The growth of global private wealth hit a speed bump in 2015, especially in the developed markets, with all regions other than Japan experiencing a slowdown relative to the previous year. This development, combined with the ongoing decline of revenue and profit margins—all amid shifting client needs in both traditional and nontraditional segments—is forcing wealth managers to reevaluate their strategies.
This year’s Global Wealth report includes two traditional features—the global market-sizing review and the wealth-manager benchmarking study—as well as a special examination of shifting client needs. The market-sizing chapter outlines the evolution of private wealth from both a global and regional perspective, including viewpoints on different client segments and offshore private banking. The benchmarking analysis is from a survey of more than 130 wealth managers and involves more than 1,000 data points related to growth, financial performance, operating models, sales excellence, employee efficiency, client segments, products, and trends in different markets and client domiciles.
We focused our benchmarking study this year on three trends that are altering the face of wealth management worldwide: tightening regulation, accelerating digital innovation, and shifting needs in traditional client segments. These trends have already had an impact on wealth managers’ costs and profitability as banks scurry to implement new compliance measures, update their IT systems, and train their sales forces. Yet the inherent revenue potential is still largely untapped, signaling “areas for action” for agile wealth managers.
In our discussion of shifting client needs, we particularly look at how demographic and socioeconomic trends are setting the stage for the rise of nontraditional client segments—currently underserved or rising in importance—that do not necessarily fit the standard, net-worth-based service approach. Two such segments offering significant growth opportunities are female investors and so-called millennials (people born between 1980 and 2000). With investing profiles that often differ from those of others with similar levels of net worth, these two groups require a different mode of engagement that can address the mismatch between what they are seeking and what wealth managers are currently offering. A survey of more than 500 wealth-management clients led to some eye-opening findings.
In preparing this report, we used traditional segment nomenclature familiar to most wealth management institutions, dividing the client base into categories on the basis of private wealth holdings, as follows:
- Ultra-high net worth (UHNW): more than $100 million
- Upper high net worth (upper HNW): between $20 million and $100 million
- Lower high net worth (lower HNW): between $1 million and $20 million
- Affluent: between $250,000 and $1 million
Moreover, in order to clearly gauge the evolution of private wealth in nearly 100 markets worldwide (representing more than 99 percent of global GDP in 2015), we updated our market-sizing methodology this year to reflect both the availability of enhanced data sources and new research on the topic of private financial wealth. Refinements were made in such areas as how private wealth is defined, the comprehensiveness of data on wealth distribution among client segments and regions, and how future global wealth is estimated. All growth rates are nominal with fixed exchange rates.
As always, our goal in Navigating the New Client Landscape: Global Wealth 2016, which is The Boston Consulting Group’s sixteenth annual report on the global wealth-management industry, is to present a clear and complete portrait of the business, as well as to offer thought-provoking analysis of issues that will affect all types of players as they pursue their growth and profitability ambitions in the years to come. We provide a holistic view of the market, emphasizing how the entire wealth-management ecosystem interacts and where the best opportunities for wealth managers can be found.