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Lending for the wealthyProduct Type: Market Research ReportPublished by: Datamonitor Published: June 2005 Product Code: R313-11175 Description IntroductionThe report discusses why lending should form an important part of the wealth manager's business before examining the three most suitable areas of lending for high net worths, including examples of wealth managers that are fulfilling this customer segments' needs in each area. Finally, seven conclusions to help wealth managers decide how best to capitalize on this important segment are presented. Scope In-depth interviews were carried out with senior executives within wealth managers that currently make lending a key part of their business Extensive research on wealth managers, both in the US and Europe, to determine the extent to which lending products are marketed to high net worths Highlights According to IRS data, in the US, individuals with more than USD600,000 in net worth accounted for 70% of debt and mortgage balances, compared to 20% of balances held by people with positive net worth of less than USD600,000. Despite the fact that wealthy individuals borrow a disproportionate amount of money relative to their numbers and that they are less likely to default on their loans than less wealthy individuals, relatively few wealth managers are capitalizing on this opportunity. Most retail banks that started with lending capability now have wealth management businesses, giving them two important points of initial contact with a prospective client. Wealth managers that don't offer to manage their clients' liabilities are likely to lose clients to lending banks that can also manage their assets. Reasons to Purchase Assesses a very lucrative and underserved business segment that you can exploit Identifies innovations in high net worth lending that can be adopted to fit your business model Presents the key conclusions to help you decide whether high net worth lending is right for you Table of Contents CHAPTER 1 LENDING FOR THE WEALTHYIntroduction A wealth management proposition should include credit products for four reasons HNW loan products allow companies to target relatively few clients but make relatively big revenues And give wealth managers an excellent way to reach new customers Where default is less likely than among mass market customers And serious competition from wealth managers in this sector is still relatively sparse Three areas of lending are particularly suitable for high net worth clients Flexibility and vertical integration are the names of the game when it comes to offering loans to purchase assets such as houses, jets, yachts and art/collectibles Short-term lending products like credit cards and bridge loans cover gaps Lending for liquidity, whether secured by investment portfolios or landholdings, allows clients to leverage their assets Conclusions Wealth managers risk losing asset management clients to banks that can meet their lending needs Wealth managers that want to build a lending business must be prepared to stick with it It is possible, but not desirable to outsource lending There is no such thing as long-term product differentiation in high net worth lending The key to successful takeup of lending products by high net worth clients is Relationship Manager training Interest rates do matter Don’t forget the potential that SME lending offers CHAPTER 2 APPENDIX Research methodology Definitions Further Reading Datamonitor Global Wealth Service SPP: Reports Datamonitor Global Wealth Service SPP: Insight Reports Datamonitor Wealth Management Competitor Tracker Datamonitor Asia Pacific Wealth Management SPP: Reports Datamonitor Savings & Investments SPP: Reports & Briefs Datamonitor’s Global Wealth Model SPP writing team LIST OF TABLES Table 1: Countries that can be modeled using Datamonitor’s Global Wealth Model LIST OF FIGURES Figure 1: High Net Worth individuals hold a significant portion of debt and mortgage balances in the US, 1998 Figure 2: UBS’s Art Banking proposition, April 2005 |
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