The global financial wealth market has experienced a decline for the first time in 15 years, with a 4% decrease to $255 trillion in 2022. The decline can be attributed to factors such as soaring inflation, resulting in higher interest rates, and poor performance in the equity market amid geopolitical uncertainty triggered by the war in Ukraine. However, experts predict a short-lived decline, with a projected 5% rebound to $267 trillion expected in 2023.
These findings are part of the BCG Global Wealth Report 2023: Resetting the Course, the 23rd annual report on global wealth released by the Boston Consulting Group (BCG).
Despite the decline, there were some positive aspects in 2022. The value of personal cash and deposits increased by 6.2% as investors adopted a more risk-averse approach. The value of real assets, including real estate and art, also rose by 5.5% to reach $261 trillion. Overall, these factors contributed to a 1% increase in total absolute global wealth, which reached $516 trillion in 2022 compared to the previous year.
Michael Kahlich, a BCG managing director and partner, and co-author of the report, said, “The first downturn in the global financial wealth market since the 2008 crisis came after a 10% rise in value in 2021, which was one of the sharpest in over a decade. 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%. However, the recent headwinds in the market show how important it is for industry players to future-proof now for consistent long-term growth.”
Mayank Jha, Managing Director & Partner, Boston Consulting Group (BCG), said, “India has bucked the global headwinds of wealth creation, led by equity markets which have performed better than its global peers last year, leading to 8% increase in financial wealth last year. Over the last 20 years, wealth in financial assets in India grew at 15% CAGR v/s a global growth rate of 6%. India’s equity markets will continue to be a strong wealth creation opportunity, today representing 24% of financial wealth, but will increase to 28% of all financial assets by 2027. It’s not surprising that India (8%) and China (9%) will record the strongest growth rates among leading global markets, which will collectively create $74 trillion in wealth over the next five years.”
While financial wealth continued to grow in Asia Pacific, the Middle East, Africa, and Latin America in 2022, it declined in North America and Europe.
Switzerland, known for being an attractive wealth management and financial hub, is expected to be surpassed by Hong Kong as the world’s largest booking centre by the end of 2025.
Hong Kong experienced the highest growth rate in assets under management (AuM) among the top booking centres over the past five years, with a compound annual growth rate (CAGR) of 13%. However, it faces stiff competition from Singapore, increasingly viewed as a safe-haven gateway to the Asia Pacific region.
The United Arab Emirates attracted assets from various regions, including Asia Pacific and Eastern Europe, resulting in faster AuM growth than any other booking centre. Its financial wealth is expected to continue growing at a healthy rate of 10% over the next five years.