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The German market for wealth management is the largest and the most important in Europe. According to our estimates the number of high-net-worth individuals (HNWIs – individuals with a minimum of € 1 million of liquid assets) is about 290,000. This definition excludes real estate investment, which in Germany is very high (usually around two thirds of the total portfolio). The reason for this exclusion is that in this type of banking liquid assets drive profitability and we would be overstating the potential of the market if we included the real estate assets. Taking this into account, total onshore liquid wealth of German HNWIs is estimated to be around € 810bn, with another € 400bn offshore.
Tough competition
Worldwide, Germany is one of the three most important markets for private wealth management. The competition is therefore tough – around 150 namable providers exist within the market. Many of them are from abroad, especially from Switzerland and Liechtenstein. However a direct comparison of the current assets under management (AuM) and market shares is difficult: minimum reporting requirements for wealth management differ among the providers, and what they do in practice differs again. Nevertheless, we can state with confidence that none of the competitors has a two-digit share of the market. As measured by AuM the largest ten player own only about 30% plus between them. Whereas in Switzerland a minimum of € 70bn AuM is seen to be necessary for remaining competitive, in Germany many providers with AuM less than € 20bn assert themselves on the market. In addition, there are numerous independent wealth manager and several family offices.
Strong fragmentation of the market by geography and sources of wealth
A further feature to the German Wealth Management market is its strong fragmentation in terms of geography and sources of wealth (e.g. entrepreneurs in the South, trading and shipping in the North, banking in the Centre etc.). Despite this individuality there are recurrent commonalities and differences depending on region and city. HNWIs in Germany are spread throughout the country with a large part of onshore wealth in Frankfurt – according to rough estimates about 19% of the total. Most of the banks have at least subsidiaries in all the most important German cities (Hamburg, Berlin, Düsseldorf and/or Cologne, Frankfurt, Stuttgart and Munich). After all, in Germany much more of a regional presence is needed compared to other countries in Europe e.g. Switzerland, Great Britain or France.
A bottleneck of highly qualified employees
At the same time, clients everywhere request holistic, tailor-made advice. For the wealth management providers this constitutes a great challenge. For comprehensive market coverage they need an enormous number of highly qualified employees, who are few and far between. A professional qualification which guarantees certain standards found its way into wealth management just a few years ago. As a consequence the bigger the bank and the more widespread it is represented, the more it has to cut down its own quality requirements, or the more it has to invest in the qualification of its employees. Alternatively the bank can concentrate on clients who are not searching for a true wealth management service, but rather standardized portfolio management with some "extras".
To read the full article see "Handbuch Wealth Management", Gabler Verlag, September 2008, pages 12-14.
