PremiumListen to this article |
Global wealth hit a record high of $530 trillion in 2021, fueled by strong equity markets and a surge in demand for real assets, according to a report released by Boston Consulting Group (BCG) on Thursday.
The report, Global Wealth 2022, found that despite geopolitical and economic destabilizers such as inflation and Russia’s invasion of Ukraine, approximately $80 trillion in new wealth is likely to be created over the next five years.
Further, in a notable industry shift, Hong Kong would probably overtake Switzerland in 2023 as the domicile managing the largest amount of private cross-border wealth, ending a run of more than 200 years of Swiss dominance, the report highlighted.
“Wealth development is resoundingly resilient, and even against the backdrop of geopolitical turmoil the growth rate will remain positive," said Anna Zakrzewski, global leader of BCG’s wealth management segment and a coauthor of the report.
The report predicted that wealth assets will continue to rise in value in all regions. But Asia-Pacific will maintain the fastest rates of wealth growth, with asset values poised to increase by a compounded annual growth rate (CAGR) of 8.4% through 2026.
If that rate holds, the region could be home to nearly one-quarter of the world’s wealth by 2026.
“Digital wealth managers have delivered 5-6 times higher shareholder value vis-à-vis traditional managers over the past decade, by virtue of superior customer experience and seamless execution," said Varun Kejriwal, managing director & partner, BCG India.
“Further, Asia Pacific is expected to see the fastest rates of wealth growth and it’s share in global wealth is expected to increase to 25% by 2026. This presents enormous opportunities for wealth managers and those who adapt to this digital shift and move decisively, will be capable of seizing these opportunities and enjoying exponential growth," Kejriwal added.
Further, wealth in the Middle East and Africa is on track to rise by a CAGR of 5.4% over the next five years, the biggest overall leap in regional wealth growth.
In North America, wealth growth will be slower than in years past, with an estimated CAGR of 4.7% through 2026, down from a prior five-year average of 9.1%. Likewise, in Western Europe, wealth growth is likely to slow from roughly 4.5% over the past five years to less than 4% annually until 2026, the report said.
The report highlighted that sustainable investing—of which net zero is a key component—is growing three to five times as fast as traditional investments, and by 2026 this asset class could account for 8% to 17% of privately invested wealth, up from 4% to 11% today.
Although people tend to think of net-zero as a 2050 goal, the report noted that wealth managers must act immediately to embed sustainable investing across the entire client life cycle.
