The latest example is a "study" being offered by PriceWaterhouseCoopers to entice banks into using its consulting services to corner the wealth management business.

PWC describes the study as its "first annual North American private banking/wealth management survey."

First the lure: "Fueled by the dramatic increase in wealth in the United States, this market offers profit margins averaging 35% and growth projected at 12% to 15% compounded annually over the next five years."

Drool on, bankers.

Next, the implied threat: "The first institution to market a truly comprehensive service offering-either through proprietary products or by forming strategic alliances and co-opetition (sic)-will come out on top." The nightmare, of course, is that if you aren't the first, you must be doomed.

Of course, PriceWaterHouseCoopers is saying nothing that's really new, which it practically admits. "This sounds like common sense," says Rob Gould, a partner in the financial services practice. But, he continues, the survey "indicates that no one type of institution, let alone a single provider, has mastered the formula for success and overtaken the market."

To strengthen the lure, PWC cites a study by the Spectrum Group, which says that in 1994, 3.5 million households had a net worth of $1 million, excluding the value of their homes, and projects the number will grow to nearly 15 million by 2004.

Now, now, PWC. As high-priced consultants, you should recognize that any business with profit margins of 35% and with net income growing at 12% to 15% annually doesn't remain that profitable or continue growing that quickly. As happens over and over again in banking, all sorts of competitors rush into such markets, quickly narrowing profit margins and slowing growth. Companies that plunge whole-heartedly into such markets often get badly burned.

And the outlook is worse in the asset management field, where the surge in the equities markets, which is the engine of the ecstatic growth in wealth, cannot go on for ever.

Of course, once that market collapses, PWC and its competitors (not its co-opetition) will be in there again, pitching their get-out-of trouble strategies. Whichever way things go, the consultants do well, just like lawyers.


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