Financial titans defy profit pressures

One Canadian firm takes a spot among other growing industry giants

Financial titans defy profit pressures
A new report has revealed the world’s biggest wealth managers, which have grown in spite of various forces that threaten the profitability of the industry.

London-based research and consulting firm ScorpioPartnership has reported that UBS, Bank of America, Morgan Stanley, Wells Fargo and the Royal Bank of Canada (RBC) were the biggest wealth firms in the world last year, according to Financial Advisor IQ.

The Scorpio report was derived from public data on more than 200 wealth firms. The results, according to the firm, showcase how top players have “successfully navigated regulatory and political upheaval in 2016, with assets under management rising by almost 4% on average.”

Among the top 10 in Scorpio’s list, RBC experienced the fastest growth, gaining nearly 14% in assets year-on-year.

Increased efficiencies could also have played a role in the positive performance. Last year, cost-to-income ratios dropped below 80% for the first time since 2012 — a positive development Scorpio attributes to managers’ successful use of technology to defray costs “despite continued compliance pressures.”

But the firm also noted an industry-wide “struggle to improve revenues, with operating income rising just 0.04% on average” last year.

The financial industry is facing regulatory headwinds around the world. In North America, US firms are exerting efforts to comply with a fiduciary rule from the Department of Labor; those in Canada face prospects of targeted reforms, a best-interest standard, and a ban on embedded commissions.

According to Scorpio, their report highlights the importance of managing “the revenue side of the profits equation” as firms work to counter downward pressures from regulation and passive-product competition.

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