Market environment with huge growth opportunities
The wealth management market in Germany offers significant opportunities for growth. By 2009, private assets in this segment are set to increase by around 6%.
| State | Dec. 31. 2006 | % |
|---|---|---|
| Baden-Wuerttemberg | 4 | 9.3 |
| Bavaria | 20 | 46.5 |
| Berlin | 1 | 2.3 |
| Hamburg | 2 | 4.7 |
| Hesse | 3 | 7.0 |
| Lower Saxony | 1 | 2.3 |
| North Rhine-Westphalia | 2 | 4.7 |
| Rhineland-Palatinate | 4 | 9.3 |
| Saarland | 1 | 2.3 |
| Saxony | 2 | 4.7 |
| Saxony-Anhalt | 1 | 2.3 |
| Schleswig-Holstein | 2 | 4.7 |
| Total1 | 43 | 100.0 |
1 The total number of offices of the new HVB Group is 788 (see Note 82).
- Personal, independent, forward-looking advice
- Earnings performance in the Wealth Management division
- HVB Wealth Management starting in 2nd place in the German wealth management market
- Strategy and value levers of the new division offer clear advantages
- Relationship model geared to holistic asset management
- Competent staff – a basic requirement for our customers
- Institut für Vermögensaufbau IVA and the firstfive rating agency award five stars to tailored-made mandate and portfolio solutions
- Special expertise in managing inheritances and trusts bridges generations
- HypoVereinsbank sells Activest to Pioneer Investments
- Excellent performance by Wealth Management subsidiaries
- Outlook: systematic alignment of the business model and organic growth
Personal, independent, forward-looking advice
According to a forecast by Barclays Wealth Insight, Germany is one of the countries that will record the highest relative growth in millionaires in the coming years. We aim to attract more than an equal share of this growth and position ourselves as one of the top names in wealth management. We provide a convincing proposition to our customers through personal, independent and far-sighted advice coupled with a high level of expertise and comprehensive strategies as well as innovative and customised solutions.
Earnings performance in the Wealth Management division
In the third quarter of 2006, the segments were re-organised in connection with the integration of HypoVereinsbank in the UniCredit Group. This re-organisation mainly affected the former Germany business segment. The Retail and Wealth Management divisions were formed from the Private Customers business unit. In addition, customers and employees were transferred from the former Corporate Customers and Professionals business unit (business customer segment) to the new Retail and Wealth Management divisions. 90% of the customers contacted decided in favour of HVB’s new proposition and switched to Wealth Management.
In 2006, the Wealth Management (WEM) division’s results were also boosted by the gain realised when the Activest companies (Activest Investmentgesellschaft mbH, Munich, Activest Investmentgesellschaft Luxembourg S.A., Luxembourg and Activest Investmentgesellschaft Schweiz AG, Berne) were sold to Pioneer Investments. The sale yielded a gain on disposal of €543 million, which is reported under net income from investments. The Activest companies were deconsolidated with effect from July 1, 2006. Hence the 2006 results cannot be compared to last year, but the adjusted figures can be used for comparison.
The Wealth Management division generated an operating profit of €214 million before loan-loss provisions and thus made a very strong contribution to HypoVereinsbank’s total profit in 2006. Operating costs remained stable despite the reestablishment of the division. (Please refer to Note 22 in the notes to the consolidated financial statements for a detailed discussion of the results).
HVB Wealth Management starting in 2nd place in the German wealth management market
We have an excellent starting position: in terms of customer assets under management, today we already have an outstanding ranking in 2nd place in the German wealth management market. Highly affluent customers were transferred from the retail and corporate banking segments of HVB AG in the course of the new divisionalisation. The new division has an investment volume of more than €31 billion and serves over 37,000 affluents. The operating result and significant profitability indicators reflect HypoVereinsbank’s excellent starting position in this important business area.
To achieve our growth targets, we have increased the number of facilities we use and people we employ. We now have more than 40 offices throughout Germany. Hence, we cover more than 90% of the market and are thus easily accessible for all of our customers. Our nationwide presence and the resulting proximity to our customers makes us stand out from many of our competitors.
Strategy and value levers of the new division offer clear advantages
We offer the individual attention and exclusivity of a private bank combined with the competence, security and international network of a large banking group – the UniCredit Group. This network spans 40 countries, including Luxembourg, Austria, Italy, Switzerland, the CEE countries and the United States among others. Besides wealth management, we also have a high level of expertise in the fields of financing, real estate finance and particularly in the management of foundations and trusts. Wealth Management at HVB AG handles distribution for wealthy retail customers in Germany, private banking operations in Luxembourg, the activities of the DAB banking group and the production and marketing of real assets, bundled in the WealthCap subsidiary currently being formed.
We serve customers at HVB AG with liquid assets of more than €500,000 under a relationship approach specially tailored to the requirements of high net worth customers. This is expanded to include specific family office services for customers with total addressable assets exceeding €30 million. In addition, our investment management units support our customers in the purchase and sale of corporate holdings and private equity products. In doing so, we follow the entire process from investment consulting all the way to the signing of agreements.
Relationship model geared to holistic asset management
A total of six customer segments form the basis of our relationship model, which is geared to providing holistic wealth management: family office customers, for whom the key element is providing holistic advice on very large and complex estates; wealthy private customers, where the focus is placed on individual asset strategies; professionals and business customers, for whom asset accumulation and corporate finance is the main element; and foundations and privately owned investment companies focusing on the professional management of large-scale assets. In addition, we attend to the private affairs of company owners and perform professional asset management for certain securities accounts, such as public-sector customers and professionals.
Competent staff – a basic requirement for our customers
Committed, highly trained and – in many instances – certified employees with special advisor virtues are absolutely essential for satisfying our customers’ high expectations. It is therefore a top priority that all of our employees’ daily activities reflect our service promise: we expect our employees to be customer-oriented, competent and innovative. We will consistently take new steps to establish ourselves as Germany’s leading wealth manager in the long term. In these efforts, customer satisfaction is the key driver of our business activities and an important factor in our employees’ pay.
Institut für Vermögensaufbau IVA and the firstfive rating agency award five stars to tailored-made mandate and portfolio solutions
We provide expertise in all relevant areas, complete with exclusive, prize-winning products. One such offering is HVB Vermögensverwaltung FIRST, an asset management product that has been awarded several top five-star marks by the independent Institut für Vermögensverwaltung (IVA). This product is aimed at customers intending to invest a volume in excess of €250,000 in this product.
Another product to receive honours is First Flex, our individual HVB Vermögensverwaltung wealth management concept, which has met with success for 25 years, and was again reassessed and likewise awarded several top five-star ratings from firstfive, an independent rating institute. With its strategic, risk-return-based investment approach HVB Vermögensverwaltung First Flex posted an average annual return of 9%. In addition to mandate solutions, we also offer our customers tailored portfolio solutions with various risk profiles. We have certified quality securities accounts for each risk class. They serve as the basis for the relationship manager, who then works with the customer to optimise the composition of the portfolio. We attach great importance to transparency through clear pricing and extensive reporting.
Special expertise in managing inheritances and trusts bridges generations
With our inheritance management and trust management, we also offer our customers cross-generational asset planning, underscoring the stringent quality standards we impose on our advisory activities. After all, a challenge such as planning the transfer of wealth to the next generation is one of the most personal issues addressed in the field of financial advice. Our certificated experts in trust and inheritance issues see to the needs of heirs, testators and trusts, as well as clients thinking of setting up a trust, from the initial idea to the asset management activities.
Financial planning is specifically tailored to cater for customers with very substantial assets. Expert advice and one-stop financial advisory services are provided by specially trained, certificated financial planners.
HypoVereinsbank sells Activest to Pioneer Investments
The advisory services we offer benefit from our membership of the UniCredit Group as we are able to call upon outstanding expertise worldwide in areas like asset management. The combination of Activest and Pioneer, a global mutual fund company that has been extremely successful for many decades, will give our customers access to an even greater range of international investment products. This means we can leverage the advantages of a strong, global asset management partner to offer our customers a broad range of worldwide products.
Excellent performance by Wealth Management subsidiaries
In 2006, DAB Bank recorded the best result in its company’s history. It now manages more than a million securities accounts for the first time. The assets under management were increased by 19% compared to the previous year. At just under €30 billion, around €14 billion of which are B2B-brokered funds, DAB is Germany’s largest independent funds platform. A successful year on the stock market saw almost eleven million transactions carried out on the DAB platform.
HVB Luxembourg Private Banking succeeded in establishing Family Trust Management Europe S.A. (FTME) in 2006 to complement its successful WEM activities. This company has specialised in managing internationally diversified assets in a Luxembourg-based corporation.
Wealth Management Capital Holding GmbH, which is currently being formed, is seeking to become one of the leading initiators of closed-end funds in Germany. Merging our subsidiaries H.F.S. (Hypo-Fondsbeteiligungen für Sachwerte GmbH), Blue Capital and HVBFondsFinance GmbH will serve to pool expertise in the three areas of private equity, German real estate and international real estate. We expect this to put us in a first mover position in the development and implementation of innovative real-estate products.
Outlook: systematic alignment of the business model and organic growth
In 2007, the focus will be placed on organic growth, notably by increasing the assets managed for customers, new customer acquisition and the optimisation of the range of products as planned. The consistent and seamless alignment of the business model to cater for the needs of defined target groups has an important role to play in this regard. We will continue to expand our business model whilst seeking to intensify co-operation with and between our subsidiaries. We intend to pursue six growth goals in the coming years: enhancing customer satisfaction; boosting customer loyalty; expanding our customer base; significantly increasing the share of our asset management products, fostering the dynamic development of fresh money and generating synergies from a higher level of networking in the co-operation between Wealth Management units.
Wealth Management distinguishes six target customer groups, two of which share a common relationship model/co-operation with Corporates
| Target customer group | Product basket | |||
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| Family office customers | Institutional |
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| Wealthy private customers | Individual |
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| Professionals/SMEs | Individual |
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| Private foundations and private asset management companies | Individual |
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| Business owners with business side in Corporates | Individual |
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| Corporate customers (public-sector corporations) | Institutional |
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- Customer allocated fully to Wealth Management
- Revenue share (customer not allocated fully to Wealth Management)
