For the first time in 15 years, the value of global financial wealth has contracted, falling by 4% in 2022 to $255 trillion. According to the study”Global Wealth 2023: Resetting the Course”, the 23rd annual report on global wealth by Boston Consulting Group (BCG), among the triggers is the context of geopolitical uncertainty due to the war in Ukraine, which has led to rising inflation, the increase in interest rates and the poor performance of stock markets. However, this decrease is expected to be short-lived, as it is expected a 5% rebound this year, which will bring the value of global wealth to 267 trillion dollars.
Among the bright spots of 2022 is a 6.2% increase in the value of global cash and personal deposits, as the past year was characterized by a more cautious approach to investing. The value of real assets, ranging from real estate to art, increased by 5.5% reaching 261 trillion dollars. Overall, absolute global wealth came to $516 trillion in 2022, an increase of 1% from 2021.
“After a record 2021 with a 10% increase, global financial wealth experienced its first decline since 2008 in 2022,” he said. Graziano Pace, Principal of BCG -. The 4% reduction is attributable to higher rates, inflation and reduced market performance. Italy was no exception with a 3% decline in financial wealth. We expect the improvement in the macroeconomic context and the market rebound to drive a return to growth as early as 2023. However, sector operators will have to continue working on a distinctive offer, an excellent advisory service and an operating model optimized for support the recovery in the medium to long term”.
The geographical areas
While financial wealth declined in North America and Europe in 2022, it continued to grow in Asia-Pacific, the Middle East, Africa and Latin America. Furthermore, as is often the case in times of macroeconomic uncertainty, cross-border wealth increased by 4.8% in 2022, reaching $12 trillion globally.
In this context, there has been a transformation in the dynamics of the sector. For example, Switzerland remains a highly attractive financial and wealth management hub, but by the end of 2025 it will be Hong Kong the booking center largest in the world. Hong Kong has in fact recorded the highest growth rate of assets under management (AuM) among the main ones booking center over the past five years, with a compound annual growth rate (CAGR) of 13%. However, what is holding this area back is the strong competition with Singapore, which is increasingly perceived as a safe haven for the Asia-Pacific region.
Finally, the UAE has attracted assets from diverse regions, including Asia-Pacific and Eastern Europe, posting faster AuM growth than any other booking center. Their financial wealth is projected to continue to grow over the next five years at a rate of 10%. Italy is the eighth country for total financial wealth worldwidewith a total of 5.7 trillion US dollars[2]slightly less than in 2021. Real assets instead recorded the same levels (7.4 trillion US dollars), while liabilities reached 900 billion dollars.
While the market has experienced a downturn over the past year, the mix of financial wealth, real asset pools and liabilities grew by 2.1% from 2017 to 2022, reaching a total of 13.7 trillion US dollars. In the last year, our country collected 11.6% of financial wealth, 11.7% of real assets and 6.8% of liabilities in Western Europe
BCG analysis estimates 411 thousand Italian millionaires, i.e. people who hold assets of at least one million dollars in financial wealth, less than 1% of the population. If you then look at the segment of the Ultra-High Net Worth, individuals who hold assets exceeding 100 million dollars of financial wealth, in Italy there are 2,000. According to the data, fine 43% of financial assets in 2022 are held by millionairesbut a large part of the wealth belongs to the so-called customers affluent e massindividuals with a wealth of up to one million[3]. Over the next 5 years, the various segments will follow different trends: the number of millionaires with assets ranging from 1 to 100 million US dollars will remain stable (Lower- e Upper-High Net-Worth) and of the affluentthe number of individuals with assets exceeding 100 million will grow by 1% (Ultra-High Net Worth), while customers will decrease by 2%. mass.
Profit pressures
The Wealth sector had been dealing with tight margins for some time, but asset managers were buoyed by the favorable financial market climate and rising business volumes. It is precisely the latter that has recorded an 11% decrease in 2022. In addition, costs have increased across the industry, given the expansion of front office teams, higher salaries and an increase in technology spending , and are expected to remain elevated due to inflation higher than that of the previous decade. Pre-tax profit margins for wealth managers also fell by an average of 2.3 basis points (bps) globally. Traders in the Asia-Pacific and North America regions recorded the steepest declines, with increases of 5.5 bps in Asia-Pacific and 3.1 bps in North America respectively, compared with increases of 2.5 bps in Europe and 0. 3 bps in Latin America.
Wealth managers need to adopt new initiatives on both the revenue and cost fronts to stay competitive, according to the study. Key actions on the revenue side include building a scalable growth engine in customer acquisition, designing a distinctive offering in the private market, reviewing of the product shelf in line with changes in interest rates and a long-needed shift in the financial advisory offering, driven by advances in generative AI. In parallel, a bold approach to reducing costs must be taken, including an end-to-end process review, careful evaluation of outsourcing decisions, exploration of third-party operational and technology solutions, and product and service streamlining. services through discretionary portfolio management similar to advisory.