In 2023, global net worth increased 4.3 per cent after a challenging 2022, as per BCG Survy. While a large portion of the gain was attributed to the financial market’s recovery, as financial wealth rose by over 7 per cent after a 4 per cent dip in 2022. It is further expected thatfinancial wealth amounting tonearly $92 trillion will be created over the next five years.
Big jump seen in North America and Western Europe
The report also revealed that 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 per cent of all new financial wealth in 2023 while the recovery was not as strong in Western Europe, where financial wealth rose only by 4.4 per cent.
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China impacts pace of growth in Asia
Although financial wealth in the Asia-Pacific region grew by 5.1 per cent in 2023, predominantly due to a slowdown in wealth creation in China, as per the report a significant increase through 2028, with the region likely to contribute nearly 30 per cent 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.
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Talking about the report, Yashraj Erande, India Leader Financial Services, BCG said that 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. Notably, China and India are positioned to drive wealth creation, having collectively generated $588 billion in financial wealth in 2023. 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.
Gen AI to be atransformational force
Furthermore, the survey found that among more than 60 major financial institutions including many wealth managers and private banks, 85 per cent believe that GenAI will be a highly disruptive and transformational force. But even though everyone is talking about it, many players are still hesitant to act, with 82 per cent 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. 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,” Akin Soysal, a BCG managing director and partner said.
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Top Booking Centers
According to the report, cross-border wealth grew by 5.1 per cent in 2023, to $13 trillion, a slightly stronger number than last year’s. It also highlighted that the most remarkable growth dynamics emerged in the United Arab Emirates (UAE) as UAE is currently the world’s seventh-largest booking center and is expected to surpass the Channel Islands and the Isle of Man as the sixth-largest by 2028.
In addition to this, it is anticipated that Hong Kong will rise to become the top global financial hub was stalled by a temporary but significant slow-down in Chinese inflow.
Furthermore, 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. It is also expected that Switzerland will keep its position as a leading booking centre for now, capturing about 15 to 20 per cent of global new cross-border wealth through 2028, but there will be strenuous competition for first place.
