Rich no more

Asset managers see margins drop as competition bites

DWS, Deutsche Bank, asset management
Deutsche Bank's DWS: In no position to throw stones. Source: Bernd Roselieb for Handelsblatt

It’s a little-known fact that Germany is home to the third-highest number of dollar millionaires in the world. And according to a forecast by Swiss bank Credit Suisse, 2.2 million millionaires will live in Germany in five years’ time — a 14 percent increase from today.

You’d think that’s good news for asset managers. Unfortunately, it doesn’t necessarily make for rich pickings. A new study shows that while the German market is worth around €740 billion ($912 billion) and growing by 5 percent a year, fierce competition is continuing to bite into profits.

“The profit margin will shrink to 10 basis points in 2018, marking the lowest level since 2007,” predicts Felix Germann, a junior partner at McKinsey, which conducted the study. By way of comparison, the margin was 30 points before the outbreak of the financial crisis in 2008, and 17 points in 2015. No one is expecting a return to growing margins anytime soon.

That will make worrying reading for the bosses of Deutsche Bank, which is listing a 25 percent stake in its asset management arm DWS this month. It hopes to raise up to €2 billion.

Tobias Wolf, head of banking at Capgemini Consulting in Switzerland, blames customer behavior for the continuing pressure. “They act cost-consciously and above all, ask for products with low margins,” he said.

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