Global net wealth staged a significant recovery of 4.3% in 2023, after a difficult year in 2022. 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, according to a new report.
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.
Financial wealth represents that of the total adult resident population, collected by market and by asset class from central banks or equivalent institutions, based on the global System of National Accounts (SNA). It encompasses cash and deposits, bonds, public and private equities and investment funds, life insurance and pensions, other accounts receivable, and cross-border wealth.
These are among the findings of BCG Global Wealth Report 2024: The GenAI Era Unfolds, the 24th annual global wealth report from Boston Consulting Group (BCG).
Generative AI (GenAI) will play a crucial role in the digital transformation of wealth managers, with use cases along the entire value chain.
Yashraj Erande, India leader, financial services, BCG, said, “The financial wealth market has seen an uptick in the last year since its slump in 2022. The trajectory has been fairly well but not as good as it was between 2014-2021. For the wealth creation market to go back to its previous era the condition should continue to be favourable.”
“India is expected to add about $730 billion annually to the overall growth by 2028. With GenAI entering the financial wealth market, it has the potential to significantly transform the wealth management sector as it will allow wealth managers to curate tailor made options for their clientele keeping in mind the favourable conditions and the risk factor of the market,” Erande added.
“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, the report anticipates 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 Centers 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.
Switzerland is expected 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.
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. 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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