Our annual scene-setter report, WealthTech 2024, published last month, included a curated collection of articles and insights focused on the technology themes, trends, and challenges impacting global wealth management in 2024. In this article, we showcase some of the key data points and insights discussed in the report alongside an infographic to keep you up-to-date with all things WealthTech in 2024.

Report insights at a glance

Wealth, AUM, and markets
The lifeblood of the sector, clients, experienced a harsh economic environment in 2022. According to the most recent World Wealth Report from Capgemini, which focuses on the global high-net-worth (HNW) population, 2022 saw the largest drop in both the total number of HNWs and overall wealth in the last decade, dropping by 3.6% and 3.3% respectively.

Accordingly, assets under management (AUM) also declined. According to PwC, global AUM fell to US$115.1 trillion in 2022, the largest fall in a decade. This puts further pressure on industry indicators, with fee income already having dropped by 17% between 2015 and 2022 and pre-tax profit margins declining by just over 12% between 2020 and 2022, according to BCG.

Rebound and growth
But the good news, according to PwC, is that markets are set to rebound, projected to reach US$147.3 trillion by 2027, representing a compound annual growth rate of 5%. This will be most pronounced in Asia, emerging markets in Africa, and the Middle East. The projected growth rate in Asia-Pacific will be roughly 50% higher than in North America by 2027.

This means that global wealth managers will be looking to those markets for new client acquisition and growth, while they also fight to retain existing assets, and acquire as many new ones in the US and Europe – and thus retain their share of those markets even if growth levels are not as promising.

Consolidation
A theme that we see across markets, but particularly in traditional geographies like the US and UK, is wealth manager consolidation. As the costs and challenges of doing business rise, so consolidation has become an ongoing and core market theme. According to PwC’s study, 73% of asset managers are considering a strategic consolidation with another asset manager, 16% of asset and wealth managers globally are expected to be swallowed up or fall by the wayside by 2027, and the top ten largest asset managers are expected to control around half of mutual fund assets globally by 2027, up from 42.5% in 2020.

Products and loyalty
To deliver on their growth aspirations, wealth managers need to offer the right product and service mix and deliver this in the right way. While the EY study says that 85% of clients are satisfied with their level of access to products, there is room to improve and a revitalised investment offering is a mechanism to support potential additional growth.

Indeed, with markets currently so volatile and returns in public markets being harder to come by in an inflationary environment, wealthy investors are increasingly showing up in private markets. PwC says private markets will account for up to half of wealth manager revenues by 2027, up from 37.6% in 2020. And BCG says alternatives accounted for US$20 trillion, more than one-fifth of total global AUM in 2022. Investments of passion are also seeing inward flows. Knight Frank’s Luxury Investment Index (KFLII), which tracks the value of 10 investments of passion, rose by a healthy 16% through 2022. Art was the top performer, rising in value by 29%.

Also, firmly on the agenda, according to various research pieces, is ESG. According to Capgemini, 64% of HNW investors ask for an ESG score before investing in a fund.

Technology for service satisfaction
Another is leveraging technology to make managing data, processes, and service delivery as seamless and smooth as possible. Another key consideration is more than 90% of asset managers are already using disruptive technology like AI, Big Data, and Blockchain, according to PwC. A digital offering is particularly important in the respect of service delivery, with over 40% of people in a survey by EY identifying virtual consultations as their preferred advice channel in 2022. The same survey said that 32% of Millennials see a strong digital offering as important when selecting a wealth management provider, and that Millennials are more likely (59%) than average (40%) to seek a wealth manager that continuously improves its digital platforms with feature enhancements.

Technology, therefore, whether through investment into a new capability or driven by a requirement to satisfy clients, requires significant and ongoing investment.

All in all, the industry is in a period of flux. But rather than hunkering down and waiting for the storm to pass, wealthy managers need to work on their product, their proposition, and the space they occupy in the market to position themselves optimally for the future.

Data infographic
For a quick on-the-go view of these data points/insights, please see below for an infographic from the WealthTech 2024 report ‘Data & Insights’ section.

For more information on our WealthTech Report series or on how to get involved with our reports, please contact office@thewealthmosaic.com.