When you're in the process of selecting the best wealth management firm to work for, one reasonable way to narrow the field is to focus on the top firms in terms of profitability. Wealth management traditionally offers a much more stable stream of revenues and profits than the rather volatile and cyclical investment banking and securities trading functions.
This listing of the top competitors in this field is ranked by the amount of pre-tax profit generated by their wealth management divisions. Although the definition of the wealth market is a highly elastic one and it can vary by firm, a generally accepted variant includes clients with at least $1 million in financial assets, but many firms set the bar lower at $250,000.
UBS generates roughly $3.5 billion in pre-tax profit from wealth management activities exclusive of extraordinary items for unauthorized trading losses. This represents over half of total pre-tax profit for the firm as a whole.
UBS is known for its aggressive cost and headcount-cutting, but these initiatives are aimed at paring back investment banking and securities trading in order to place an increased focus and emphasis on wealth management.
UBS has a large footprint among wealth management clients in the Americas with about half of all its wealth management assets coming from clients in the western hemisphere. Around 10 percent of its assets come from Swiss clients and about 25 percent are from other Europeans.
Bank of America
Many people know Bank of America as their friendly neighborhood Bank offering senior citizens free checking. Actually, Bank of America is the parent company of Merrill Lynch, and it also includes its U.S. Trust and Bank of America Private Wealth Management divisions in its segment reporting for Global Wealth and Investment Management. Merrill Lynch and Morgan Stanley are in close competition for the largest force of financial advisors in the U.S. market with over 15,000 each, but Merrill Lynch has the most productive financial advisors. They average about $1 million in revenue each.
Wells Fargo (known as the Wells Fargo Private Bank) offers diverse wealth management and ranks third with over $2 billion in wealth management pre-tax profits. Its banking operations are so large that this represents under 10 percent of the corporate total. When Wells Fargo received the blessing of the FDIC to acquire Wachovia's banking operation (in2008) it made Wells Fargo a major national player in securities brokerage.
Credit Suisse leads the field with regard to the percentage of total pre-tax profits originating with wealth management—a robust 75 percent. A major player in private banking as well as securities brokerage, Credit Suisse also has a diversified wealth management business.
JPMorgan Chase is an amalgamation of Banc One, Chase Bank, and the old-line Wall Street investment banking and wealth management firm J.P. Morgan & Co. It earns about $1.5 billion in pre-tax profits from wealth management activities, which accounts for around 6 percent of the company total.
Morgan Stanley's wealth management operations were greatly enhanced in 2009 when Morgan Stanley and Citigroup announced the merger of Smith Barney with Morgan Stanley's Global Wealth Management Group. Morgan Stanley paid $2.7 billion cash upfront to Citigroup for a 51 percent stake in the joint venture. Morgan Stanley's wealth management division now contributes over 50 percent of total pre-tax profit. In 2012, Morgan Stanley increased its ownership stake in the former Smith Barney to 100 percent ownership.
HSBC is a global banking giant that earns nearly $1 billion in pre-tax profits from wealth management, but that represents only a modest 5 percent of its total earnings.
Deutsche Bank is a Frankfurt-based bank that garners about 8 percent of its overall pre-tax profits from wealth management, or just under $500 million.
Headquartered in London, Barclays generates about $400 million in pre-tax profits from wealth management or around 7 percent of its overall bottom line.
The Wealth Management unit BNP Paribas is considered the top private bank in France and one of the best banks globally for philanthropic services.
The firm reports nearly $300 million in pre-tax wealth management profits for about 3 percent of the company total.
Influences on Profits
The profits ascribed to the wealth management divisions of these firms can be heavily influenced by internal transfer pricing policies and procedures. Odds are that transactions originating with wealth management clients may be contributing to significant profits ascribed to other divisions of these firms—such as investment banking and securities trading.