The value of global financial wealth declined by 4% in 2022 for the first time in over a decade, revealed the 23rd annual global wealth report by the Boston Consulting Group (BCG).
The report estimated that global financial wealth was reduced to $255 trillion as a result of inflation, rising interest rates, poor equity market performance and geopolitical uncertainties.
However, BCG expected the decline to be short-lived, with a 5% rebound to $267 trillion expected in 2023.
North America suffered the highest decline of -8%. Western Europe was less affected, with a drop of -1.4%, but is expected to have the lowest increase in financial wealth in the future, growing at half the rate of the Middle East and Asia.
In contrast, Africa, the Middle East, Latin America and Asia showed signs of financial growth. $138 trillion of new wealth is expected to enter these markets between 2022 and 2027, with the highest growth rates in the Middle East and Africa.
Cross-border wealth increased by 4.8% in 2022, with a similar trend seen in the UK – which ranked 4th in last year’s total financial wealth category, topped by the US, China and Japan.
Positive trends included a 6.2% increase in the value of personal cash and deposits and the growth of real assets by 6% to $261 trillion. Wealth in the high and ultra-high-net-worth wealth categories witnessed continued growth.
Michael Kahlich, managing director and partner, BCG, and co-author of the report, said: “We expect that the improving macroeconomic outlook and rebound in stock markets will drive a return to growth in financial wealth as early as 2023, and our five-year compound annual growth rate forecast to 2027 remains a healthy 5.3%.”
Switzerland stood out as a “highly attractive wealth management and financial hub” but is expected to be overtaken by Hong Kong as the world’s largest booking centre in the next three years. However, Hong Kong, too, is facing competition from Singapore, which is perceived as a safe-haven gateway to the Asia Pacific region. The United Arab Emirates attracted assets from across regions, growing its assets under management faster than any other booking centre.
Pre-tax profit margins for wealth managers decreased by an average of 2.3 basis points globally, with the Asia Pacific and North American regions witnessing the steepest declines.
Commenting on how wealth managers can stay competitive, Ivana Zupa, a co-author of the report, said these included building a scalable growth engine in client acquisition and designing a distinctive private market offering.
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