Global wealth has reached unprecedented heights thanks to a combination of strong equities markets and strong demand for real estate assets, opening up new business options for wealth managers.
FREMONT, CA: The strength of equities markets and demand for real assets have helped boost global wealth to a new record high, thereby presenting wealth managers with fresh options.
The most significant increase in wealth in more than a decade (10.6 percent) propelled 2021 to a new high of US$530 trillion, with $26 trillion in new private wealth created.
A new analysis, however, emphasizes the significance of wealth management organizations and financial advisors possessing a solid understanding of growing sectors such as sustainable investing and crypto-related assets.
"Global Wealth 2022: Standing Still Is Not an Option" by Boston Consulting Group (BCG) estimates that over the next five years, $80 trillion in new wealth will be created, including about $2 trillion in Canada, for a total of $9.4 trillion.
How the wealth management sector responds to this through strategic decisions, attractive products and services for clients, and the capacity to attract and keep clients, will be crucial for maintaining competitiveness.
Wealth clients seek next-generation products and services, such as net zero, cryptocurrencies, customization, and digitization. The essential question currently facing wealth managers is not which initiatives to pursue but how to implement them most effectively.
Rapid growth
While wealth is predicted to increase in all regions, Asia-Pacific will continue to lead the pack.
With an expected 8.4 percent compound annual growth rate (CAGR) in asset prices over the next five years, the region could possess over a quarter of the world's wealth by 2026.
North American wealth assets are projected to increase at a slower rate than in recent years: 4.7 percent CAGR through 2026 compared to 9.1 percent on average over the previous five years. Europe will increase by 4 percent (down from 4.5 percent five-year average).
Responsible investing
Sustainable investments are expanding three to five times faster than conventional ones. The BCG analysis predicts that by 2026, this asset class would represent 8-17 percent of privately invested wealth, up from 4-11 percent today.
Rather than viewing net zero as a distant objective for 2050, wealth managers must act now to integrate sustainable investment across the whole client life cycle due to the heightened push toward net zero.
