The wealth management industry is going to have to reevaluate their business models and offerings to better serve their wealth clients in the wake of the coronavirus crisis and ensuing economic downturn, announced Boston Consulting Group (BCG) in its annual report.
Dubbed “Global Wealth 2020: The Future of Wealth Management—A CEO Agenda,” the report analyzes the past two decades of wealth growth and assesses the long-term impact of the COVID-19 crisis over the next 20 years.
Since the turn of the millennia, wealth has nearly tripled--from $80 trillion in 1999 to $226 trillion in 2019--despite suffering from a number of crises, including the 9/11 terrorist attacks, and 2008 financial crisis.
In 2019, there was significant growth in personal financial wealth, according to the report, increasing nearly 10 percent from the 2018 figure.
In the near term future, however, the coronavirus crisis will almost certainly cause wealth to shrink. The question is, how will the global pandemic impact wealth in the long term.
It’s All About The Recovery
The report lays out three possible scenarios for the COVID-19 recovery. In the best case scenario, where growth is quick to rebound, personal financial wealth should grow from $226 trillion in 2019 to $282 trillion in 2024.
If the recovery is slow due to continued economic shocks caused by the pandemic, the report predicts that wealth could tumble to $215 trillion in 2020, before edging higher to $265 trillion in 2024.
The worst case scenario presented in the report would see wealth fall to $210 million in 2020, and then increase to just $243 trillion by 2024.
While these three scenarios are certainly entertaining, the wealth management industry will more directly face a challenge from the needs and expectations of its wealth clients, which is already happening at an accelerated rate.
Wealth Is Changing
The next 20 years will Gen X enter retirement, Millennials enter their prime earning years, and Gen Z will begin to climb the career ladder. In a very interesting turn of events, women will grow their wealth faster than men.
Asia (outside of Japan) and Latin America are expected to continue to outpace the rest of the world when it comes to wealth creation.
“Effectively serving the world's wealthy is going to get far more complex in the years ahead,” stated the report’s co-author and a BCG managing director and partner Anna Zakrzewski. “And as digitization lowers barriers to entry to wealth management as a business, competition will intensify.”
Among others, BCG recommends developing more-personalized value propositions, enhancing ESG and impact-investment offerings; investing in digital and data; and designing a state-of-the-art technology platform.