Once hailed as a steady income stream, the wealth management business is weighing on growth at big U.S. banks. Fred Katayama reports.
Big U.S. banks will be releasing their earnings results this week, but don't expect much from their wealth management businesses. Once hailed as a steady income stream, wealth management has been losing its luster. Uncertainty about the markets' direction over Britain's vote to leave the European Union is hurting demand for services. Argus Research analyst Stephen Biggar said, "The market instability from Brexit will definitely put pressure on wealth management goals." Also pressuring the business: rising compliance costs due to a new Labor Department rule issued in April. Barclays has cut earnings estimates at Morgan Stanley partly due to the weaker growth of wealth management. And it has lowered revenue forecasts for the wealth units at Bank of America and Wells Fargo. It's getting tougher to generate fees from managing assets. A B of A Merrill Lynch study showed investors are sitting on the largest pile of cash in 15 years, and equity holdings are at a four-year low.