For all the pressures it has been under, Switzerland remains the world's largest offshore center, with Hong Kong in second place, while the UAE is expanding rapidly. Cross-border wealth in the US is expected to rise 6.9 per cent from 2023 to 2028.

Global financial wealth rose by almost 7 per cent in 2023 to $275 trillion, almost reversing the 4 per cent drop in 2022 when markets took a tumble and an estimated $92 trillion in financial wealth is likely to be created in the next five years, according to Boston Consulting Group in a recent report. 

Total net wealth, covering all forms of wealth, rose 4.3 per cent last year, to $477 trillion.

Financial wealth in North America and Western Europe rose last year. Supported by strong equity markets, the region was among the fastest-growing regions, accounting for more than 50 per cent of all new financial wealth in 2023. However, the recovery was not as strong in Western Europe, where financial wealth rose by 4.4 per cent.

Although financial wealth in Asia-Pacific grew by only 5.1 per cent in 2023, predominantly due to a slowdown in wealth creation in China, BCG expects a “significant increase," with the region likely to contribute nearly 30 per cent of new financial wealth by 2028. In addition to China, India is well positioned to be a driver of greater wealth; it has already generated roughly $590 billion in new financial wealth in 2023, its largest increase in history. 

Among other details of the BCG Global Wealth Report 2024, despite all the changes affecting the Alpine state in recent years, such as the loss of bank secrecy and last year's Credit Suisse drama, Switzerland is still the world’s largest hub for cross-border wealth, growing in line with its historical average of 4.8 per cent and gaining the most wealth in absolute dollar terms. Switzerland's wealth, which stood at $2.6 trillion in 2023, is expected to rise at a compound average growth rate (CAGR) of 3.6 per cent through 2028, BCG said.

Hong Kong is in second place as a cross-border center, at $2.4 trillion last year, with an expected CAGR of 6 per cent; Singapore is third at $1.7 trillion (8.5 per cent); the US is fourth at $1.3 trillion (6.9 per cent); the UK mainland is fifth at $900 billion (3.8 per cent); the Channel Islands and Isle of Man are sixth at $700 billion (2.7 per cent); the United Arab Emirates is seventh at $600 billion (7.7 per cent); Luxembourg is eighth at $500 billion (4.6 per cent); the Cayman Islands are ninth at $400 billion (4.4 per cent); and the Bahamas are 10th at $400 billion (4.7 per cent).

UAE dynamics, Hong Kong hits speed bump
The report said that the “most remarkable growth dynamics” emerged in the United Arab Emirates, which is the world's seventh-largest booking center and is expected to surpass the Channel Islands and the Isle of Man as the sixth-largest by 2028.

As for Hong Kong, the city’s anticipated rise to become the top global financial hub was stalled by a temporary but significant slowdown in Chinese inflow, BCG said. The jurisdiction’s severe anti-Covid restrictions during the pandemic, plus the new national security law enforced by Beijing in 2020, appear to have affected Hong Kong. 

“Singapore now appears to be in a position to challenge Hong Kong’s rise over the long term,” BCG said.

No room to relax
Reflecting on the bounceback in wealth last year, the report said that while this was welcome news for advisors and banks, it is no reason to relax. Margins have fallen “significantly” since 2007 – the year before the financial crash.

“Industry players can no longer rely exclusively on revenues from interest income, and they face rising costs due to inflation, operational inefficiencies, and tightening regulatory requirements,” the report said. 

Perhaps inevitably, generative artificial intelligence makes an appearance in this year’s report. AI will “play a crucial role in the digital transformation of wealth managers, with use cases along the entire value chain,” BCG said.

AI and wealth
BCG’s GenAI in Financial Institutions benchmarking survey found that among more than 60 major financial institutions – including many wealth managers and private banks – 85 per cent think that GenAI will be a highly disruptive and/or transformational force. 

But even though everyone is talking about it, many players are still hesitant to adopt it, BCG said, with 82 per cent of those it questioned lacking an overarching, longer-term GenAI strategy and a short-term implementation roadmap.

“GenAI and other AI tools will disrupt the traditional ways of working for wealth managers,” said Akin Soysal, a BCG managing director and partner and a co-author of the report. From client acquisition and onboarding to servicing and ongoing support, there are many ways that technology will streamline operations – also in the area of compliance – while improving customer experience. The challenge for wealth managers is to know where to begin.”