Global net wealth staged a significant recovery of 4.3% in 2023, after a difficult year in 2022, says Boston Consulting Group.
Much of the growth was due to a rebound in the financial market, as financial wealth—a subset of global net wealth—rose by almost 7%, following a 4% decline in 2022.
Over the next five years, an estimated $92 trillion of financial wealth will be created, it said.
This does not alleviate the pressure on wealth managers, who have seen their margins decrease significantly since 2007.
Industry players can no longer rely exclusively on revenues from interest income, and they face rising costs due to inflation, operational inefficiencies, and tightening regulatory requirements.
Generative AI (GenAI) will play a crucial role in the digital transformation of wealth managers, with use cases along the entire value chain.
These are among the findings of BCG Global Wealth Report 2024.
"Wealth creation resumed in 2023—but even so, wealth managers cannot afford to stand still," said Michael Kahlich, a managing director and partner at BCG and a coauthor of the report.
"To capitalise on growing global wealth, industry players, among others, will need to set a clear digital transformation strategy and leverage GenAI to manage costs and improve client experience."
Financial Wealth Trends by Region
Financial wealth in North America and Western Europe bounced back in 2023. Supported by strong equity markets,
North America was among the fastest-growing regions, accounting for more than 50% of all new financial wealth in 2023. The recovery was not as strong in Western Europe, where financial wealth rose by 4.4%.
Although financial wealth in the Asia-Pacific region grew by only 5.1% in 2023, predominantly due to a slowdown in wealth creation in China, we anticipate a significant increase through 2028, with the region likely to contribute nearly 30% of new financial wealth by 2028.
In addition to China, India is well positioned to be a driver of greater wealth, having generated roughly $590 billion in new financial wealth in 2023, its largest increase in history.
The Top Booking Centres in a Changing World
Cross-border wealth grew by 5.1% in 2023, to $13 trillion, a slightly stronger number than last year's.
The most remarkable growth dynamics emerged in the United Arab Emirates (UAE). The UAE is currently the world's seventh-largest booking centre and is expected to surpass the Channel Islands and the Isle of Man as the sixth-largest by 2028.
Hong Kong's anticipated rise to become the top global financial hub was stalled by a temporary but significant slow-down in Chinese inflow. Singapore now appears to be in a position to challenge Hong Kong's rise over the long term.
Switzerland remains the largest booking centre worldwide, growing in line with its historical average of 4.8% and gaining the most wealth in absolute dollar terms.
Switzerland and other European cross-border booking centres, including the UK and Luxembourg, are growing at a slower pace than Singapore, the UAE, and the US.
The shift is occurring mostly because of stronger demand for geographic diversification, reflecting a continued surge in wealth generation in Middle Eastern and Asian markets.
"We expect Switzerland to keep its position as a leading booking centre for now, capturing about 15% to 20% of global new cross-border wealth through 2028, but there will be strenuous competition for first place," said Boston Consulting Group.
GenAI and the Future of Wealth Management
BCG's GenAI in Financial Institutions benchmarking survey found that among more than 60 major financial institutions—including many wealth managers and private banks—85% believe that GenAI will be a highly disruptive and/or transformational force, the group said.
But even though everyone is talking about it, many players are still hesitant to act, with 82% lacking an overarching, longer-term GenAI strategy and a short-term implementation roadmap.
"GenAI and other AI tools will disrupt the traditional ways of working for wealth managers," said Akin Soysal, a BCG managing director and partner and a coauthor of the report.
"From client acquisition and onboarding to servicing and ongoing support, there are many ways that technology will streamline operations—also in the area of compliance—while improving customer experience. The challenge for wealth managers is to know where to begin."
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