The years following the financial crisis have seen significant developments in the financial services sector. Global wealth managers now face the challenge of adapting to a market environment that is evolving quickly, if not revolutionizing.
Client needs, shareholder expectations, stricter new regulations and milestone developments in technology are driving future business models and shaping their requirements. While we must wait to see the full impact of these changes, it is already clear that new industry structures will emerge in the coming years. Adapting early to the new reality will open the door to profitable future growth opportunities.
- The global volume of net investable assets of high-net-worth individuals (HNWI+) will increase by around 25% to almost US$70 trillion by 2021.
- Holistic wealth management will emerge as a new kind of digitalized business model. Holistic wealth managers are expected to gain a market share of 30% by 2025.
- Wealth managers with traditional business models will largely disappear from the market as a result.
- Traditional wealth managers located in or operating out of the United States are likely to survive in the international offshore business thanks to increasingly favorable conditions.
- The service offering of wealth managers with an offshore business model will increasingly mirror that of onshore wealth managers.
Seizing global growth potential
Its size and growth make the HNWI+ segment of the global wealth management market particularly attractive. 1 Today’s market for net investable assets (NIA) already exceeds US$55,000 billion. 2 According to our EY Global Wealth Model, global NIA will reach US$69,607 billion by 2021, increasing by almost one-quarter of the current volume, or at an annual growth rate of 4.7% through 2021. Wealth managers should be anticipating and seizing this market potential and enormous growth now.
From a regional perspective, we expect North America to see the largest growth in NIA. Although this region can be seen as a mature and well-established market, with growth of around 4.4% compared with global growth of 4.7%, its integrated market and common language make it extremely attractive nevertheless. The pursuit of personal success and a healthy risk appetite are embedded in a corporate culture that drives innovation and contributes to private wealth accumulation.
With expected above-average growth of 5.9% and a high increase in NIA, nations in Asia-Pacific can be viewed as rapidly developing and weighty co-players, adding to the region’s appeal. Entrepreneurship is blooming, nourished by access to financing options, an educated workforce and an outstanding work ethic. The development is creating regional investment opportunities for HNWI+ and driving growth. Centers of innovation, such as Singapore, are viewed as appealing for companies because of their effective infrastructure and state support.
Moreover, double-taxation treaties, free-trade agreements and investment treaties are making foreign trade easier. One exception here is Japan, which is expected to see minimal annual growth of 0.4%. Nevertheless, the country remains an interesting market with absolute NIA growth of more than US$140 billion.
We see Africa and the Middle East in particular as markets that will return above-average growth in the future. Apart from petroleum and natural gas, large areas are geared toward the export of precious metals and diamonds. Private companies and financial institutions in the Middle East benefit on account of their geographical location from the flourishing trading business and trade finance.
A high global influx of capital in the form of development aid from supranationals, together with free-trade agreements directly promoting foreign private investment, culminate in the expansion and improvement of infrastructure and sustainable economic growth. In 2014 and 2015 alone, foreign private investors injected capital investments of over US$200 billion into large-scale projects on the African continent.