Boston Consulting Group Global Wealth Report 2020: The Future of Wealth Management – A CEO Agenda
20th June 2020 | Hong Kong
The world’s leading management consulting firm Boston Consulting Group (BCG) has released the 20th edition of the BCG Global Wealth Report 2020, titled “The future of Wealth Management – A CEO Agenda.”
The BCG Global Wealth Report 2020 provides insights into global wealth growth and global wealth management industry over the last 20 years (1999 to 2019), global wealth forecast for the next 5 and 20 years and key agenda for Wealth Management CEOs.
- Looking Back over 20 Years and Ahead to the Future
- The Next 20 Years of Wealth Management
- The Wealth Management CEO Agenda
BCG’s Anna Zakrzewski, Managing Director and Partner, Global Leader, Wealth Management:
“The last twenty years have witnessed many peaks and valleys and the next twenty will likely bring the same. Although some of the necessary initiatives may not be new, there is much more progress to be made. By acting decisively now, wealth managers have an opportunity to build on their current momentum and position themselves optimally for the future.”
1. Key Numbers
- Millionaires grew from 8.9 million in 1999 to more than 24 million by the end of 2019
- Personal wealth grew from $80.5 trillion in 1999 to $226.4 trillion at the end of 2019
- Millionaires hold more than 50% of total financial wealth globally
” Personal Wealth Grew from $80.5 trillion in 1999 to $226.4 trillion “
- Wealth industry profit pool remained the same with $135 billion in 2019 compared with $130 billion in 2007
- Cross-border wealth surged over the past 20 years, growing from $3.1 trillion in 1999 to $9.6 trillion in 2019
- More than 50% of HNW & UHNW are invested in equities and investment fund, shares, on average
- Retail segment invested, on average, only about 9% of their assets in equities and investment funds, with more than 80% going instead into cash, deposits, life insurance and pensions.
BCG Global Wealth Report 2020 Classification
- Retail: less than $250,000
- Affluent: between $250,000 and $1 million
- HNW: between $1 million and $20 million
- Upper HNW: between $20 million and $100 million
- UHNW: more than $100 million
BCG Wealth Growth Projection 2020-2024
Quick Rebound – From $226 trillion in 2019 to $282 trillion in 2024, a CAGR of 4.5%
Slow Recovery – Fall to $215 trillion in 2020 and grow to $265 trillion in 2024, a CAGR of 3.2%
Lasting Damage – Wealth would decrease to $210 trillion in 2020 and then increase to $243 trillion by 2024, a CAGR of just 1.4%
CAGR ~ Compounded Annual Growth Rate
2. Wealth Management to Face more Pressure
- Asset-based fees, which are more vulnerable to market declines, make up a higher percentage of wealth manager incomes than they did in the past (45% in 2018 compared with 30% in 2013)
- Wealth managers are entering the crisis in a weaker financial position than they were in prior to the last financial crisis: 9% began 2020 in the red, compared with just 5% in 2007
- Cost-Income Ratios are higher (77% in 2018 compared with 60% in 2007)
3. Growth Markets Will Outpace Mature Markets
- Asia ex-Japan will grow at between 5.1% and 7.4% annually over the next five years
- Asia will overtake Western Europe as the second wealthiest region in the world by 2022
- Wealth in North America, which is more heavily weighted toward equities, could grow at –0.6% to 3.7% annually from 2019 to 2024
- Western Europe, we project a more stable range of approximately 1.6% to 3.6%, given the region’s heavier weighting toward cash and deposits
HNW and UHNW will remain the fastest growing segments in North America and that the affluent band will be the fastest-growing segment in Asia, Western Europe, and the Middle East. In Asia, affluent individuals will see their wealth rise by a CAGR of 6.0% to 8.7% over the next five years (totaling from $5.7 trillion to $6.5 trillion by 2024).
Segment Growth Projection 2020-2024:
- The affluent segment globally (valued at $35.3 trillion) will grow at a CAGR of 1.7% to 4.6% from 2019 to 2024.
- The HNW segment (valued at $87.7 trillion) will grow at a CAGR of from 0.2% to 4.7% over the same period.
- The UHNW segment (valued at $27.3 trillion) will grow at a CAGR of from 1.4% to 5.8% until 2024.
4. Gen X, Y & Z in 2040
- Gen Xers will be entering retirement
- Gen Yers will be in their prime earning years
- Gen Zers will be climbing the career ladder
Generations X, Y, and Z will also be more educated and economically empowered than prior generations. Members of these younger cohorts will live in a dynamic and fast-paced global environment with increased economic and geopolitical volatility.
For these younger generations, wealth won’t just be about money. It will also be about meaning, purpose, connection, and making a positive difference in the world. This orientation will create a very different future for wealth management providers.
- Gen X – Born in 1960s to late 1970s
- Gen Y – Born in 1980s and 1990s
- Gen Z – Born in 1995 to 2010
5. CEO Agenda
CEOs must treat 2020 as a pivotal point. BCG’s recommended agenda for wealth management CEOs features three key imperatives:
- Protect the bottom line by pursuing smart revenue uplift, optimizing the front-office setup, streamlining compliance and risk-management processes, and improving structural efficiency.
- Win the future by developing more-personalized value propositions, enhancing ESG and impact-investment offerings, designing challenger plays, and leveraging ecosystems and M&A.
- Build capabilities by gaining better client understanding, attracting top talent, investing in digital and data, and designing a state-of-the-art technology platform.
Boston Consulting Group Global Wealth Report 2020
1. Looking Back over 20 Years and Ahead to the Future
- Wealth Growth Has Proved Its Resilience in Weathering Crises
- Economic Growth Has Put More Wealth in More Hands
- Recovery from COVID-19 Will Define Growth in the Years Ahead
- Growth Markets Will Outpace Mature 30 Markets
- Cross-Border Wealth Patterns Will Continue to Change
2. The Next 20 Years of Wealth Management
- Tomorrow’s Clients Will Want More from Wealth
- Wealth Management Must Rise to the Challenge
- The Provider Landscape Will Remake Itself
- Models Will Vary, but All Will Involve Ecosystems
3. The Wealth Management CEO Agenda
- Protect the Bottom Line
- Win the Future
- Build Capabilities
By Anna Zakrzewski
Managing Director and Partner, Global Leader, Wealth Management
(Anna Zakrzewski is a Managing Director and Partner in the Zurich office of Boston Consulting Group and the global leader of the Financial Institutions practice’s wealth management segment)
The wealth management industry is over 200 years old. Yet for most of that history, providers have operated according to the same general playbook. It took the massive digital and regulatory disruption of the past 20 years to begin shaking up industry business models, and evidence suggests that most providers have moved slowly, with many still adhering to traditional ways of private banking.
Among the major obstacles to change are fear of losing key relationship managers (RMs) and clients, a belief that the high-touch model is crucial to success, and the ten-year bull market, which shielded players from having to make tough decisions sooner. Despite a significantly larger asset and client base, however, the industry’s profit pool remains about the same as it was more than a decade ago, having reached just $135 billion in 2019 compared with $130 billion in 2007.
The COVID-19 pandemic—for all its devastating impacts—is a wakeup call. Wealth management providers should heed that call and recommit themselves to the improvement efforts they have long needed to make.
This is BCG’s 20th year of producing our Global Wealth Report. Our 20-year vantage point—along with the data that we have amassed over that period—allows us to distill important patterns in the nature of wealth growth and provide an outlook on the years ahead.
One striking feature of wealth growth over the past two decades has been its extraordinary resilience. Despite multiple crises, wealth growth has proved to be stubbornly robust, springing back from even the most severe tests. Today there is more wealth in more hands, and the wealth gap separating mature markets and growth markets at the beginning of the century has narrowed dramatically. Over the past 20 years, personal financial wealth globally has nearly tripled, rising from $80 trillion in 1999 to $226 trillion at the end of 2019.
Nevertheless, effectively serving the world’s wealthy is going to get far more complicated in the years ahead. As the demographics of wealth shift, so will the needs and expectations of wealth clients. In addition, the disruptive forces that emerged at the beginning of the century are accelerating. As digitization lowers barriers to entry to wealth management as a business, competition will intensify and offerings that once provided differentiation will face commoditization.
Fittingly for our 20th anniversary, this year’s report takes a 20-20 view, looking back over the past two decades and ahead to 2040. Our review of global market sizing, which encompasses 97 markets, provides a detailed retrospective. In addition, we evaluate the potential long-term impact of the COVID-19 crisis and consider whether the resiliency of wealth growth will endure.
This year’s report also includes a vision of the future of wealth management, based on ideation sessions and interviews held with clients, experts, next-generation individuals, and industry professionals. (Several artistic renderings from those sessions are featured in this report.) We examine how the industry’s value proposition and offerings will change over the next two decades, how interaction models will evolve, and which successful business models will emerge. We close with a checklist outlining what leaders must do in the months and years ahead to prepare for that future.
Our CEO agenda lists specific actions that will enable organizations to address the demands of the present environment and manage their profitability while transforming their businesses to thrive in the future.
As always with our annual global wealth reports, our goal is to present a clear and complete portrait of the business and to offer thought-provoking perspectives on issues that affect all types of players in their pursuit of innovation, growth, and profitability.
- Anna Zakrzewski, Managing Director & Partner (Zurich)
- Joe Carrubba, Managing Director & Partner (New York)
- Dean Frankle, Managing Director & Partner (London)
- Andrew Hardie, Managing Director & Partner (Singapore)
- Michael Kahlich, Principal (Zurich)
- Daniel Kessler, Managing Director & Senior Partner (Zurich)
- Martin Mende, Partner & Director (Zurich)
- Tjun Tang, Managing Director & Senior Partner (Hong Kong)
- André Xavier, Managing Director & Senior Partner (Sao Paulo)
About Boston Consulting Group (BCG)
Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we help clients with total transformation—inspiring complex change, enabling organizations to grow, building competitive advantage, and driving bottom-line impact.
To succeed, organizations must blend digital and human capabilities. Our diverse, global teams bring deep industry and functional expertise and a range of perspectives to spark change. BCG delivers solutions through leading-edge management consulting along with technology and design, corporate and digital ventures—and business purpose. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, generating results that allow our clients to thrive.
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