 25 %
ABB 16
ABB 17
0 % 20 %ø 40 % 60 % 80 % 100 %
ABB15 Client trust/proximity
Less administrative effort
Minimal infrastructure
No organizational regulations
No equity capital and liquidity regulations
No minimal capital requirements
Low auditing costs
No risk distribution regulations
0 % 20 % 40 % 60 % 80 % 100 %
0
2
4
6
8
10
12
0
10
20
30
40
50
60
70
ø
AUM of institutional clients in percent (2007)
Pe
rcen
t of I
AMs
AUM of foreign clients in percent (2007)
Pe
rcen
t of I
AMs
0 % 20 % 40 % 60 % 80 % 100 %
German-speaking Switzerland
French-speaking Switzerland
Italian-speaking Switzerland
N
umbe
r of F
TEs
Ef
ficie
ncy
ratio
5 and more employees
2 to < 5 employees
< 2 employees
-3.9 %
-4.3 %
100 %
80 %
60 %
40 %
20 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
AUM of foreign clients in percent (2007)
AU
M o
f ins
titut
iona
l clie
nts
in p
erce
nt (2
007)
46 %
38 %
16 %
77 %
75 %
73 %
71 %
69 %
67 %
Institutional clients
Private clients
Swiss clients
European clients
Other clients
Top clients
Small clients
Institutional clients
Private clients
INDEPENDENT ASSET MANAGERS IN SWITZERLAND TREND REPORT 2007 -2010
Structure and typology of the industry
�
TheskillsshowninFigure4areinmostcasesacquiredatSwissbanks–principallymajorSwissbanks.Thus,around�0%ofin-dependentassetmanagersareformerbankemployees(cf.Figure5).OnecanthereforeassumethatthemajorityofIAMclientsusedtohavetheirassetsmanagedbyabank.
Figure5:
Professionalbackgroundofindependentassetmanagers
ABB 01
ABB 02
Region Responses Return rate
German-speaking Switzerland 233 24.3 %
French-speaking Switzerland 54 15.7 %
Italian-speaking Switzerland 18 20.2 %
Total Switzerland 305 21.9 %
ABB 04
ABB 05
ABB 06
ABB 03
Client advisory
Customer relationship management
Asset allocation
Personality of employee
Absolute performance
Cost/income structure
Acquisition of new clients
Relative performance
Psychological capabilities
Product creation
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
1.5
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
2.0 2.5 … 5 = less loyal1 = loyal
100 %
80 %
60 %
40 %
20 %
0 %
ABB080 % 20 % 40 % 60 % 80 % 100 %
Acquisition of other IAM
ABB 07
0 % 20 % 40 % 60 % 80 % 100 %
Negotiation skills
Foreign clients
Swiss clients
ABB 11
2004 2007 2010
8
6
4
2
0
Other Swiss bank
Major Swiss bank
IAM with no. of personnel = 1
IAM with no. of personnel > 1
Other (as applicable): USA ø 2.375 (8 mentions)
Asia ø 2.1 (5 mentions)
South America ø 1.2 (5 mentions)
Middle-East ø 2.25 (4 mentions)Current value Projected value in 3 years
Number of answers “high”
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Financial knowledge
Information needs
Price sensitivity
Performance awareness
Acquisition of new clients
Cross-selling
Increase in “Share of Wallet”
ABB 090 % 20 % 40 % 60 % 80 % 100 %
Personnel recruitment
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Critical size
Costs
Market saturation
ABB14
0 % 20 % 40 % 60 % 80 % 100 %
Banks
< 2 employees
2 to < 5 employees
5 and more employees
Very important
Important
Unimportant
Individuals
Strategic investors
Financial investors
Other IAMs
ABB 13
30 %
Regulations
2004
2007
2010
Net new money
Critical size
Back-up person
Costs
Investment performance
Market conditions
Growth in general
Succession
Yields
ABB 100 % 20 % 40 % 60 %
< 2 employees
2 to < 5 employees
5 and more employees
Administration
Asset management
Efficiency ratio (right scale)
Over-proportional to the market
Proportional to the market
Under-proportional to the market
Total market
ABB 12
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
100 %
80 %
60 %
40 %
20 %
0 %
8.0 % -5.3 %
11.8 % -5.4 %
2004
2007
2010
-0.5 % -4.6 %
0 % 5 % 10 % 15 % 20 % 25 %
ABB 16
ABB 17
0 % 20 %ø 40 % 60 % 80 % 100 %
ABB15 Client trust/proximity
Less administrative effort
Minimal infrastructure
No organizational regulations
No equity capital and liquidity regulations
No minimal capital requirements
Low auditing costs
No risk distribution regulations
0 % 20 % 40 % 60 % 80 % 100 %
0
2
4
6
8
10
12
0
10
20
30
40
50
60
70
ø
AUM of institutional clients in percent (2007)
Pe
rcen
t of I
AMs
AUM of foreign clients in percent (2007)
Pe
rcen
t of I
AMs
0 % 20 % 40 % 60 % 80 % 100 %
German-speaking Switzerland
French-speaking Switzerland
Italian-speaking Switzerland
N
umbe
r of F
TEs
Ef
ficie
ncy
ratio
5 and more employees
2 to < 5 employees
< 2 employees
-3.9 %
-4.3 %
100 %
80 %
60 %
40 %
20 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
AUM of foreign clients in percent (2007)
AU
M o
f ins
titut
iona
l clie
nts
in p
erce
nt (2
007)
46 %
38 %
16 %
77 %
75 %
73 %
71 %
69 %
67 %
Institutional clients
Private clients
Swiss clients
European clients
Other clients
Top clients
Small clients
Institutional clients
Private clients
9
INDEPENDENT ASSET MANAGERS IN SWITZERLAND TREND REPORT 2007 -2010
Client characteristics and behavior
Figure6:
Trendsinclientloyalty
ABB 01
ABB 02
Region Responses Return rate
German-speaking Switzerland 233 24.3 %
French-speaking Switzerland 54 15.7 %
Italian-speaking Switzerland 18 20.2 %
Total Switzerland 305 21.9 %
ABB 04
ABB 05
ABB 06
ABB 03
Client advisory
Customer relationship management
Asset allocation
Personality of employee
Absolute performance
Cost/income structure
Acquisition of new clients
Relative performance
Psychological capabilities
Product creation
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
1.5
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
2.0 2.5 … 5 = less loyal1 = loyal
100 %
80 %
60 %
40 %
20 %
0 %
ABB080 % 20 % 40 % 60 % 80 % 100 %
Acquisition of other IAM
ABB 07
0 % 20 % 40 % 60 % 80 % 100 %
Negotiation skills
Foreign clients
Swiss clients
ABB 11
2004 2007 2010
8
6
4
2
0
Other Swiss bank
Major Swiss bank
IAM with no. of personnel = 1
IAM with no. of personnel > 1
Other (as applicable): USA ø 2.375 (8 mentions)
Asia ø 2.1 (5 mentions)
South America ø 1.2 (5 mentions)
Middle-East ø 2.25 (4 mentions)Current value Projected value in 3 years
Number of answers “high”
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Financial knowledge
Information needs
Price sensitivity
Performance awareness
Acquisition of new clients
Cross-selling
Increase in “Share of Wallet”
ABB 090 % 20 % 40 % 60 % 80 % 100 %
Personnel recruitment
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Critical size
Costs
Market saturation
ABB14
0 % 20 % 40 % 60 % 80 % 100 %
Banks
< 2 employees
2 to < 5 employees
5 and more employees
Very important
Important
Unimportant
Individuals
Strategic investors
Financial investors
Other IAMs
ABB 13
30 %
Regulations
2004
2007
2010
Net new money
Critical size
Back-up person
Costs
Investment performance
Market conditions
Growth in general
Succession
Yields
ABB 100 % 20 % 40 % 60 %
< 2 employees
2 to < 5 employees
5 and more employees
Administration
Asset management
Efficiency ratio (right scale)
Over-proportional to the market
Proportional to the market
Under-proportional to the market
Total market
ABB 12
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
100 %
80 %
60 %
40 %
20 %
0 %
8.0 % -5.3 %
11.8 % -5.4 %
2004
2007
2010
-0.5 % -4.6 %
0 % 5 % 10 % 15 % 20 % 25 %
ABB 16
ABB 17
0 % 20 %ø 40 % 60 % 80 % 100 %
ABB15 Client trust/proximity
Less administrative effort
Minimal infrastructure
No organizational regulations
No equity capital and liquidity regulations
No minimal capital requirements
Low auditing costs
No risk distribution regulations
0 % 20 % 40 % 60 % 80 % 100 %
0
2
4
6
8
10
12
0
10
20
30
40
50
60
70
ø
AUM of institutional clients in percent (2007)
Pe
rcen
t of I
AMs
AUM of foreign clients in percent (2007)
Pe
rcen
t of I
AMs
0 % 20 % 40 % 60 % 80 % 100 %
German-speaking Switzerland
French-speaking Switzerland
Italian-speaking Switzerland
N
umbe
r of F
TEs
Ef
ficie
ncy
ratio
5 and more employees
2 to < 5 employees
< 2 employees
-3.9 %
-4.3 %
100 %
80 %
60 %
40 %
20 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
AUM of foreign clients in percent (2007)
AU
M o
f ins
titut
iona
l clie
nts
in p
erce
nt (2
007)
46 %
38 %
16 %
77 %
75 %
73 %
71 %
69 %
67 %
Institutional clients
Private clients
Swiss clients
European clients
Other clients
Top clients
Small clients
Institutional clients
Private clients
The general prognosis regarding deve-lopmentsinclientloyaltyisrathergloomy.Theindustryanticipatesadecreaseinclientloyaltyinallsegmentsoverthenextthreeyears (cf. Figure 6). In principle it can beshownthatone-personcompaniesconsidertheirclientsmoreloyalthandolargercom-panies.
ThisisnosurpriseasIAMclientsseemmostinterestedinaone-to-onerelationshipand personal advisory services. However,whether one could venture a theory thatwithincreasingcompanysize,clientloyaltyisgenerallyonthedecreaseisquestionable.
It is prudent at this point tomention thatdata is based on respondents’ qualitativeestimates.
Institutional clients are consideredleast loyal. On the one hand, these clientrelationshipscanbecharacterizedbymorequantitative elements such as investmentperformanceorpricing.Ontheotherhand,mostIAMsclearlyfocusonwealthyprivateclients and therefore have limited know-howwhichwouldallowthemtoaddressandserviceinstitutionalclientneeds.
Ofinterestisthediscoverythattopcli-ents(thewealthiest20%ofIAMclients)areconsideredmoreloyalthanlesswealthycli-ents(theleastwealthy20%ofIAMclients).Thiscandoubtlessbeexplainedbythehig-hercostsinvolvedinachange.Atthesame
timeonecansaythatclientswithincreasingconfidenceinservicesseemtoincreasetheir“ShareofWallet”withtheirIAM.Thus,long-term these clients become top clients. TheIAM‘s top clients are generally givenmostattentionwhichalsoincreasesconfidence.
10
Figure7showshowcertainclientseg-ments are assessed according to variouseconomiccharacteristics.Itishardlysurpri-singthatinstitutionalclientsdominateotherclientsegmentsasregardsthesecharacteris-tics.Thecharacteristicwhereforeignclientstake the lead is with financial knowledge.
The latter are also less price-sensitive. Itseemsthatinmostcaseslucrativenetyieldscanbeearnedwithtaxadvantagesdespitehighadministrativecosts.
Figure7:
IAMassessmentofvariousclientsegments
ABB 01
ABB 02
Region Responses Return rate
German-speaking Switzerland 233 24.3 %
French-speaking Switzerland 54 15.7 %
Italian-speaking Switzerland 18 20.2 %
Total Switzerland 305 21.9 %
ABB 04
ABB 05
ABB 06
ABB 03
Client advisory
Customer relationship management
Asset allocation
Personality of employee
Absolute performance
Cost/income structure
Acquisition of new clients
Relative performance
Psychological capabilities
Product creation
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
1.5
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
2.0 2.5 … 5 = less loyal1 = loyal
100 %
80 %
60 %
40 %
20 %
0 %
ABB080 % 20 % 40 % 60 % 80 % 100 %
Acquisition of other IAM
ABB 07
0 % 20 % 40 % 60 % 80 % 100 %
Negotiation skills
Foreign clients
Swiss clients
ABB 11
2004 2007 2010
8
6
4
2
0
Other Swiss bank
Major Swiss bank
IAM with no. of personnel = 1
IAM with no. of personnel > 1
Other (as applicable): USA ø 2.375 (8 mentions)
Asia ø 2.1 (5 mentions)
South America ø 1.2 (5 mentions)
Middle-East ø 2.25 (4 mentions)Current value Projected value in 3 years
Number of answers “high”
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Financial knowledge
Information needs
Price sensitivity
Performance awareness
Acquisition of new clients
Cross-selling
Increase in “Share of Wallet”
ABB 090 % 20 % 40 % 60 % 80 % 100 %
Personnel recruitment
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Critical size
Costs
Market saturation
ABB14
0 % 20 % 40 % 60 % 80 % 100 %
Banks
< 2 employees
2 to < 5 employees
5 and more employees
Very important
Important
Unimportant
Individuals
Strategic investors
Financial investors
Other IAMs
ABB 13
30 %
Regulations
2004
2007
2010
Net new money
Critical size
Back-up person
Costs
Investment performance
Market conditions
Growth in general
Succession
Yields
ABB 100 % 20 % 40 % 60 %
< 2 employees
2 to < 5 employees
5 and more employees
Administration
Asset management
Efficiency ratio (right scale)
Over-proportional to the market
Proportional to the market
Under-proportional to the market
Total market
ABB 12
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
100 %
80 %
60 %
40 %
20 %
0 %
8.0 % -5.3 %
11.8 % -5.4 %
2004
2007
2010
-0.5 % -4.6 %
0 % 5 % 10 % 15 % 20 % 25 %
ABB 16
ABB 17
0 % 20 %ø 40 % 60 % 80 % 100 %
ABB15 Client trust/proximity
Less administrative effort
Minimal infrastructure
No organizational regulations
No equity capital and liquidity regulations
No minimal capital requirements
Low auditing costs
No risk distribution regulations
0 % 20 % 40 % 60 % 80 % 100 %
0
2
4
6
8
10
12
0
10
20
30
40
50
60
70
ø
AUM of institutional clients in percent (2007)
Pe
rcen
t of I
AMs
AUM of foreign clients in percent (2007)
Pe
rcen
t of I
AMs
0 % 20 % 40 % 60 % 80 % 100 %
German-speaking Switzerland
French-speaking Switzerland
Italian-speaking Switzerland
N
umbe
r of F
TEs
Ef
ficie
ncy
ratio
5 and more employees
2 to < 5 employees
< 2 employees
-3.9 %
-4.3 %
100 %
80 %
60 %
40 %
20 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
AUM of foreign clients in percent (2007)
AU
M o
f ins
titut
iona
l clie
nts
in p
erce
nt (2
007)
46 %
38 %
16 %
77 %
75 %
73 %
71 %
69 %
67 %
Institutional clients
Private clients
Swiss clients
European clients
Other clients
Top clients
Small clients
Institutional clients
Private clients
11
INDEPENDENT ASSET MANAGERS IN SWITZERLAND TREND REPORT 2007 -2010
Growth
AnincreaseinmanagedassetsintheIAMindustryisgenerallystrivedforbyincreasingthe “Share ofWallet” of existing clients orvia client acquisition (cf. Figure �). Furtherdevelopment and thedeepeningof existingclient relationships is the dominant growthstrategyof smaller IAMs inparticular.Costadvantages in comparison with alternativegrowthopportunitiesseemtoplayanimpor-
tantrolehere,acquisitionofnewclientsisofcoursesignificantlymoreexpensive.
GrowthbyacquisitionofotherIAMsisanimportant alternative particularly for largerIAMs. Through acquisition, the latter strivetowardsaconsolidationoftheindustry.
Figure�:
Assessmentofstrategicimportanceofspecificgrowthdrivers
ABB 01
ABB 02
Region Responses Return rate
German-speaking Switzerland 233 24.3 %
French-speaking Switzerland 54 15.7 %
Italian-speaking Switzerland 18 20.2 %
Total Switzerland 305 21.9 %
ABB 04
ABB 05
ABB 06
ABB 03
Client advisory
Customer relationship management
Asset allocation
Personality of employee
Absolute performance
Cost/income structure
Acquisition of new clients
Relative performance
Psychological capabilities
Product creation
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
1.5
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
2.0 2.5 … 5 = less loyal1 = loyal
100 %
80 %
60 %
40 %
20 %
0 %
ABB080 % 20 % 40 % 60 % 80 % 100 %
Acquisition of other IAM
ABB 07
0 % 20 % 40 % 60 % 80 % 100 %
Negotiation skills
Foreign clients
Swiss clients
ABB 11
2004 2007 2010
8
6
4
2
0
Other Swiss bank
Major Swiss bank
IAM with no. of personnel = 1
IAM with no. of personnel > 1
Other (as applicable): USA ø 2.375 (8 mentions)
Asia ø 2.1 (5 mentions)
South America ø 1.2 (5 mentions)
Middle-East ø 2.25 (4 mentions)Current value Projected value in 3 years
Number of answers “high”
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Financial knowledge
Information needs
Price sensitivity
Performance awareness
Acquisition of new clients
Cross-selling
Increase in “Share of Wallet”
ABB 090 % 20 % 40 % 60 % 80 % 100 %
Personnel recruitment
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Critical size
Costs
Market saturation
ABB14
0 % 20 % 40 % 60 % 80 % 100 %
Banks
< 2 employees
2 to < 5 employees
5 and more employees
Very important
Important
Unimportant
Individuals
Strategic investors
Financial investors
Other IAMs
ABB 13
30 %
Regulations
2004
2007
2010
Net new money
Critical size
Back-up person
Costs
Investment performance
Market conditions
Growth in general
Succession
Yields
ABB 100 % 20 % 40 % 60 %
< 2 employees
2 to < 5 employees
5 and more employees
Administration
Asset management
Efficiency ratio (right scale)
Over-proportional to the market
Proportional to the market
Under-proportional to the market
Total market
ABB 12
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
100 %
80 %
60 %
40 %
20 %
0 %
8.0 % -5.3 %
11.8 % -5.4 %
2004
2007
2010
-0.5 % -4.6 %
0 % 5 % 10 % 15 % 20 % 25 %
ABB 16
ABB 17
0 % 20 %ø 40 % 60 % 80 % 100 %
ABB15 Client trust/proximity
Less administrative effort
Minimal infrastructure
No organizational regulations
No equity capital and liquidity regulations
No minimal capital requirements
Low auditing costs
No risk distribution regulations
0 % 20 % 40 % 60 % 80 % 100 %
0
2
4
6
8
10
12
0
10
20
30
40
50
60
70
ø
AUM of institutional clients in percent (2007)
Pe
rcen
t of I
AMs
AUM of foreign clients in percent (2007)
Pe
rcen
t of I
AMs
0 % 20 % 40 % 60 % 80 % 100 %
German-speaking Switzerland
French-speaking Switzerland
Italian-speaking Switzerland
N
umbe
r of F
TEs
Ef
ficie
ncy
ratio
5 and more employees
2 to < 5 employees
< 2 employees
-3.9 %
-4.3 %
100 %
80 %
60 %
40 %
20 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
AUM of foreign clients in percent (2007)
AU
M o
f ins
titut
iona
l clie
nts
in p
erce
nt (2
007)
46 %
38 %
16 %
77 %
75 %
73 %
71 %
69 %
67 %
Institutional clients
Private clients
Swiss clients
European clients
Other clients
Top clients
Small clients
Institutional clients
Private clients
12
A particular threat to the sustainablegrowthoftheindustryappearstobethedif-ficultyofdrawingtalentwithattractivewor-king conditions and pecuniary incentives,andbeingable tokeep them (cf. Figure9).However,thiscouldbeacyclicalphenome-nonas thealternativeemployer–thebank–iscurrentlyinapositiontomakeveryat-tractive remuneration packages due to theexcellentdevelopmentofstockmarkets.
Perceived market saturation is deemedan indicator foranemergingconsolidation.
Additionally,theperceivedzenithwhichtheSwissfinancialcentreseesinitsskillinat-tractingforeignmoneywouldmakeitselffeltonthemarket(cf.alsoFigure12).
Also striking is that critical size isper-ceivedasagrowthimpediment.Investmentswhichwouldinmanycasesbenecessaryfora growth strategy do not seem financiallyviable formany IAMs. Seen from this per-spective,providerswiththeadvantageofsizecouldtapintoattractivegrowthpotential.
Figure9:
AssessmentoftherelevanceofcertaingrowthimpedimentsfortheindividualIAMs
ABB 01
ABB 02
Region Responses Return rate
German-speaking Switzerland 233 24.3 %
French-speaking Switzerland 54 15.7 %
Italian-speaking Switzerland 18 20.2 %
Total Switzerland 305 21.9 %
ABB 04
ABB 05
ABB 06
ABB 03
Client advisory
Customer relationship management
Asset allocation
Personality of employee
Absolute performance
Cost/income structure
Acquisition of new clients
Relative performance
Psychological capabilities
Product creation
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
1.5
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
2.0 2.5 … 5 = less loyal1 = loyal
100 %
80 %
60 %
40 %
20 %
0 %
ABB080 % 20 % 40 % 60 % 80 % 100 %
Acquisition of other IAM
ABB 07
0 % 20 % 40 % 60 % 80 % 100 %
Negotiation skills
Foreign clients
Swiss clients
ABB 11
2004 2007 2010
8
6
4
2
0
Other Swiss bank
Major Swiss bank
IAM with no. of personnel = 1
IAM with no. of personnel > 1
Other (as applicable): USA ø 2.375 (8 mentions)
Asia ø 2.1 (5 mentions)
South America ø 1.2 (5 mentions)
Middle-East ø 2.25 (4 mentions)Current value Projected value in 3 years
Number of answers “high”
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Financial knowledge
Information needs
Price sensitivity
Performance awareness
Acquisition of new clients
Cross-selling
Increase in “Share of Wallet”
ABB 090 % 20 % 40 % 60 % 80 % 100 %
Personnel recruitment
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Critical size
Costs
Market saturation
ABB14
0 % 20 % 40 % 60 % 80 % 100 %
Banks
< 2 employees
2 to < 5 employees
5 and more employees
Very important
Important
Unimportant
Individuals
Strategic investors
Financial investors
Other IAMs
ABB 13
30 %
Regulations
2004
2007
2010
Net new money
Critical size
Back-up person
Costs
Investment performance
Market conditions
Growth in general
Succession
Yields
ABB 100 % 20 % 40 % 60 %
< 2 employees
2 to < 5 employees
5 and more employees
Administration
Asset management
Efficiency ratio (right scale)
Over-proportional to the market
Proportional to the market
Under-proportional to the market
Total market
ABB 12
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
100 %
80 %
60 %
40 %
20 %
0 %
8.0 % -5.3 %
11.8 % -5.4 %
2004
2007
2010
-0.5 % -4.6 %
0 % 5 % 10 % 15 % 20 % 25 %
ABB 16
ABB 17
0 % 20 %ø 40 % 60 % 80 % 100 %
ABB15 Client trust/proximity
Less administrative effort
Minimal infrastructure
No organizational regulations
No equity capital and liquidity regulations
No minimal capital requirements
Low auditing costs
No risk distribution regulations
0 % 20 % 40 % 60 % 80 % 100 %
0
2
4
6
8
10
12
0
10
20
30
40
50
60
70
ø
AUM of institutional clients in percent (2007)
Pe
rcen
t of I
AMs
AUM of foreign clients in percent (2007)
Pe
rcen
t of I
AMs
0 % 20 % 40 % 60 % 80 % 100 %
German-speaking Switzerland
French-speaking Switzerland
Italian-speaking Switzerland
N
umbe
r of F
TEs
Ef
ficie
ncy
ratio
5 and more employees
2 to < 5 employees
< 2 employees
-3.9 %
-4.3 %
100 %
80 %
60 %
40 %
20 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
AUM of foreign clients in percent (2007)
AU
M o
f ins
titut
iona
l clie
nts
in p
erce
nt (2
007)
46 %
38 %
16 %
77 %
75 %
73 %
71 %
69 %
67 %
Institutional clients
Private clients
Swiss clients
European clients
Other clients
Top clients
Small clients
Institutional clients
Private clients
13
A large number of respondents see agrowingdemandforindependentassetma-nagement in Switzerland from private cli-ents.Latentmarketpotentialhasevidentlybeendetected.Growthopportunitiesarecer-tainly identifiable;however, itwouldseemthatitislargeIAMsinparticularwhothinktheirskillssufficienttobeabletoseizetheseopportunities. These IAMs are thus expec-tingabove-averagegrowth.SmallIAMs,ontheotherhand,assesstheirgrowthpotentialmuchmorepessimisticallyandassumelessthanaveragegrowth(cf.Figure10).
Adichotomousdevelopmentwouldap-pear to result: Small companies will staysmallandlargecompanieswillbecomelar-ger. It is important to note, however, thatthe nature of asset management enablesexistencewithoutgrowth.Thisisduetothespecialpricemodel(fixedfeedependentonportfoliovolume)whichguaranteesacons-tantsourceofincome.ThereforegrowthintheIAMindustryisnotasvitalasinothersectorsaslongasaminimalclientvolumeisreached.
Figure10:
AssessmentofgrowthintheindividualIAMsincomparisontoentiremarket
ABB 01
ABB 02
Region Responses Return rate
German-speaking Switzerland 233 24.3 %
French-speaking Switzerland 54 15.7 %
Italian-speaking Switzerland 18 20.2 %
Total Switzerland 305 21.9 %
ABB 04
ABB 05
ABB 06
ABB 03
Client advisory
Customer relationship management
Asset allocation
Personality of employee
Absolute performance
Cost/income structure
Acquisition of new clients
Relative performance
Psychological capabilities
Product creation
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
1.5
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
2.0 2.5 … 5 = less loyal1 = loyal
100 %
80 %
60 %
40 %
20 %
0 %
ABB080 % 20 % 40 % 60 % 80 % 100 %
Acquisition of other IAM
ABB 07
0 % 20 % 40 % 60 % 80 % 100 %
Negotiation skills
Foreign clients
Swiss clients
ABB 11
2004 2007 2010
8
6
4
2
0
Other Swiss bank
Major Swiss bank
IAM with no. of personnel = 1
IAM with no. of personnel > 1
Other (as applicable): USA ø 2.375 (8 mentions)
Asia ø 2.1 (5 mentions)
South America ø 1.2 (5 mentions)
Middle-East ø 2.25 (4 mentions)Current value Projected value in 3 years
Number of answers “high”
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Financial knowledge
Information needs
Price sensitivity
Performance awareness
Acquisition of new clients
Cross-selling
Increase in “Share of Wallet”
ABB 090 % 20 % 40 % 60 % 80 % 100 %
Personnel recruitment
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Critical size
Costs
Market saturation
ABB14
0 % 20 % 40 % 60 % 80 % 100 %
Banks
< 2 employees
2 to < 5 employees
5 and more employees
Very important
Important
Unimportant
Individuals
Strategic investors
Financial investors
Other IAMs
ABB 13
30 %
Regulations
2004
2007
2010
Net new money
Critical size
Back-up person
Costs
Investment performance
Market conditions
Growth in general
Succession
Yields
ABB 100 % 20 % 40 % 60 %
< 2 employees
2 to < 5 employees
5 and more employees
Administration
Asset management
Efficiency ratio (right scale)
Over-proportional to the market
Proportional to the market
Under-proportional to the market
Total market
ABB 12
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
100 %
80 %
60 %
40 %
20 %
0 %
8.0 % -5.3 %
11.8 % -5.4 %
2004
2007
2010
-0.5 % -4.6 %
0 % 5 % 10 % 15 % 20 % 25 %
ABB 16
ABB 17
0 % 20 %ø 40 % 60 % 80 % 100 %
ABB15 Client trust/proximity
Less administrative effort
Minimal infrastructure
No organizational regulations
No equity capital and liquidity regulations
No minimal capital requirements
Low auditing costs
No risk distribution regulations
0 % 20 % 40 % 60 % 80 % 100 %
0
2
4
6
8
10
12
0
10
20
30
40
50
60
70
ø
AUM of institutional clients in percent (2007)
Pe
rcen
t of I
AMs
AUM of foreign clients in percent (2007)
Pe
rcen
t of I
AMs
0 % 20 % 40 % 60 % 80 % 100 %
German-speaking Switzerland
French-speaking Switzerland
Italian-speaking Switzerland
N
umbe
r of F
TEs
Ef
ficie
ncy
ratio
5 and more employees
2 to < 5 employees
< 2 employees
-3.9 %
-4.3 %
100 %
80 %
60 %
40 %
20 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
AUM of foreign clients in percent (2007)
AU
M o
f ins
titut
iona
l clie
nts
in p
erce
nt (2
007)
46 %
38 %
16 %
77 %
75 %
73 %
71 %
69 %
67 %
Institutional clients
Private clients
Swiss clients
European clients
Other clients
Top clients
Small clients
Institutional clients
Private clients
INDEPENDENT ASSET MANAGERS IN SWITZERLAND TREND REPORT 2007 -2010
Growth
Itmustcomeasasurprisetotheindustrytodiscoverthatthemostsignificantantici-pated increase in personnel is expected inadministration(particularlyregulation)andonlytoasmallextentinassetmanagement(cf. Figure 11). Such a developmentwouldrather result in a significant worsening of
IAM operating efficiency and thereforeunderpinstheapprehensionthatincreasingregulationwould increase (administrative)costs. The industry assumes that in 2010an IAM has on average 6.7 employees(FTEs) of which 4.� employees (FTEs) arecrediteddirectlytoassetmanagement.
Figure11:
DevelopmentofnumberofemployeesandoperatingefficiencyofanaverageIAM(FTE:Fulltimeequivalent)
ABB 01
ABB 02
Region Responses Return rate
German-speaking Switzerland 233 24.3 %
French-speaking Switzerland 54 15.7 %
Italian-speaking Switzerland 18 20.2 %
Total Switzerland 305 21.9 %
ABB 04
ABB 05
ABB 06
ABB 03
Client advisory
Customer relationship management
Asset allocation
Personality of employee
Absolute performance
Cost/income structure
Acquisition of new clients
Relative performance
Psychological capabilities
Product creation
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
1.5
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
2.0 2.5 … 5 = less loyal1 = loyal
100 %
80 %
60 %
40 %
20 %
0 %
ABB080 % 20 % 40 % 60 % 80 % 100 %
Acquisition of other IAM
ABB 07
0 % 20 % 40 % 60 % 80 % 100 %
Negotiation skills
Foreign clients
Swiss clients
ABB 11
2004 2007 2010
8
6
4
2
0
Other Swiss bank
Major Swiss bank
IAM with no. of personnel = 1
IAM with no. of personnel > 1
Other (as applicable): USA ø 2.375 (8 mentions)
Asia ø 2.1 (5 mentions)
South America ø 1.2 (5 mentions)
Middle-East ø 2.25 (4 mentions)Current value Projected value in 3 years
Number of answers “high”
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Financial knowledge
Information needs
Price sensitivity
Performance awareness
Acquisition of new clients
Cross-selling
Increase in “Share of Wallet”
ABB 090 % 20 % 40 % 60 % 80 % 100 %
Personnel recruitment
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Critical size
Costs
Market saturation
ABB14
0 % 20 % 40 % 60 % 80 % 100 %
Banks
< 2 employees
2 to < 5 employees
5 and more employees
Very important
Important
Unimportant
Individuals
Strategic investors
Financial investors
Other IAMs
ABB 13
30 %
Regulations
2004
2007
2010
Net new money
Critical size
Back-up person
Costs
Investment performance
Market conditions
Growth in general
Succession
Yields
ABB 100 % 20 % 40 % 60 %
< 2 employees
2 to < 5 employees
5 and more employees
Administration
Asset management
Efficiency ratio (right scale)
Over-proportional to the market
Proportional to the market
Under-proportional to the market
Total market
ABB 12
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
100 %
80 %
60 %
40 %
20 %
0 %
8.0 % -5.3 %
11.8 % -5.4 %
2004
2007
2010
-0.5 % -4.6 %
0 % 5 % 10 % 15 % 20 % 25 %
ABB 16
ABB 17
0 % 20 %ø 40 % 60 % 80 % 100 %
ABB15 Client trust/proximity
Less administrative effort
Minimal infrastructure
No organizational regulations
No equity capital and liquidity regulations
No minimal capital requirements
Low auditing costs
No risk distribution regulations
0 % 20 % 40 % 60 % 80 % 100 %
0
2
4
6
8
10
12
0
10
20
30
40
50
60
70
ø
AUM of institutional clients in percent (2007)
Pe
rcen
t of I
AMs
AUM of foreign clients in percent (2007)
Pe
rcen
t of I
AMs
0 % 20 % 40 % 60 % 80 % 100 %
German-speaking Switzerland
French-speaking Switzerland
Italian-speaking Switzerland
N
umbe
r of F
TEs
Ef
ficie
ncy
ratio
5 and more employees
2 to < 5 employees
< 2 employees
-3.9 %
-4.3 %
100 %
80 %
60 %
40 %
20 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
AUM of foreign clients in percent (2007)
AU
M o
f ins
titut
iona
l clie
nts
in p
erce
nt (2
007)
46 %
38 %
16 %
77 %
75 %
73 %
71 %
69 %
67 %
Institutional clients
Private clients
Swiss clients
European clients
Other clients
Top clients
Small clients
Institutional clients
Private clients
14
15
Ofparamountimportanceforthefinan-cialcentrearequestionsrelatingtothede-velopmentoftheforeignclientsegment.Fi-gure12illustratesthisimportanceforIAMs,although also here one cannot speak of ahomogenousindustry–thereareIAMsforwhichthenumberofforeignclientsisofnoimportance(cf.Figure17,Appendix).
IAMs in the Italian-speaking part ofSwitzerlandareparticularlydependentonfo-reignmoney.Here90%ofclientscomefromoutsideSwitzerland.Strikingisthereforethatonewouldgenerallyanticipateareductioninthe importanceof foreignclients.Althoughthis should not lead directly to a drain onfunds, a continuous inflow of money fromabroadcannolongerbeexpected.
Figure12:
DevelopmentofforeignAUMagainstentireAUMofanaverageIAM
ABB 01
ABB 02
Region Responses Return rate
German-speaking Switzerland 233 24.3 %
French-speaking Switzerland 54 15.7 %
Italian-speaking Switzerland 18 20.2 %
Total Switzerland 305 21.9 %
ABB 04
ABB 05
ABB 06
ABB 03
Client advisory
Customer relationship management
Asset allocation
Personality of employee
Absolute performance
Cost/income structure
Acquisition of new clients
Relative performance
Psychological capabilities
Product creation
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
1.5
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
2.0 2.5 … 5 = less loyal1 = loyal
100 %
80 %
60 %
40 %
20 %
0 %
ABB080 % 20 % 40 % 60 % 80 % 100 %
Acquisition of other IAM
ABB 07
0 % 20 % 40 % 60 % 80 % 100 %
Negotiation skills
Foreign clients
Swiss clients
ABB 11
2004 2007 2010
8
6
4
2
0
Other Swiss bank
Major Swiss bank
IAM with no. of personnel = 1
IAM with no. of personnel > 1
Other (as applicable): USA ø 2.375 (8 mentions)
Asia ø 2.1 (5 mentions)
South America ø 1.2 (5 mentions)
Middle-East ø 2.25 (4 mentions)Current value Projected value in 3 years
Number of answers “high”
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Financial knowledge
Information needs
Price sensitivity
Performance awareness
Acquisition of new clients
Cross-selling
Increase in “Share of Wallet”
ABB 090 % 20 % 40 % 60 % 80 % 100 %
Personnel recruitment
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Critical size
Costs
Market saturation
ABB14
0 % 20 % 40 % 60 % 80 % 100 %
Banks
< 2 employees
2 to < 5 employees
5 and more employees
Very important
Important
Unimportant
Individuals
Strategic investors
Financial investors
Other IAMs
ABB 13
30 %
Regulations
2004
2007
2010
Net new money
Critical size
Back-up person
Costs
Investment performance
Market conditions
Growth in general
Succession
Yields
ABB 100 % 20 % 40 % 60 %
< 2 employees
2 to < 5 employees
5 and more employees
Administration
Asset management
Efficiency ratio (right scale)
Over-proportional to the market
Proportional to the market
Under-proportional to the market
Total market
ABB 12
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
100 %
80 %
60 %
40 %
20 %
0 %
8.0 % -5.3 %
11.8 % -5.4 %
2004
2007
2010
-0.5 % -4.6 %
0 % 5 % 10 % 15 % 20 % 25 %
ABB 16
ABB 17
0 % 20 %ø 40 % 60 % 80 % 100 %
ABB15 Client trust/proximity
Less administrative effort
Minimal infrastructure
No organizational regulations
No equity capital and liquidity regulations
No minimal capital requirements
Low auditing costs
No risk distribution regulations
0 % 20 % 40 % 60 % 80 % 100 %
0
2
4
6
8
10
12
0
10
20
30
40
50
60
70
ø
AUM of institutional clients in percent (2007)
Pe
rcen
t of I
AMs
AUM of foreign clients in percent (2007)
Pe
rcen
t of I
AMs
0 % 20 % 40 % 60 % 80 % 100 %
German-speaking Switzerland
French-speaking Switzerland
Italian-speaking Switzerland
N
umbe
r of F
TEs
Ef
ficie
ncy
ratio
5 and more employees
2 to < 5 employees
< 2 employees
-3.9 %
-4.3 %
100 %
80 %
60 %
40 %
20 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
AUM of foreign clients in percent (2007)
AU
M o
f ins
titut
iona
l clie
nts
in p
erce
nt (2
007)
46 %
38 %
16 %
77 %
75 %
73 %
71 %
69 %
67 %
Institutional clients
Private clients
Swiss clients
European clients
Other clients
Top clients
Small clients
Institutional clients
Private clients
ThisdevelopmenthitsIAMsharder,forinstance,thanthebankingworld.Thelattermake up for part of these losses with on-shoreactivitiesinthehomemarketsofcli-ents.Inthiscasethelackofsizeisfatalfor
IAMs:Expansionstrategiesabroadwiththeassociatedcostsandenormousrisksarenotwithinthereachofmostcompanies.
INDEPENDENT ASSET MANAGERS IN SWITZERLAND TREND REPORT 2007 -2010
Growth
Trends
Issues thatwill increasinglyattract theattentionof IAMs in thecomingyearsareclearly identifiable: Regulation, costs andsuccession.
Theregulatoryaspectisdoubtlessclose-lyconnectedtothecostissue,wherebythelatter is intensifiedbydevelopments in IT.Many IAMsmayhavedelayedmaking thenecessary investments (even a Web pres-ence,nowconsideredanecessity,isfarfromprofessional formost IAMs) and are facedwith significant investments. For portfoliomanagement, reportingoronlineaccess toaccounts, technically mature solutions areavailableandexpectedbyclientsbutrequiremassive investment. Additionally, multifa-cetedsolutions for theentireareaofbusi-nessprocessoutsourcingareavailabletodaywhich, however, would require long-termplanning(whetherallIAMshavetheneces-sarytimelefttoamortizesuchinvestmentsisdoubtful).Oneshouldalsonotdisregardthestealthydevelopmentofincreasingcom-plexity inproducts, systemsandsolutions,whichleadtosustainedcostpressure.
Regulation is still considered a stumb-lingblockby IAMsand the restof thefi-nancial sector. Three quarters of IAMs as-sumethattheindustrywilllosesomeofitsattractionbecauseoffurtherregulationover
thenextyears.Thefactthatrequirementsinthis areahave increasedover thepast fewyearsshouldnotbedismissed.However,oneshouldnotdisregard the fact that thishasalsooccurredtoprotect the industry itself.Acertainamountofdiscomfortisunavoid-able. Important seems that the surge inregulationshouldnotbecomeapermanentcondition.Anaccentuation in the increaseofregulatoryrequirementscarriesthedan-gerthattheIAMbusinessbecomeslastinglyunattractive. The authors detect sensitivityintheregulatorstotheseproblems;howeverrespondentsviewthis(still)asdoubtful.
Figure13showsanoverviewofthemostfrequentlynamedproblemsintheindustryovertime.Tokeepthebalancebetweentheoptimistsandpessimists,respondentswhereaskedtonamethreeissuesforeachyeargi-ven.Regulationiscurrentlythemostpres-singsubject.Theindustryalsoassumesthatthe problem will not lessen over the nextthreeyearswhichisthecase,forexample,forcriticalsize.
16
17
Figure13:
OverviewofcertainproblemsandchallengesintheIAMindustryovertime
ABB 01
ABB 02
Region Responses Return rate
German-speaking Switzerland 233 24.3 %
French-speaking Switzerland 54 15.7 %
Italian-speaking Switzerland 18 20.2 %
Total Switzerland 305 21.9 %
ABB 04
ABB 05
ABB 06
ABB 03
Client advisory
Customer relationship management
Asset allocation
Personality of employee
Absolute performance
Cost/income structure
Acquisition of new clients
Relative performance
Psychological capabilities
Product creation
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
1.5
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
2.0 2.5 … 5 = less loyal1 = loyal
100 %
80 %
60 %
40 %
20 %
0 %
ABB080 % 20 % 40 % 60 % 80 % 100 %
Acquisition of other IAM
ABB 07
0 % 20 % 40 % 60 % 80 % 100 %
Negotiation skills
Foreign clients
Swiss clients
ABB 11
2004 2007 2010
8
6
4
2
0
Other Swiss bank
Major Swiss bank
IAM with no. of personnel = 1
IAM with no. of personnel > 1
Other (as applicable): USA ø 2.375 (8 mentions)
Asia ø 2.1 (5 mentions)
South America ø 1.2 (5 mentions)
Middle-East ø 2.25 (4 mentions)Current value Projected value in 3 years
Number of answers “high”
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Financial knowledge
Information needs
Price sensitivity
Performance awareness
Acquisition of new clients
Cross-selling
Increase in “Share of Wallet”
ABB 090 % 20 % 40 % 60 % 80 % 100 %
Personnel recruitment
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Critical size
Costs
Market saturation
ABB14
0 % 20 % 40 % 60 % 80 % 100 %
Banks
< 2 employees
2 to < 5 employees
5 and more employees
Very important
Important
Unimportant
Individuals
Strategic investors
Financial investors
Other IAMs
ABB 13
30 %
Regulations
2004
2007
2010
Net new money
Critical size
Back-up person
Costs
Investment performance
Market conditions
Growth in general
Succession
Yields
ABB 100 % 20 % 40 % 60 %
< 2 employees
2 to < 5 employees
5 and more employees
Administration
Asset management
Efficiency ratio (right scale)
Over-proportional to the market
Proportional to the market
Under-proportional to the market
Total market
ABB 12
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
100 %
80 %
60 %
40 %
20 %
0 %
8.0 % -5.3 %
11.8 % -5.4 %
2004
2007
2010
-0.5 % -4.6 %
0 % 5 % 10 % 15 % 20 % 25 %
ABB 16
ABB 17
0 % 20 %ø 40 % 60 % 80 % 100 %
ABB15 Client trust/proximity
Less administrative effort
Minimal infrastructure
No organizational regulations
No equity capital and liquidity regulations
No minimal capital requirements
Low auditing costs
No risk distribution regulations
0 % 20 % 40 % 60 % 80 % 100 %
0
2
4
6
8
10
12
0
10
20
30
40
50
60
70
ø
AUM of institutional clients in percent (2007)
Pe
rcen
t of I
AMs
AUM of foreign clients in percent (2007)
Pe
rcen
t of I
AMs
0 % 20 % 40 % 60 % 80 % 100 %
German-speaking Switzerland
French-speaking Switzerland
Italian-speaking Switzerland
N
umbe
r of F
TEs
Ef
ficie
ncy
ratio
5 and more employees
2 to < 5 employees
< 2 employees
-3.9 %
-4.3 %
100 %
80 %
60 %
40 %
20 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
AUM of foreign clients in percent (2007)
AU
M o
f ins
titut
iona
l clie
nts
in p
erce
nt (2
007)
46 %
38 %
16 %
77 %
75 %
73 %
71 %
69 %
67 %
Institutional clients
Private clients
Swiss clients
European clients
Other clients
Top clients
Small clients
Institutional clients
Private clients
INDEPENDENT ASSET MANAGERS IN SWITZERLAND TREND REPORT 2007 -2010
1�
Looking back in time shows that newmoneyand investmentperformance in theyearsfollowingtheInternetbubblewerethedominantissues.Theextremelypoorperfor-mancefiguresduringthistimenotonlyledtoageneraldisgruntlementinclients.Froma psychological perspective, the problemswere also a challenge for asset managersbecause of their close relationship to theirclients.Newmoneyacquisitionwas extre-mely difficult in this phase (as it was fortheentirefinancialsector)andtheprospectof new clients was overshadowed. Invest-mentperformanceisnotcurrentlyanissue(hardlysurprisinginoneofthelongestbullmarketsofthelastfewdecades),butwillofcoursequicklyreappearinworseningmar-ketconditions.
Succession is the real “leader” of theproblem areas. In the coming three years,thisaspectisoneoftheseriouschallenges.Inanindustrystronglycharacterizedbyin-dividuals,wheretheproblemofsuccessionposesa“natural”challenge,itisonlysurpri-singthattheproblemwasnotconsideredan
issueearlier.Towhatextentapsychologicalcrowding-outeffectplaysarolecanonlybeguessedat.
Thefactisthatthisproblemisonacol-lisioncoursewiththeindustryandwillleadtoafundamentalchangeinitsstructure.Astheproblemofsuccessionwillsoonaccumu-lateintheindustry,earlysolutionstothesequestions will bring important advantagesto“earlymovers”:Whathappensonmarketswheneveryonewantstousethesamedooratthesametimeisplainlydemonstratedtoinvestorstimeandtimeagain.
19
INDEPENDENT ASSET MANAGERS IN SWITZERLAND TREND REPORT 2007 -2010
Trends
Figure14:
OverviewofpreferredbuyersbysizeofindividualIAM
ABB 01
ABB 02
Region Responses Return rate
German-speaking Switzerland 233 24.3 %
French-speaking Switzerland 54 15.7 %
Italian-speaking Switzerland 18 20.2 %
Total Switzerland 305 21.9 %
ABB 04
ABB 05
ABB 06
ABB 03
Client advisory
Customer relationship management
Asset allocation
Personality of employee
Absolute performance
Cost/income structure
Acquisition of new clients
Relative performance
Psychological capabilities
Product creation
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
1.5
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
2.0 2.5 … 5 = less loyal1 = loyal
100 %
80 %
60 %
40 %
20 %
0 %
ABB080 % 20 % 40 % 60 % 80 % 100 %
Acquisition of other IAM
ABB 07
0 % 20 % 40 % 60 % 80 % 100 %
Negotiation skills
Foreign clients
Swiss clients
ABB 11
2004 2007 2010
8
6
4
2
0
Other Swiss bank
Major Swiss bank
IAM with no. of personnel = 1
IAM with no. of personnel > 1
Other (as applicable): USA ø 2.375 (8 mentions)
Asia ø 2.1 (5 mentions)
South America ø 1.2 (5 mentions)
Middle-East ø 2.25 (4 mentions)Current value Projected value in 3 years
Number of answers “high”
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Financial knowledge
Information needs
Price sensitivity
Performance awareness
Acquisition of new clients
Cross-selling
Increase in “Share of Wallet”
ABB 090 % 20 % 40 % 60 % 80 % 100 %
Personnel recruitment
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Critical size
Costs
Market saturation
ABB14
0 % 20 % 40 % 60 % 80 % 100 %
Banks
< 2 employees
2 to < 5 employees
5 and more employees
Very important
Important
Unimportant
Individuals
Strategic investors
Financial investors
Other IAMs
ABB 13
30 %
Regulations
2004
2007
2010
Net new money
Critical size
Back-up person
Costs
Investment performance
Market conditions
Growth in general
Succession
Yields
ABB 100 % 20 % 40 % 60 %
< 2 employees
2 to < 5 employees
5 and more employees
Administration
Asset management
Efficiency ratio (right scale)
Over-proportional to the market
Proportional to the market
Under-proportional to the market
Total market
ABB 12
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
100 %
80 %
60 %
40 %
20 %
0 %
8.0 % -5.3 %
11.8 % -5.4 %
2004
2007
2010
-0.5 % -4.6 %
0 % 5 % 10 % 15 % 20 % 25 %
ABB 16
ABB 17
0 % 20 %ø 40 % 60 % 80 % 100 %
ABB15 Client trust/proximity
Less administrative effort
Minimal infrastructure
No organizational regulations
No equity capital and liquidity regulations
No minimal capital requirements
Low auditing costs
No risk distribution regulations
0 % 20 % 40 % 60 % 80 % 100 %
0
2
4
6
8
10
12
0
10
20
30
40
50
60
70
ø
AUM of institutional clients in percent (2007)
Pe
rcen
t of I
AMs
AUM of foreign clients in percent (2007)
Pe
rcen
t of I
AMs
0 % 20 % 40 % 60 % 80 % 100 %
German-speaking Switzerland
French-speaking Switzerland
Italian-speaking Switzerland
N
umbe
r of F
TEs
Ef
ficie
ncy
ratio
5 and more employees
2 to < 5 employees
< 2 employees
-3.9 %
-4.3 %
100 %
80 %
60 %
40 %
20 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
AUM of foreign clients in percent (2007)
AU
M o
f ins
titut
iona
l clie
nts
in p
erce
nt (2
007)
46 %
38 %
16 %
77 %
75 %
73 %
71 %
69 %
67 %
Institutional clients
Private clients
Swiss clients
European clients
Other clients
Top clients
Small clients
Institutional clients
Private clients
Asregardsthenotionofanidealorsui-tablebuyerforindependentassetmanagers,it can be seen that with small companiesemotionalreasonsareoftendominant,orthatholdingontoconventionalbusinessstrate-gies is a priority. These companies there-fore prefer individuals or other IAMs asbuyers. This stands in contrastwith larger
companieswhofavorbanksorstrategicin-vestors.Figure14showsthetypeofsucces-sorpreferredbytheindividualcompanies.
20
The industry is therefore looking to-wards a phase of increasing competition,competitionwhichwillprobably intensifyassoonas thecurrentstabilityoncapitalmarketsdecreases.Thequestionofcriticalcompanysizeinthefutureispossiblymorecomplexthanevenindustryrepresentativesanticipate.Thetrendheretoanincreaseincriticalcompanysizeshouldevolveoutoftheoperatingconstantsjustwiththeincre-ase in fix costs. However, striking is thatamongst the IAMs heterogeneous modelsdoexist.
Incertaincases,itseemsthatitissmallstructures which are most efficient. Thus,theIAMindustryisrathercharacterizedbyadichotomoustendencyof“awayfromthemiddle”.Ontheonehand,thiswouldspeakin favorofacontinuationof small struc-turesand,ontheotherhand,foranincre-aseinsizeformiddle-sizedstructures.Theanticipatedconsolidationwouldthencomeaboutformiddle-sizedIAMsinparticular.
21
INDEPENDENT ASSET MANAGERS IN SWITZERLAND TREND REPORT 2007 -2010
Regulation
Regulation has emerged as the largestcurrentproblemareaforIAMs.Forthisre-ason,anumberofmoredetailedquestionswereasked.Ofparticularinterestistowhatextendtheadvantagesordisadvantagesofalternativesareassessed,e.g. thechoiceofsecuritiesdealerstatus(thestatusclosesttothatoftheIAM).Inprinciplethemaindif-ferenceincomparisonwithasecuritiesdea-lerisseenasthemoreintenserelationshiptotheclientwhichisfarmoredominantinIAMs(cf.Figure15).
Thisis,however,aquestionofstrategicpositioningwhichisnotgivenpersebytheregulatorystatus.Asalsobecameclearfromotheranswersinthisstudy,theclientrela-tionship is the fundament from which theindustrytakesitsimage.
On a more factual-quantitative level,responsessuggestthattheregulatorycorsetwornbythesecuritiesdealer isnotattrac-tive for IAMs. In particular, the increasedadministrative and organizational effort isviewedasobstructive.
Figure15:
AssessmentofvariousregulatoryadvantagesoftheIAMcomparedwiththesecuritiesdealer
ABB 01
ABB 02
Region Responses Return rate
German-speaking Switzerland 233 24.3 %
French-speaking Switzerland 54 15.7 %
Italian-speaking Switzerland 18 20.2 %
Total Switzerland 305 21.9 %
ABB 04
ABB 05
ABB 06
ABB 03
Client advisory
Customer relationship management
Asset allocation
Personality of employee
Absolute performance
Cost/income structure
Acquisition of new clients
Relative performance
Psychological capabilities
Product creation
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
1.5
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
2.0 2.5 … 5 = less loyal1 = loyal
100 %
80 %
60 %
40 %
20 %
0 %
ABB080 % 20 % 40 % 60 % 80 % 100 %
Acquisition of other IAM
ABB 07
0 % 20 % 40 % 60 % 80 % 100 %
Negotiation skills
Foreign clients
Swiss clients
ABB 11
2004 2007 2010
8
6
4
2
0
Other Swiss bank
Major Swiss bank
IAM with no. of personnel = 1
IAM with no. of personnel > 1
Other (as applicable): USA ø 2.375 (8 mentions)
Asia ø 2.1 (5 mentions)
South America ø 1.2 (5 mentions)
Middle-East ø 2.25 (4 mentions)Current value Projected value in 3 years
Number of answers “high”
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Financial knowledge
Information needs
Price sensitivity
Performance awareness
Acquisition of new clients
Cross-selling
Increase in “Share of Wallet”
ABB 090 % 20 % 40 % 60 % 80 % 100 %
Personnel recruitment
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Critical size
Costs
Market saturation
ABB14
0 % 20 % 40 % 60 % 80 % 100 %
Banks
< 2 employees
2 to < 5 employees
5 and more employees
Very important
Important
Unimportant
Individuals
Strategic investors
Financial investors
Other IAMs
ABB 13
30 %
Regulations
2004
2007
2010
Net new money
Critical size
Back-up person
Costs
Investment performance
Market conditions
Growth in general
Succession
Yields
ABB 100 % 20 % 40 % 60 %
< 2 employees
2 to < 5 employees
5 and more employees
Administration
Asset management
Efficiency ratio (right scale)
Over-proportional to the market
Proportional to the market
Under-proportional to the market
Total market
ABB 12
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
100 %
80 %
60 %
40 %
20 %
0 %
8.0 % -5.3 %
11.8 % -5.4 %
2004
2007
2010
-0.5 % -4.6 %
0 % 5 % 10 % 15 % 20 % 25 %
ABB 16
ABB 17
0 % 20 %ø 40 % 60 % 80 % 100 %
ABB15 Client trust/proximity
Less administrative effort
Minimal infrastructure
No organizational regulations
No equity capital and liquidity regulations
No minimal capital requirements
Low auditing costs
No risk distribution regulations
0 % 20 % 40 % 60 % 80 % 100 %
0
2
4
6
8
10
12
0
10
20
30
40
50
60
70
ø
AUM of institutional clients in percent (2007)
Pe
rcen
t of I
AMs
AUM of foreign clients in percent (2007)
Pe
rcen
t of I
AMs
0 % 20 % 40 % 60 % 80 % 100 %
German-speaking Switzerland
French-speaking Switzerland
Italian-speaking Switzerland
N
umbe
r of F
TEs
Ef
ficie
ncy
ratio
5 and more employees
2 to < 5 employees
< 2 employees
-3.9 %
-4.3 %
100 %
80 %
60 %
40 %
20 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
AUM of foreign clients in percent (2007)
AU
M o
f ins
titut
iona
l clie
nts
in p
erce
nt (2
007)
46 %
38 %
16 %
77 %
75 %
73 %
71 %
69 %
67 %
Institutional clients
Private clients
Swiss clients
European clients
Other clients
Top clients
Small clients
Institutional clients
Private clients
22
Itisthereforehardlysurprisingthatonly5%of IAMswouldconsider thepossibilityofa change to securitiesdealer statusandonly3%thetransformationtothestatusofabank.Althoughfromaregulatorypointofview,closersupervisionappearspreferable,itcanbedeterminedthatIAMscurrentlyseenosuitableandrealisticalternativetotheirregulatory status. From a business policyperspective, the incentives fora changeofstatus seem too small: IAMs do not see abetterreputationwithclientsthroughstricter
supervisionasasecuritiesdealer.Onlybeingsubjecttothebankingandprofessionalsec-recyactandeasieraccesstoEuropeancli-entsareseenasbeingclearadvantagesforsecuritiesdealersandbanks.
23
INDEPENDENT ASSET MANAGERS IN SWITZERLAND TREND REPORT 2007 -2010
Appendix
Figure16:
DistributionofIAMsbyAUMofinstitutionalclients
ABB 01
ABB 02
Region Responses Return rate
German-speaking Switzerland 233 24.3 %
French-speaking Switzerland 54 15.7 %
Italian-speaking Switzerland 18 20.2 %
Total Switzerland 305 21.9 %
ABB 04
ABB 05
ABB 06
ABB 03
Client advisory
Customer relationship management
Asset allocation
Personality of employee
Absolute performance
Cost/income structure
Acquisition of new clients
Relative performance
Psychological capabilities
Product creation
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
1.5
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
2.0 2.5 … 5 = less loyal1 = loyal
100 %
80 %
60 %
40 %
20 %
0 %
ABB080 % 20 % 40 % 60 % 80 % 100 %
Acquisition of other IAM
ABB 07
0 % 20 % 40 % 60 % 80 % 100 %
Negotiation skills
Foreign clients
Swiss clients
ABB 11
2004 2007 2010
8
6
4
2
0
Other Swiss bank
Major Swiss bank
IAM with no. of personnel = 1
IAM with no. of personnel > 1
Other (as applicable): USA ø 2.375 (8 mentions)
Asia ø 2.1 (5 mentions)
South America ø 1.2 (5 mentions)
Middle-East ø 2.25 (4 mentions)Current value Projected value in 3 years
Number of answers “high”
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Financial knowledge
Information needs
Price sensitivity
Performance awareness
Acquisition of new clients
Cross-selling
Increase in “Share of Wallet”
ABB 090 % 20 % 40 % 60 % 80 % 100 %
Personnel recruitment
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Critical size
Costs
Market saturation
ABB14
0 % 20 % 40 % 60 % 80 % 100 %
Banks
< 2 employees
2 to < 5 employees
5 and more employees
Very important
Important
Unimportant
Individuals
Strategic investors
Financial investors
Other IAMs
ABB 13
30 %
Regulations
2004
2007
2010
Net new money
Critical size
Back-up person
Costs
Investment performance
Market conditions
Growth in general
Succession
Yields
ABB 100 % 20 % 40 % 60 %
< 2 employees
2 to < 5 employees
5 and more employees
Administration
Asset management
Efficiency ratio (right scale)
Over-proportional to the market
Proportional to the market
Under-proportional to the market
Total market
ABB 12
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
100 %
80 %
60 %
40 %
20 %
0 %
8.0 % -5.3 %
11.8 % -5.4 %
2004
2007
2010
-0.5 % -4.6 %
0 % 5 % 10 % 15 % 20 % 25 %
ABB 16
ABB 17
0 % 20 %ø 40 % 60 % 80 % 100 %
ABB15 Client trust/proximity
Less administrative effort
Minimal infrastructure
No organizational regulations
No equity capital and liquidity regulations
No minimal capital requirements
Low auditing costs
No risk distribution regulations
0 % 20 % 40 % 60 % 80 % 100 %
0
2
4
6
8
10
12
0
10
20
30
40
50
60
70
ø
AUM of institutional clients in percent (2007)
Pe
rcen
t of I
AMs
AUM of foreign clients in percent (2007)
Pe
rcen
t of I
AMs
0 % 20 % 40 % 60 % 80 % 100 %
German-speaking Switzerland
French-speaking Switzerland
Italian-speaking Switzerland
N
umbe
r of F
TEs
Ef
ficie
ncy
ratio
5 and more employees
2 to < 5 employees
< 2 employees
-3.9 %
-4.3 %
100 %
80 %
60 %
40 %
20 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
AUM of foreign clients in percent (2007)
AU
M o
f ins
titut
iona
l clie
nts
in p
erce
nt (2
007)
46 %
38 %
16 %
77 %
75 %
73 %
71 %
69 %
67 %
Institutional clients
Private clients
Swiss clients
European clients
Other clients
Top clients
Small clients
Institutional clients
Private clients
Figure17:
DistributionofIAMsbyAUMofforeignclients
ABB 01
ABB 02
Region Responses Return rate
German-speaking Switzerland 233 24.3 %
French-speaking Switzerland 54 15.7 %
Italian-speaking Switzerland 18 20.2 %
Total Switzerland 305 21.9 %
ABB 04
ABB 05
ABB 06
ABB 03
Client advisory
Customer relationship management
Asset allocation
Personality of employee
Absolute performance
Cost/income structure
Acquisition of new clients
Relative performance
Psychological capabilities
Product creation
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
1.5
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
2.0 2.5 … 5 = less loyal1 = loyal
100 %
80 %
60 %
40 %
20 %
0 %
ABB080 % 20 % 40 % 60 % 80 % 100 %
Acquisition of other IAM
ABB 07
0 % 20 % 40 % 60 % 80 % 100 %
Negotiation skills
Foreign clients
Swiss clients
ABB 11
2004 2007 2010
8
6
4
2
0
Other Swiss bank
Major Swiss bank
IAM with no. of personnel = 1
IAM with no. of personnel > 1
Other (as applicable): USA ø 2.375 (8 mentions)
Asia ø 2.1 (5 mentions)
South America ø 1.2 (5 mentions)
Middle-East ø 2.25 (4 mentions)Current value Projected value in 3 years
Number of answers “high”
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Financial knowledge
Information needs
Price sensitivity
Performance awareness
Acquisition of new clients
Cross-selling
Increase in “Share of Wallet”
ABB 090 % 20 % 40 % 60 % 80 % 100 %
Personnel recruitment
< 2 employees
2 to < 5 employees
5 and more employees
Mean
Critical size
Costs
Market saturation
ABB14
0 % 20 % 40 % 60 % 80 % 100 %
Banks
< 2 employees
2 to < 5 employees
5 and more employees
Very important
Important
Unimportant
Individuals
Strategic investors
Financial investors
Other IAMs
ABB 13
30 %
Regulations
2004
2007
2010
Net new money
Critical size
Back-up person
Costs
Investment performance
Market conditions
Growth in general
Succession
Yields
ABB 100 % 20 % 40 % 60 %
< 2 employees
2 to < 5 employees
5 and more employees
Administration
Asset management
Efficiency ratio (right scale)
Over-proportional to the market
Proportional to the market
Under-proportional to the market
Total market
ABB 12
German-speaking Switzerland French-speaking Switzerland Italian-speaking Switzerland
100 %
80 %
60 %
40 %
20 %
0 %
8.0 % -5.3 %
11.8 % -5.4 %
2004
2007
2010
-0.5 % -4.6 %
0 % 5 % 10 % 15 % 20 % 25 %
ABB 16
ABB 17
0 % 20 %ø 40 % 60 % 80 % 100 %
ABB15 Client trust/proximity
Less administrative effort
Minimal infrastructure
No organizational regulations
No equity capital and liquidity regulations
No minimal capital requirements
Low auditing costs
No risk distribution regulations
0 % 20 % 40 % 60 % 80 % 100 %
0
2
4
6
8
10
12
0
10
20
30
40
50
60
70
ø
AUM of institutional clients in percent (2007)
Pe
rcen
t of I
AMs
AUM of foreign clients in percent (2007)
Pe
rcen
t of I
AMs
0 % 20 % 40 % 60 % 80 % 100 %
German-speaking Switzerland
French-speaking Switzerland
Italian-speaking Switzerland
N
umbe
r of F
TEs
Ef
ficie
ncy
ratio
5 and more employees
2 to < 5 employees
< 2 employees
-3.9 %
-4.3 %
100 %
80 %
60 %
40 %
20 %
0 %
0 % 20 % 40 % 60 % 80 % 100 %
AUM of foreign clients in percent (2007)
AU
M o
f ins
titut
iona
l clie
nts
in p
erce
nt (2
007)
46 %
38 %
16 %
77 %
75 %
73 %
71 %
69 %
67 %
Institutional clients
Private clients
Swiss clients
European clients
Other clients
Top clients
Small clients
Institutional clients
Private clients