Wealth Management in Russia 2009

Overview 1
Catalyst 1
Summary 1
Methodology 2
Executive Summary 3
In the context of the economic and market woes, the falls in wealth have been relatively modest 3
HNWs are relatively unsophisticated on investment matters, loyal and very conservative 3
Russia is becoming more competitive for wealth managers 3
Table of Contents 4
Table of tables 5
Table of figures 6
Table of figures 6
Russia's Wealth 7
Russia's fortunes are very much linked to the vagaries of oil and gas 7
After a bruising 2008, the Russian Stock Exchange bounced back strongly in 2009 9
The property market has also given up gains made in prior years 10
Deposit rates and money market rates have offered modest returns to Russian investors 10
Russian investors have the vast majority of their liquid assets in deposits 11
The fall in the market has increased the importance of deposits over other asset classes 11
The recessionary environment has taken its toll on Russian HNWs in 2008 13
The declines have been modest and Datamonitor expects a rapid growth in wealth going forward 13
The value of wealth held by affluent shows associated growth rates 17
The Evolution of Russia's Wealth Management Market 19
Russia's wealth management market has its origins in the economic reforms of the former Soviet Union 19
The burgeoning wealth market in Russia has given rise to opportunities for domestic and international wealth managers who invest clients' money onshore and offshore 20
Domestic Russian banks have expanded their businesses to offer HNWs a range of wealth offerings 20
International banks have started to significantly expand their wealth management operations into Russia 21
The Russian wealth market is a competitive space for both onshore and offshore funds 21
Encouraging the take-up of a broader range of investment products is a challenge for wealth managers in Russia 22
The Wealth Management Opportunity Index 23
Wealth management market features 26
Range of products and services: 0 26
Level of consolidation: 1 27
Ease of market entry: 2 27
Level of international wealth management activity in the country: 1 28
Russian HNW client characteristics 29
Level of use of onshore services: -1 29
Level of demand for high quality service: -2 29
Appendix 31
Datamonitor's Wealth Management Opportunity Index 31
There are five key parameters when assessing a market for its wealth management potential 31
There are 18 components to the five key parameters of the wealth management opportunity index 32
Institutional factors 32
Economic variables 32
Wealth management market size 32
Wealth management market features 33
Wealth management client characteristics 34
Definitions 35
The drivers of growth in the wealthy population 35
Income growth (combined with inflation, changes in GDP by sector, household savings rates and debt levels) 35
Investment returns (market capitalization, interest rates and bond yields) 35
The following measures are not, in themselves, drivers of wealthy population growth 35
Market capitalization 35
GDP 35
The following measures are not drivers of wealthy population growth except under very restricted circumstances 36
Primary residence value growth 36
Inheritance 36
Methodology 36
Global Wealth Model 36
The UK sub-model 36
Global sub-model (for all other countries) 36
Forecasting methodology 37
Continuous refinement to the understanding of liquid wealth distribution 37
Datamonitor's wealth numbers compared with other wealth numbers 37
Bibliography 38
Further reading 38
Ask the analyst 39
Datamonitor consulting 39
Disclaimer 39
List of Tables
Table 1: Market capitalization of Central and Eastern European stock exchanges 10
Table 2: Short-term deposit and money market rates, and change in consumer prices in Russia 11
Table 3: The portfolio allocations of retail investors in Russia 13
Table 4: Number of individuals in Russia in euro bands (000s) 15
Table 5: Forecast number of individuals in Russia in euro bands (000s) 17
Table 6: Value of onshore liquid assets in Russia in euro bands (€bn) 17
Table 7: Forecast value of onshore liquid assets in Russia in euro bands (€bn) 18
Table 8: Wealth Management Opportunity Index: Russia 24
Table 9: Wealth Management Opportunity Index: Russia 25
List of Figures
Figure 1: 2008 marked a turning point in the fortunes of Russia's labor market 8
Figure 2: The Russian Stock Exchange fell dramatically between the end of 2007 and 2008 9
Figure 3: Rates of return on deposits and in the money market have run at mid-single digits 11
Figure 4: Deposits dominate retail investors' portfolios in Russia 12
Figure 5: The number of wealthy individuals in Russia declined over 2008 14
Figure 6: The number of wealthy individuals in Russia is set to rise rapidly from 2009 onwards 16