What You Need to Know
- Investors with $100,000 to $3 million have relatively simple needs and are often shunted into standardized products, according to Boston Consulting group.
- Assets held globally by investors 75 and older are expected to grow grow at a compound annual rate of nearly 7% over the next five years.
- The UHNW market is growing, too.
Global financial wealth rose by 8.3% to a record $250 trillion throughout crisis year 2020 as household savings increased and markets showed remarkable resilience, Boston Consulting Group reported Thursday.
Global prosperity and wealth are likely to continue to expand significantly over the next five years as economic recovery proceeds, and will present wealth managers with some highly attractive opportunities, the report said.
North America, Asia (ex–Japan) and Western Europe will be the main generators of financial wealth, accounting for 87% of new financial wealth growth worldwide between now and 2025.
The report said many wealth management clients last year moved into alternative investments in their search for higher returns, shifting away from low-yield debt securities. As part of this trend, real assets, led primarily by real estate ownership, hit an all-time high of $235 trillion.
Nevertheless, in Asia, which has the largest concentration of wealth in real assets ($84 trillion, 64% of the regional total), financial assets will grow by 7.9%, while real assets will grow by 6.7% in coming years.
In particular, investment funds in the region will become the fastest-growing financial asset class, with a projected compound annual growth rate of 11.6% through 2025.
Underserved Wealth Holders
The next five years could usher in a wave of prosperity for wealth managers, but they will have to adopt a client’s eye view and reorient their business model in order to capture the opportunity, BCG said.
Consider well-off people with simple investment needs and financial wealth between $100,000 and $3 million. This “simple-needs segment” comprises 331 million individuals worldwide, holds $59 trillion in investable wealth and potentially could contribute $118 billion to the global wealth revenue pool.
“Wealth managers often underserve those in the simple-needs segment with a standardized set of products, and the result is a poor client experience with no “wow” factor,” Anna Zakrzewski, global leader of BCG’s wealth management segment and a coauthor of the report, said in a statement.
“This is essentially a missed opportunity. To better serve this key segment, wealth managers must embrace a new approach that lets them reach a larger audience in a cost-effective and scalable way, but with a highly personalized offering.”