When Clients Take the Lead - Global Wealth 2021 June 2021 By Anna Zakrzewski, Joseph Carrubba, Dean Frankle, Andrew Hardie, Michael Kahlich ...
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When Clients Take the Lead Global Wealth 2021 June 2021 By Anna Zakrzewski, Joseph Carrubba, Dean Frankle, Andrew Hardie, Michael Kahlich, Daniel Kessler, Hans Montgomery, Edoardo Palmisani, Olivia Shipton, Akin Soysal, Tjun Tang, Andre Xavier
Contents
07 The Evolution of Wealth The Decumulation Phase Is a
35
• 08 Framing the Revenue Opportunity Golden Opportunity for Retirees
• 09 Real Assets Double the Wealth Pool and WMs
• 10 Liabilities Represent an Unfulfilled • 36 The Decumulation Dilemma
Opportunity
• 37 Introducing an Advisor-Led, Digitally
Enabled Decumulation Model
• 40 Five Ways to Defend and Grow the
17 The Simple-Needs Opportunity Decumulation Advantage
• 18 A Bold, New Digital Wealth
Management Model
• 20 Winning by Thinking and Acting Like 42 Conclusion
a Tech Company
43 About Our Methodology
25 The New Ultras
Boston Consulting Group partners with leaders • 26 Today’s Next Gens Are Tomorrow’s 44 About the Authors
Ultras
in business and society to tackle their most
important challenges and capture their greatest • 30 To Wow the Ultras, Avoid These
opportunities. BCG was the pioneer in business Seven Sins 46 Acknowledgments
strategy when it was founded in 1963. Today,
we work closely with clients to embrace a
transformational approach aimed at benefiting 47 For Further Reading
all stakeholders—empowering organizations to
grow, build sustainable competitive advantage,
and drive positive societal impact.
Our diverse, global teams bring deep industry and
functional expertise and a range of perspectives
that question the status quo and spark change.
BCG delivers solutions through leading-edge
management consulting, technology and design,
and corporate and digital ventures. We work in a
uniquely collaborative model across the firm and
throughout all levels of the client organization,
fueled by the goal of helping our clients thrive and
enabling them to make the world a better place.
Preface
Sometimes, it takes having the world turned upside down to understand what it should
look like right-side up.
After a year and a half of norm-busting events, individuals and businesses know what
is essential and what is not. Having adapted to extraordinary challenges, we’ve all
learned that it’s possible to pivot in ways we couldn’t have imagined before. And
having lived through dizzying changes, we’ve seen firsthand the importance of client
proximity, speed, and efficiency.
Wealth managers now have a chance to put that perspective into practice in their
own work. For a long time, the typical industry model has operated in an inside-out
fashion. It’s time to correct that. Instead of following a corporate agenda, wealth
managers must pursue a client agenda. Instead of sorting clients by their wallets, they
must differentiate them by their needs and use behavioral insights to unlock new
sources of value. And instead of letting complexity and cost dictate the pace of inno-
vation, they must let clients set the tempo, employing digital platforms and cross-
functional teams to speed go-to-market and to scale impact.
The next five years have the potential to usher in a wave of prosperity for individuals
and wealth managers alike. But sizing and capturing that opportunity requires adopt-
ing a client’s eye view and reorienting the entire business model accordingly.
For Boston Consulting Group’s 21st annual Global Wealth Report, my colleagues and I
sought to do just that. We started with a radically simple proposition—understanding
what clients needs are at each step of the wealth management life cycle. By shifting
focus from wallets to needs, our analysis revealed whole segments that wealth man-
agers are either underserving or not serving at all. These include individuals with
simple needs, the new ultras, and the “affluent retiree” market—a $90 trillion invest-
able wealth pool today.
Through interviews, analysis, and detailed examples, we lay out what it takes to attract
and retain these clients and serve them in a competitively sustainable way. Although
these examples represent some of the largest opportunities for wealth managers,
they are just a subset of the total number available for those willing to change or
rethink their approach.
The pandemic may have turned the world upside down, but it has also created the
opportunity to refocus on first principles and see what’s truly important. Wealth
managers have talked about being client-led for years. Now they have the chance—
and the imperative—to deliver on it.
We hope that the ideas expressed here prompt stimulating conversation, and we look
forward to continuing that dialogue with you.
Anna Zakrzewski
Managing Director and Partner
Global Leader, Wealth Management
4 GLOBAL WEALTH 2021: WHEN CLIENTS TAKE THE LEAD BOSTON CONSULTING GROUP 5
The Evolution
of Wealth
Not even a pandemic could break global wealth’s increase in 20 years. Markets shrugged off early jitters and
resilience in 2020. sent many indices and equities to record highs by the
year’s end.
When we issued our report last year, the pandemic had
just plunged the world’s economy into its worst recession Flush with cash and encouraged by the prospect of robust
since World War II. Analysts expected global wealth to returns, individuals directed more wealth into equities and
contract, and perhaps severely. Following the 2008 finan- investment funds and away from lower-yielding debt secu-
cial crisis, financial wealth declined by 8%, and the eco- rities, continuing precrisis trends. Many also embraced
nomic impacts of the pandemic looked to be every bit as alternative investments such as private equity, private
punishing, if not worse. debt, and real estate in the quest for even higher yields.
Last year was anything but typical, however. Instead of The next five years may be stronger still. We see signs of
shrinking, global financial wealth soared, rising 8.3% over an emerging economic recovery that could significantly
the course of 2020 to reach an all-time high of $250 trillion. expand prosperity and wealth between now and 2025. This
Behind the boom was a spike in net new savings and growth will create extraordinary opportunities for wealth
strong stock market performance fueled by highly support- managers (WMs), but it will require them to look at the
ive central banks. Cash and deposits grew by 10.6% over market through a new set of lenses.
the previous year’s numbers, marking the largest annual
Analysts expected global wealth to contract
due to the Covid-19 pandemic. But instead
of shrinking, global financial wealth soared,
rising over 8.3% over the course of 2020 to
reach an all-time high of $250 trillion.
6 GLOBAL WEALTH 2021: WHEN CLIENTS TAKE THE LEAD BOSTON CONSULTING GROUP 7
Exhibit 1 - Absolute HNWI Investable Assets and Revenue Growth, Lenses for Looking at Wealth Real Assets Double the Wealth Pool
2020–2025 Financial wealth accounted for $250 trillion (52%) of global
wealth in 2020. But real assets effectively doubled the size
Absolute ∆ in HNWI investable wealth 2020–20251 ($trillions) of the pool. Led primarily by real estate ownership, these
431
Absolute ∆ in WM revenues 2020–20252 ($billions) assets generated $235 trillion, or 48% of total global
wealth.
Asia (excluding Japan) Asia (excluding Japan) has the largest concentration of
GLOBAL 8.0
Middle East $trillions wealth in real assets, which comprise 64% of the regional
0.3 Total net wealth
25.7 24.1 Latin America 0.9
total ($84 trillion), followed by Western Europe (55%, $64
trillion). In North America, real assets account for just 28%
0.4
87.1 1.9
Oceania of the region’s wealth, with the remaining 72%, or $111
trillion, in financial assets.
0.3
1.2
Real assets tend to make up the preponderance of overall
wealth (63%) in growth markets.1 The reverse is true in
mature markets.2 There, financial assets are responsible
for a larger share of wealth (59%). This is due to several
factors: mature countries have well-established financial
Africa markets that are easier for individuals to access, and they
0.1 also have stable currencies that encourage wealthy people
North America Eastern Europe 0.2 to maintain holdings in cash, deposits, securities, and other
13.5 Western Europe and Central Asia liquid assets. Growth markets that lack these elements
44.7 2.4 0.3 often see individuals place a greater share of their wealth
11.8 in physical assets.
1.5
Over the next five years, however, a combination of greater
Sources: Global Wealth Report 2021; BCG global wealth market sizing and benchmarking database. financial inclusion and growing capital market sophistica-
Note: Wealth in local currency was converted to US dollars at the 2020 year-end exchange rate across all time periods. tion will change the wealth composition in growth markets.
1
Absolute ∆ in HNWI investable onshore wealth 2020–2025 is the change in HNWI investable onshore wealth from 2020 to 2025, excluding currency In Asia, for example, financial asset growth is likely to
effects. 2 The WM channel comprises players and business units that provide wealth management services to HNWI customers (with financial wealth
of more than $1 million), via WMs or as standalone units of universal banks. For the US, wirehouses, bank trusts, registered investment advisors, and Total net wealth = Financial wealth + Real assets – Liabilities exceed real asset growth (7.9% versus 6.7%). In particular,
additional smaller WM providers are also included. investment funds will become the fastest-growing financial
asset class, with a projected CAGR of 11.6% through 2025.
This spike comes as more individuals embrace viable
Framing the Revenue Opportunity Tomorrow will be a different story. Key Insights About 2020 alternatives to investments in traditional real assets.
Total global financial wealth reached a record high in 2020
Asia’s WM revenue pools will soar Market Sizing
of $250 trillion. Over the next five years, North America faster than any other market’s
and Asia (excluding Japan) will be the leading financial worldwide, almost doubling over
wealth generators in absolute terms, followed by Western
Europe. (See Exhibit 1.) Together, these three regions will the next five years to $52 billion. +10.6% Record growth
of deposits
account for 87% of new financial wealth growth worldwide The key driver? Greater WM
between now and 2025. Of the $65 trillion in global finan-
cial wealth that we expect to see generated over this peri-
penetration.
od, $25 trillion will come from North America, $22 trillion Our modeling suggests that WM assets under manage-
from Asia, and $10 trillion from Western Europe. The ment (AuM) in Asia will expand at a compound annual
remaining regions of the world will have only a marginal growth rate of 11.6% from now until 2025, outpacing the
impact on new wealth generation, especially when viewed growth in investable onshore wealth of high net worth
individuals (HNWIs), which will be approximately 10.4%. Strong capital +11.5%
individually.
markets
Asia is also becoming a larger hub for cross-border wealth.
As promising as that outlook is, WMs need to view global By 2023, Hong Kong will be the biggest booking center
wealth through a revenue lens in order to see the true worldwide. (See the sidebar “A Change of Leadership in
opportunity for banks and advisors. Today, Asia has low Global Cross-Border Wealth.”)
levels of WM penetration. North America dominates, with
WMs in the region having generated $150 billion in reve-
nues in 2020, nearly two-thirds (64%) of the global total Solid real
+6.8% estate market
($235 billion.) Western Europe remains firmly entrenched 1. Growth markets consist of the regions Latin America, Africa, Eastern
in second place ($43 billion in revenues, 18%), and Asia Europe, Middle East and Asia (excluding Japan).
comes in a distant third, at $28 billion (12%). 2. Mature markets consist of the regions North America, Western
Source: BCG Global Wealth 2021. Europe, Japan, and Oceania.
8 GLOBAL WEALTH 2021: WHEN CLIENTS TAKE THE LEAD BOSTON CONSULTING GROUP 9
Significant Differences in Wealth Allocation Among Regions North 2015 2020 2025 Asia 2015 2020 2025 Western 2015 2020 2025
America (excluding Japan)
Europe
Financial assets, real assets, and liabilities ($trillions)
+7.2% +4.4% +9.5% +6.8% +4.1% +3. 0%
95.9 136.0 168.4 74.1 116.9 162.7 84.4 103.0 119.2
Financial
assets
78.7 110.6 135.3 29.2 46.8 68.4 42.9 52.6 62.5
assets
Real
32.5 43.7 53.8 51.9 83.6 115.4 53.1 63.8 71.8
Global 2015 2020 2025
Liabilities
–15.4 –18.3 –20.8 –7.0 –13.5 –21.1 –11.6 –13.4 –15.0
+6.7% +4.8%
Financial assets consist of cash and Financial 312 431 544
deposits; bonds, equities, and investment assets Japan Latin Middle
fund shares; life insurance and pensions; +1.4% +0.8%
America
+10.0% +7.8%
East
+7.7% +6.4%
and other small asset classes 183 250 315
25.8 27.6 28.7 8.0 12.9 18.8 7.7 11.1 15.1
Financial
assets
Real assets consist of real estate (including 16.8 18.3 19.3 3.9 5.7 8.0 3.5 4.8 6.3
assets
land owned by individuals), consumer
Real
durables, and valuables (such as 170 235 296
assets
Real
11.8 12.5 12.7 4.9 8.3 12.2 4.8 7.1 10.0
nonmonetary gold and other metals
valued at current prices)
Liabilities
Liabilities
–2.7 –3.1 –3.3 –0.8 –1.1 –1.4 –0.6 –0.8 –1.1
Liabilities include credit card loans, –41 –53 –67
mortgage loans, and other short-term and
long-term loans
Oceania Eastern Europe Africa
+6.1% +4.5% +8.4% +5.8% +10.3% +7.1%
and Central
7.7 10.4 12.9 Asia 6.2 9.3 12.4 2.1 4.1 5.8
Financial
assets
3.8 5.3 7.1 2.6 4.1 5.7 1.2 1.9 2.5
Liabilities Represent an Unfulfilled Opportunity been more resilient to margin compression than either
deposits or invested assets. WMs have several advantages
assets
Real
Now totaling $53 trillion globally, the liabilities market is that can help them boost their share of the HNWI and 5.5 7.1 8.2 4.2 6.1 7.8 1.5 2.6 3.7
growing at a rate comparable to that of financial wealth, UHNWI wallet. These include their close and often long-
making it an attractive—though still largely untapped— standing client relationships, their specialized expertise,
area for WMs. HNWIs and ultra high net worth individuals and their distinctive lending products. But WMs that want Liabilities
–1.6 –2.0 –2.4 –0.6 –0.9 –1.1 –0.2 –0.3 –0.4
(UHNWIs) hold $9.4 trillion in liabilities worldwide, but to grow their market share must professionalize their
WMs service only 41% of these loans. The remaining $5.6 approach to credit risk management, bundle liabilities
trillion is in the hands of retail and wholesale banks, insur- with traditional banking services (such as savings accounts,
ers, and other lenders. credit cards, and overdrafts), bring an integrated perspec-
tive to clients’ balance sheet planning and product engi-
WMs that persist in their current approach to the liabilities neering by advising on products such as Lombard loans Sources: Global Wealth Report 2021; BCG global wealth market sizing and benchmarking database.
market will lose out on significant revenue potential. In and structured loans, and speed-up credit approval pro- Note: Wealth in local currency converted to US dollars at the 2020 year-end exchange rate across all time periods. Financial assets are per the SNA
addition to their attractive growth, liability products have cesses and procedures. 2008 reporting standard, in $trillions. Growth percentages for the period 2015–2020 and 2020–2025 represent the relevant compound annual growth
rates over the period. Because of rounding, not all totals exactly match the sum of the component numbers listed.
10 GLOBAL WEALTH 2021: WHEN CLIENTS TAKE THE LEAD BOSTON CONSULTING GROUP 11
$trillions $trillions
Financial wealth
Financial wealth
$trillions $trillions
Wealth
Wealth managers’ AuMmanagers’ AuM
250
34
250
34
141 141
76 76
$trillions
From Total HNWIs’
$trillions
and
HNWI
HNWI investable
Ultras’
investable Investable
wealth wealth Wealth
to Wealth Management Revenues $trillions
$trillions
Investable wealth
Investable wealth FROM
FROM TOTAL TOTALINVESTABLE
HNWI+ HNWI+ INVESTABLE WEALTH
WEALTH TO TO MANAGEMENT
WEALTH WEALTH MANAGEMENT REVENUES
REVENUES
Wealth management stake (I) Wealth management stake (II)
Wealth management stake (I) Wealth management stake (II)
HNWIs’ and ultras’ wealth,
Wealthandmanagement
wealth manager
stakepenetration
(I) WealthWealth
manager revenues
management on HNWIs
stake (II) and ultras
HNWI+
HNWI+ investable investable
wealth wealth
and wealth and wealth
managers’ managers’ penetration
penetration Wealth
Wealth managers’ managers’
revenues revenues on HNWI
on HNWI
2020 ($trillions)
2020 ($trillions)
2020 ($billions)
2020 ($billions)
Absolute growth 2020–2025 ($trillions)
Absolute growth 2020–2025 ($trillions)
Absolute growth 2020–2025 ($billions)
Absolute growth 2020–2025 ($billions)
WM penetration 2020 (%)
WM penetration 2020 (%)
Wealth, 2020
47.2 47.2
12.4 12.4
10.3 10.3
3.0 3.0
0.8 0.8
0.8 0.8
0.7 0.7
0.7 0.20.7 0.2
($trillions)
Absolute growth,
13.5 13.58.0 8.0
2.4 2.4
0.4 0.4
0.3 0.3
0.4 0.4
0.3 0.3
0.3 0.10.3 0.1 Wealth, 2020
149.7 149.7
27.7 27.7
43.1 43.1
4.3 2.04.3 2.0
3.2 3.2
2.7 2.7
1.7 0.31.7 0.3
2020-2025 ($trillions) ($billions)
Absolute growth,
44 39 39 63 44.724.1 24.1 11.8 1.20.8 1.2 1.9 1.5 0.20.9 0.2
4326 43 58 47 2037 20
Wealth manager
penetration, 2020 (%) 44 63 26 58 47 37 44.7
2020–2025 ($billions) 11.8 0.8 1.9 1.5 0.9
Asia Eastern Asia Eastern
Asia
North Western Eastern
Latin Middle North NorthAsia Western Western Latin
Eastern
Latin Middle Middle
North Western
(excluding Japan Latin
Oceania Middle
Europe and Africa (excluding Japan Oceania Europe and Africa Africa
(excluding
America Japan
Europe Oceania Europe
Americaand Africa
East (excluding
America Japan
Europe Oceania Europe
Americaand East
America Europe America East America Europe
Japan) America East
Japan) Japan) Central Asia Central Asia Japan) Central Asia Central Asia
Source: BCG Global Wealth 2021.
12 GLOBAL WEALTH 2021: WHEN CLIENTS TAKE THE LEAD BOSTON CONSULTING GROUP 13
A Change of Leadership in Global Cross-Border Financial Centers
Switzerland was the largest cross-border booking center in Over the next five years, Singapore will remain the third- The US will see cross-border AuMs grow at a CAGR of 6.9% Switzerland will experience modest AuM growth of just
2020. But we expect Hong Kong to take the lead in 2023 largest booking center in size and the fastest-growing one during this period, reaching $1.3 trillion by 2025. Latin 3.2%. Flows from Germany, France, and Italy will remain
by overall size, with strong inflows from mainland China overall, with AuMs anticipated to climb by a CAGR of 9.1% America will drive 72% of this growth, propelled by individ- low, but declines in these areas will be partially offset by
driving AuMs to a staggering $3.2 trillion by 2025, a CAGR and reach $1.9 trillion by 2025. Some of this surge will uals seeking state-of-the-art investing capabilities and an rising inflows from growth markets. New growth market
of 8.5%. (See the exhibit.) come from investors who bypass Hong Kong out of con- investor-friendly environment. An additional 18% of US flows represented 59% of Switzerland’s cross-border AuMs
cern for political and social instability as well as from cross-border wealth growth is likely to come from Asia. in 2020, and they are expected to represent 61% by 2025.
rapidly rising sourcing markets such as Taiwan.
Leading Global Cross-Border
Financial Centers Hong Kong Singapore
Cross-border financial center wealth, 2020 Switzerland CAGR, 2020–2025 (%) 9 9
($trillions)
Sources: Global Wealth Report 2021; BCG global wealth market CAGR, 2020–2025 (%) 3 Dependence on 49 70
sizing and benchmarking database.
Note: Cross-border wealth is defined as financial wealth booked
in a jurisdiction separate from the wealth owner’s jurisdiction of
Dependence on 59 2.1 cross-border wealth (%)
domicile. All dollar figures are expressed in US dollars. cross-border wealth (%) Top source region of Asia Asia
1Although we anticipate that the tenth-largest cross-border cross-border wealth
financial center in 2025 will be Cyprus, we have replaced it with Top source region of Western
Liechtenstein in the 2025 ranking chart because Liechtenstein
has a more geographically diverse client base and global status. cross-border wealth Europe
2.4
1.2
2020 ranking 2025 ranking
1. Switzerland Hong Kong
2. Hong Kong Switzerland
3. Singapore Singapore
4. US US
5. CI and Isle of Man UAE
0.9
6. UAE CI and Isle of Man
7. UK mainland UK mainland 0.5
8. Luxembourg Luxembourg
9. Monaco Monaco
10. Liechtenstein Liechtenstein1 0.4 0.4 0.3 0.2
0.5
US UAE CI and Isle of Man Luxembourg UK mainland Monaco Liechtenstein
CAGR, 2020–2025 (%) 7 5 2 CAGR, 2020–2025 (%) 3 4 2 2
Dependence on 1.5 66 >90 Dependence on 80 10 >90 >90
cross-border wealth (%) cross-border wealth (%)
Top source region of Latin Middle Western Top source region of Western Western Western Western
cross-border wealth America East Europe cross-border wealth Europe Europe Europe Europe
14 GLOBAL WEALTH 2021: WHEN CLIENTS TAKE THE LEAD BOSTON CONSULTING GROUP 15
The Simple-Needs
Opportunity
The Size of the Prize Globally
331 118
59
million clients $billions
revenue pools
CAGR, 2020–2025 $trillions
3.2% investable wealth CAGR, 2020–2025
6.8%
CAGR, 2020–2025
4.1%
WMs are staring at a large,
Sources: BCG global wealth market sizing and benchmarking database 2021; BCG needs-based Affluents segmentation 2020.
untapped market. It consists
of individuals who have
uncomplicated investment WMs often overlook people in the simple-needs segment That’s a missed opportunity. The simple-needs segment
whose wealth is $1 million or less because their assets are numbers 331 million individuals, holds $59 trillion in
needs, somewhat limited too large to conform to retail offerings and too small to investable wealth, and has the potential to contribute $118
attract the attention that higher net worth tiers draw. At billion to the global wealth revenue pool. And that base is
financial knowledge, and the upper end, individuals with wealth of between $1 and about to get larger. But winning this segment requires
$3 million often find themselves besieged by relationship embracing a radically different business model, predicated
financial wealth of between managers (RMs) who offer the same standardized set of on a deep understanding of client needs and optimized for
products. The result is a low degree of personalization and efficiency.
$100,000 and $3 million. We a lackluster client experience with no “wow” factor.
call it the “simple-needs
segment.”
16 GLOBAL WEALTH 2021: WHEN CLIENTS TAKE THE LEAD BOSTON CONSULTING GROUP 17
Who the Clients Are and What They Need choices that put their funds at risk. Arcane terminology right to see their account’s performance in different time
and technical language can be intimidating, too. (See scales, and they can scroll down to dig deeper into their
Exhibit 2.) Because clients’ level of comfort with numbers holdings and the performance of individual stocks. In
can differ considerably, financial terminology—such as addition, WMs need to make portfolio dashboards and
percentage changes and yields—that seems basic to some simulation tools readily available. A client can use them to
people can read like a foreign language to others. To make explore scenarios such as whether investing slightly more
~70% Baby boomers (~51–70 years old) educational content more accessible, WMs should try to per month might bring their retirement date closer, there-
~20% Generation X (~35–50 years old) use nonfinancial terms and visual aids. Interactive charts, by increasing the tangibility of investment outcomes. And
~30%–50% of clients have instant feeds, and gamification make learning more invit- finally, given the rising popularity of environmental, social,
little wealth invested ~10% Millennials (Democratized Access to “Haute” Investments made available to clients in the simple-needs segment. In soar by as much as 40% to 50%. A strong digital model can The Operating Model of the Future
addition to making these offerings available, WMs must also boost market capitalization, enabling WMs to achieve
Private equity, hedge funds, and venture capital have long make them comprehensible, a task that involves present- multiples similar to those that tech companies enjoy. For
for Simple-Needs Clients
been the exclusive preserve of institutional clients and very ing sophisticated financial products in an intuitive and example, Coinbase acquired more than 50 million paying
wealthy individuals. The same is true for securities-backed easy-to-understand way and applying the same learning customers and reached a market cap of $60 billion in only Instead of reinforcing artificial divides that segregate the
lending and thematic investment. Innovative WMs will logic that we detailed earlier. (See Exhibit 3.) seven years. The tech improvements that WMs make to front office from the product and back offices, WMs must
provide simple-needs clients with greater access to these serve the simple-needs segment can pay off in other areas create a one-bank approach that treats collaborative,
investment categories and to the prospect of greater Although WMs will continue to serve simple-needs clients of the business as well, improving service quality and cross-functional teaming as the default way of working.
wealth. For example, a pre-IPO investment that might primarily through a discretionary investment model—for cost-to-serve in higher wealth tiers. Despite its name, the This operating model supports experimentation and al-
normally require a minimum stake of millions of dollars instance, most WMs will not offer such clients advice on simple-needs segment will be the avant-garde for WMs lows institutions to deliver innovations to the market at a
could be sold to mass wealth clients at much smaller individual stocks—digitization will permit greater portfolio and a testing lab of digital innovation. much faster tempo. Roles and responsibilities will evolve
investment levels by aggregating individual demand. Like- customization than is possible today without creating in kind. For example, RMs will no longer act solely as
wise, other HNWI and UHNWI offerings, such as access to cost-to-serve problems. Over time, these advances may Start Small and Move Fast sellers. Instead, they’ll actively support the design team,
subject matter experts, private equity deal talks, and hedge blur the line between discretionary and advisory models. bringing the client’s voice to the development process,
fund investing master classes, can be scaled down and WMs should adopt a “build-measure-learn” model to co-creating digital solutions, and advising on features and
develop a minimum viable product, place it in the market offerings.
as quickly as possible, and then test and refine it in rapid
Exhibit 3 - Democratizing Access to Private Banking cycles. The Canadian fintech Wealthsimple, for example, In order for these changes to work, however, organizations
has compressed its development timelines, supported by must develop a new set of key performance indicators, and
Initial view of next-generation mass-market products (non-exhaustive) processes that solicit immediate and direct client feed- they must realign their incentive schemes. This step is
back. As a result, Wealthsimple was among the first com- crucial and entails more than simply dusting off existing
panies to build commission-free trading and crypto trading performance metrics. Rather, WMs should invest in a
into its platform. It also launched a spate of popular fea- thoughtful change management and training approach
tures such as peer-to-peer money transfer, automated that will encourage collaborative teaming and help em-
portfolio rebalancing, and optimized tax-loss harvesting ployees transition successfully to the new model.
within just a few months—far faster than traditional re-
Customizable discretionary mandates
lease cycles. Talent needs will also shift. The usual mix of sales, prod-
More sophisticated portfolio uct, tech, risk, and operations capabilities will not suffice.
management tailored to clients' goals, WMs must ensure that foundational digital enablers are WMs will have to acquire expertise in data mining and
enabled by tech in place, too. These include ready access to data, a strong analytics, customer-centric design, agile delivery, and other
analytics infrastructure, a diversified tech stack, and cross- skills. Given the high demand for these capabilities in the
Alternative investments functional teams capable of converting raw client intelli- broader marketplace, WMs must approach hiring and
gence into superior insights and delivery. (See the sidebar retention strategically, nurturing talent within their own
Private equity, venture capital, and
real estate in share classes for “The Operating Model of the Future for Simple-Needs workforce and applying best practices from other sectors.
smaller investors Clients.”)
Lending in the
investment context
What Success Looks Like: Harnessing Digital to Win This Segment
Lombard loans and financing-backed
investments extended to smaller
1
investors, via tech
Pre-IPO shares
Hyperpersonalization 4
Access to private sale of shares at scale
before a stock is listed on a public
stock exchange
2 Pricing and reporting
simplicity
Sources: BCG Global Wealth 2021; expert inputs; company information.
Supercharged
RM
15–30
bps
Winning by Thinking and Acting Like tions quickly. The payoff for firms that figure out how to do 3 5 Cost to serve
a Tech Company this well, especially in serving those at the lower end (indi-
viduals with $1 million or less in investable wealth), is Scale-down of
Contextual, consumable UHNWI offerings
The digital model presented here is clearly disruptive, but likely to be huge, as these individuals represent, on aver- learning
it is also the way of the future for this segment of simple- age, 50% to 60% of WMs’ client base worldwide. Some
needs clients. WMs can win that future by emulating tech fintechs, for example, have been able to build a base of 20 Digital will deliver better client servicing… …at much lower cost
leaders. It is essential to translate client feedback into million clients in just a few years. WMs that get their mod-
compelling products and features and to release innova- el right could see revenue pools from simple-needs clients Sources: BCG global wealth market sizing and benchmarking database 2021;
BCG needs-based Affluents segmentation 2020.
20 GLOBAL WEALTH 2021: WHEN CLIENTS TAKE THE LEAD BOSTON CONSULTING GROUP 21Exhibit 4 - Eight Standout Levers for Client Acquisition, Activation, and Such information can help a WM nurture demand. For ment offices staffed with specialists who focus on sales
Retention example, knowing that an individual was in the middle of
divorce proceedings could prompt the WM to send perti-
pitches and support client onboarding. Creating these
dedicated groups can help WMs boost sales while freeing
nent information, such as a set of articles on financial man- RMs to spend more time on content conversations, expert
agement offerings designed to offset the impact of alimony counseling, and client handholding before and after a sale.
Behavioral investment nudges Celebrations of clients' payments. Much of this outreach could be automated.
E.g., allow clients to set their financial betterment Supporting all of these activities are such foundational
own investing rules, such as E.g., grant cash-backs when clients reach WMs can also use digital tools to assist in qualifying and elements as automated lead scoring, a marketing automa-
"Invest $X every time you beat specific AuM thresholds
your friend at tennis" delivering leads. For example, Goldman Sachs Personal tion suite, and customer relationship tools.
Financial Management has created a series of engaging
quizzes that prospective clients can complete as part of
the presale discovery process. Encompassing behavioral
The race is on. The next few years
Harnessing a mobile
banking relationship
Social media marketing
E.g., showcase influencers
science, the quizzes invite self-reflection, often helping will see a revolution in how WMs
E.g., place smartphone talking about their individuals crystallize how they think and feel about their serve the simple-needs segment.
financial future in ways that they may not have previously
pop-ups and banners
on clients’ online banking
investing experience
realized. Such approaches provide implicit value even The winners will be those that can
key pages before the relationship has commenced and help increase spin up the most compelling digital
prospective clients’ openness to further engagement. wealth platform at the fastest rate
Leading WMs are updating their sales conversion practic- and sustain that pace over time.
es, too. For example, some are creating business develop-
Partnership with Out-of-the-box
employers’ groups referral programs
E.g., give discounted CFA E.g., allow clients to skip
advisor consultations
to partners companies' employees
the queue when enrolling friends
Exhibit 5 - Wealth Management Marketing and Sales in the 2020s
Demand
center le
d
Premium content Free high-quality tools Sales led
marketing prelaunch E.g., provide a free credit score
E.g., publish a catchy personal calculator to drive traffic
finance blog to create hype
Sources: BCG Global Wealth 2021; CB Insights 2021; company information.
Master the Art and Science of Client Acquisition, Embrace Next-Generation Marketing and Sales
Activation, and Retention
Digitization can allow WMs to substantially elevate their Qualify and
Tech stars recognize that building, activating, and retaining marketing and sales game for all segments, from lead Identify leads Nurture demand Convert to sales
deliver leads
a large and loyal client base is essential to creating net- generation to qualification and sales conversion. (See
work effects. They also understand that acquiring that base Exhibit 5.) In the area of lead generation, for example, a
External data sources for new Hook offerings to drive Presale client discovery toolkits RM/advisor actions dashboard
is a major undertaking: growing adoption can cost six WM could reduce the amount of time it typically takes to leads/contacts, at key trigger engagement/initial purchase (money mindset, goals, and CRM tools
times what it takes to build the digital platform itself. To surface potential targets by pulling in a wider array of points (content or products) tradeoffs)
Business development office for
improve performance for simple-needs clients (and all external data. Analytics could scour information from on- Marketing toolkit expansion to Personalized and automated Demand center for centralized sale conversion
other segments), WMs should focus on a proven set of line real-estate marketplaces and look for known triggers, capture actionable leads and nurturing journeys (content appointment setting (inside
acquisition, activation, and retention levers. (See Exhibit 4.) such as a set of high-end properties for sale. Public records contacts (e.g., digital marketing) driven) sales, digital channels) Optimized client onboarding
post-sale conversion
could then say who the current homeowners are and pro- Simplification/digitization of Further enriched life event RM/advisor match capability
Establishing a larger presence on social media networks can vide the WM with a tangible lead. Partnerships with law referral journeys, gamification/ triggers; e.g., account
incentives aggregation for existing
extend reach. Some WMs are increasing their digital media firms and other professional services organizations could customers
marketing on sites such as Facebook and Instagram, where enrich the data pool further, helping to identify individuals
they can gain instant visibility among target segments, at pivotal life stages, whether starting a new business or
especially younger demographics. Together, these steps can going through marriage or divorce. Enhance orchestration to optimize demand generation pathways (data layer, automated lead scoring, marketing automation suite, CRM tools
help WMs improve client engagement and reduce churn. and approaches, sales and marketing feedback loops)
Sources: BCG Global Wealth Report 2021; BCG experience.
22 GLOBAL WEALTH 2021: WHEN CLIENTS TAKE THE LEAD BOSTON CONSULTING GROUP 23The New Ultras
In 2020, more than 6,000 people worldwide became ultras. Should growth continue at its current 13% annual rate,
That uptick caps a decade of expansion by the segment, China will be home to $10.4 trillion in ultra assets by 2029,
with year-on-year growth of 9% since 2015. The ultra brack- more than anywhere else in the world. The US will be close
et, consisting of individuals whose total financial wealth behind, with a forecasted total of $9.9 trillion in investable
exceeds $100 million, now includes 60,000 people and a wealth by 2029.
combined $22 trillion in investable wealth, representing
15% of the world’s total investable wealth. Aside from these two heavyweights, ten other countries will
present attractive, long-term opportunities. (See Exhibit 6.)
With this surge in growth come changes in where wealth is
concentrated, how it is generated, and who holds it. The
US sits at the top of the league table in UHNWI concentra-
tion, as it has for some time. But China is on track to over-
take it by the end of the decade.
Should growth continue at its
current 13% annual rate, China
will be home to $10.4 trillion in
ultra assets by 2029, more than
anywhere else in the world.
24 GLOBAL WEALTH 2021: WHEN CLIENTS TAKE THE LEAD BOSTON CONSULTING GROUP 25Critically, WMs that want to succeed in these high-growth Providing that caliber of service will require WMs to ex- Next Gens Enjoy a Mix-and-Match Approach to this point repeatedly in our interviews, and it’s a theme we
markets must be attuned to local differences, such as plore new product and digital frontiers. Those willing to Banking have heard from wealth clients for a long time. Yet WMs
sources of wealth. For example, in China, most ultras are stretch their models will be strongly positioned to capture still haven’t changed!
first generation, while the US and Europe have a mix of the next wave of growth, which is likely to be very large. Next gens are comfortable with independently navigating
first-, second-, and third-generation ultras. More than two- many elements of their wealth management, and they’re Next Gens Don’t Want to Be Treated Like Their
thirds of US ultras are self-made, while inherited assets Today’s Next Gens Are Tomorrow’s Ultras not inclined to pay high fees for activities they believe they Parents
account for close to half of all ultra wealth in Europe. can do well enough on their own, such as stock picking.
Over the next 10 to 15 years, the next-gen segment will be What they want are exclusive opportunities, specialized This is an important point of distinction, but many banks
There are demographic changes as well. Women have an influential driver of future growth. This segment, com- lending, and investment expertise—services and capabili- are not attuned to these generational differences. WMs
broken through the top wealth ranks in greater numbers posed of individuals between the ages of 20 and 50, in- ties they can access only through a WM. Examples include must refresh their business models and approaches if they
than ever before. Although still a minority, women now cludes current young UHNWIs, current HNWIs whose high-value alternative investments, deal opportunities, hope to satisfy the needs, values, and expectations of the
account for around 12% of all ultras, with most of them wealth will grow, and others who will accumulate life- private placements, and bespoke credit. For example, an next-gen segment.
living in the US, Germany, and China. changing wealth from inheritance or liquidity events. Col- entrepreneur might receive a starter loan collateralized
lectively, the next gen has longer investment horizons, a against her parent’s equity holdings.
What ultras want from their WMs is shifting, too. Offerings greater appetite for risk, and often a desire to use their
that seemed leading edge a few years ago, such as impact wealth to create positive societal impact as well as solid Next Gens Expect Advisors to Have In-Depth
investments and exposure to alternative asset classes, can returns. Aspirations differ greatly across the next gen, as Knowledge
look stale today. Service must be highly differentiated to do individual profiles and lifestyles. (See the sidebar “Meet
suit client needs, and omnichannel access and rich digital the Next Gen.”) Yet our interviews reveal a number of A common frustration for next gens is that too many
functionality have become standard features. cross-cutting themes. RMs—even those from the most prestigious banks—come
to meetings with generic presentations. Next gens echoed
Exhibit 6 - Top 12 UHNWI Markets
Financial investable wealth Number of ultras
2019 vs 2020 UHNWIs in 2020 2020 to 2025 ∆ 2019 to 2020
UHNW investable wealth ($trillions)
change (%) (thousands) (thousands) change (%)
US .8 2.0 15.8 20.6 7.4 15.4
Mainland China 3.6 2.9 26.5 7.8 5.8 23.9
Germany 1.4 0.4 5.9 2.9 0.7 6.4
Hong Kong 1.0 0.4 10.4 1.9 0.7 8.7
France 0.7 0.1 2.1 2.5 0.5 4.1
India 0.6 0.5 16.9 0.8 0.6 14.4
UK 0.6 0.1 3.5 2.1 0.4 4.6
Italy 0.5 -0.1 0.4 1.8 0.2 0.2
Russia 0.5 0.2 14.8 0.5 0.2 12.4
Canada 0.5 0.2 10.0 1.9 0.6 8.7
Switzerland 0.4 -0.1 3.7 0.7 0.1 3.3
Taiwan 0.4 -0.2 2020 2020 to 2025 ∆ 12.4 1.3 0.5 12.2
Source: BCG Global Wealth 2021.
Note: UHNWI = ultra high net worth individual, defined as an individual with total financial wealth of $100 million. All dollar amounts are expressed
in US dollars.
26 GLOBAL WEALTH 2021: WHEN CLIENTS TAKE THE LEAD BOSTON CONSULTING GROUP 27Meet the Next Gen
Profile
LR JD PB AB
is a 22-year-old working for a venture is a 34-year-old entrepreneur turned pro- is 27 years old and works in the family is a 38-year-old entrepreneur who grew up
within the family’s wider business. She fessional investor. He’s a self-made ultra, business. He lives between China and the in Europe and now lives in California. He
lives in Europe and enjoys competi- and lives in Texas with his girlfriend. US and has a strong interest in philosophy. enjoys comedy and watersports.
tion-level sports.
WM attitudes and relationships WM attitudes and relationships WM attitudes and relationships WM attitudes and relationships
My WM engaged when I graduated. The timing was per- Earlier, I didn’t see the value in WMs. I thought, “Why pay I don’t have a relationship with a WM firm. I’m a bit young My company raised funds with Goldman, so I decided to
fect. We’re in regular contact (WhatsApp and bi-weekly someone when I don’t know if they will do as good a job as for that, and it’s not relevant, as my parents manage fami- move my money there. They just made it easy. I don’t need
calls). He shares articles and brings a wide perspective on I could?” Now, I’d be willing to outsource if the RM can ly assets. a high level of service, but I’d pay an RM to make my life
the managerial aspects of private companies. I enjoy learn- bring me something I can’t get myself. easier.
ing from him.
Turnoffs Turnoffs Turnoffs Turnoffs
It’s unpleasant when it feels like WMs are trying to sell me The pitches I tend to see are garbage. Why the hell would I It’s off-putting when someone talks to me only because I have been contacted by a load of prestigious firms, and
something. Another pitfall some of my friends experience give this person millions of dollars? they want me to invest. I’m interested in programs where I the outreach was pretty bland. I didn’t take them up on it.
is assuming people my age understand what they are get something of value, such as when a Swiss bank brought
talking about when they may have no clue. a group of twenty-somethings together for a week to learn
about investing.
Unmet needs Unmet needs Unmet needs Unmet needs
I’m looking for private market access combined with ESG. I’d like more private direct market and alternative invest- I’m looking for a long-term methodical approach. The most I’d want more access to unique opportunities, like angel or
I’d like tangible, real impact through my investments, ments, along with exclusive business deals. I wouldn’t pay important thing to me is maintaining wealth over genera- VC investments. I prefer a DIY approach. I don’t think a
which is only possible if I invest directly (putting an ESG someone to buy stocks. tions. wealth manager can pick stocks better than I can. Plus, it’s
sticker on a basket of stocks is too disconnected). cheaper on Robinhood.
The desired advisor The desired advisor The desired advisor The desired advisor
Informality is important and a small age gap (no more My ideal advisor is highly experienced. I want the really My ideal RM is a person of high integrity and competence. “B players” go into wealth management. Competence is in
than 15 years). I’d also like someone I click with and who smart, awkward guy from The Big Short, not a well-dressed Care and professionalism are crucial. such short supply. I don’t believe they can outperform the
takes the time to explain things properly. slick talker! market. If they did, I’d ask, “Why you aren’t working for a
hedge fund?”
What’s needed to win What’s needed to win What’s needed to win What’s needed to win
A big part of the experience is learning about new invest- There needs to be an incentive structure where the firm I want to trust that we will have aligned incentives and that Stick to business. That’s what I’m paying for, and I see
ments. Instead of networking events, I’d like to attend makes money only when I do and pays to attract really they will behave in the right way. through the other bits that are ultimately going to cost me
content sessions on technical investing skills. Pricing isn’t smart people. more.
a major deciding factor.
28 GLOBAL WEALTH 2021: WHEN CLIENTS TAKE THE LEAD BOSTON CONSULTING GROUP 29To Wow the Ultras, Avoid These Seven Sins competitive advantage, even if it means forgoing the pri-
mary client relationship.
Avoid Embrace
Servicing ultras is not for every bank, but the opportunity
can be very attractive for those with the right capabilities. Both approaches can deliver enormous value, but they
WMs can approach the opportunity in one of two ways: as require WMs to avoid seven common sins. (See Exhibit 7.)
an orchestrator that serves the full suite of client needs, or The top performers over the next five years will deliver the
as a niche player that specializes in a particular area of wow factor in the following ways:
Exhibit 7 - The Seven Sins Wealth Managers Commit in Serving Ultras Failure to segment Targeted needs-based segmentation
Ultras have distinct needs and aspirations, yet many Top WMs individualize planning, and they include the
2. Transaction-driven exchanges WMs treat them as a homogeneous group and often whole team.
Contact clients only when neglect to consider an ultra’s key advisors, gatekeep-
they want to sell, forfeiting ers, and staff. WM leaders differentiate outreach and offerings
continuous engagement based on needs, not wallet. They tailor strategy to the
family’s values and communications to the ultra’s
preferred frequency, formality, and channel.
1. Failure to segment 3. Silos of individual RMs These interactions extend to the client’s support
Treat all ultras the same, Try to maximize bank network, ensuring that key people are in the loop and
and forget key advisors service offerings, have direct access to the right WM resources. For
and gatekeepers resulting in individual example, the WM can pair advisors for mega ultra
silos and gaps clients with top investment bank specialists.
Transaction-driven exchanges Interaction-driven experiences
Some WMs are so focused on the sale that they Because small moments matter, leading WMs insist
contact clients only when transaction opportunities on excellence across every touchpoint.
arise, and they fail to account for client needs in
completing those journeys. The result is missed Rather than leaving service quality to chance, strong
7. Assuming opportunities to bring value and more occasions to performers identify client journeys, and consider
next-gen loyalty 4. Product-led
engagement frustrate clients. what clients need at each stage, such as applying for
Assume that credit. They define common standards of excellence,
next-generation Try to fit the client
such as the number of days required to open an
heirs will into the offering,
account, and introduce sales force effectiveness
automatically stay instead of the
measures designed especially for ultra clients.
other way round
By elevating execution, top WMs act at key moments
6. Exclusively human and deliver value across every interaction.
approach
Bet all on high-touch
personal
attention, overlooking 5. RM-driven reactive Silos of individual RMs Bringing all of the bank
digitization decisions
Believe that analytics Despite well-intentioned efforts to offer clients the Trailblazing WMs strive to be as borderless as their
has no role with ultras, best of the bank’s array of services and expertise, too ultra clients.
and favor intuition many firms struggle to break free of organizational
over data silos, resulting in individual RM islands, service gaps, Recognizing that ultras are global citizens with com-
and suboptimal decisions. plex needs, top WMs deliver a one-bank experience.
They prioritize internal coordination, enabling RMs
around the globe to tap into client profile information
and access expertise—sparing clients the need to
repeat basic information and enabling key features
Sources: BCG Global Wealth 2021; expert inputs; interviews of UHNWIs. such as priority account opening and expedited credit
Note: UHNWIs are defined as individuals with total financial wealth of more than $100 million. approval—across all markets.
30 GLOBAL WEALTH 2021: WHEN CLIENTS TAKE THE LEAD BOSTON CONSULTING GROUP 31Product-led engagement Client-led solutions Exclusively human approach A bionic approach combining
the best of human and digital
Because they structure sales around particular offer- Winning firms work backward from the client’s needs, Many WMs believe that a high-touch model must be
ings, many WMs work to fit the client to the product creating individualized solutions. human-centered, which leads them to underinvest in Top WMs invest in digital platforms and apps to
rather than the other way around digital tools and platforms. digitally support human interactions across channels
Rather than applying one campaign to all ultras, at critical moments.
innovative WMs champion client-centricity. If a client
is interested in ESG, for example, the RM might These investments allow WMs to excel at the basics
construct a proposition based on the specific dimen- and build from there, providing clients with digital
sions the client cares most about. enablers such as an at-a-glance view of their global
portfolios and interactive modeling. In Asia, for exam-
These WMs align performance metrics to support ple, clients often interact with WMs through Whats
their client-first mindset, with growth targets tied to App and WeChat. Mobile apps can also enable self-
solutions, not campaigns, and with client satisfaction serve and direct chat. And responsive design ensures
a leading measure. that information is easy for clients to access and
read. These digital tools support human interactions
so that clients have the right information and func-
tionality at their fingertips.
RM-driven reactive decisions Anticipating needs that the client Assuming next-gen loyalty Earning next-gen loyalty
may not even be aware of having
WMs may feel that they have a good handle on how Some WMs imagine that next gens will automatically Much like luxury brand leaders, innovative WMs
best to serve ultras, relying on years of experience With a strong data and analytics backbone, top WMs stay with their family’s current wealth manager. That build authentic connections and foster lifetime
and intuition to guide them. But while such experi- provide proactive recommendations that delight and can be a dangerous assumption. relationships.
ence is certainly valuable, hunches don’t deliver the reward.
fact base needed. Relationships take time to develop, so leading WMs
These leaders make gathering robust data a priority, start early and target their outreach to the age and
and they invest in specialized algorithms to aid sales lifestyle of the next gen—for example, inviting a
planning. Advanced analytics can surface market first-time Asian entrepreneur to a founders event
triggers, revealing, for example, a client in need of headed by other Asian and global leaders. By contin-
increased leverage. Other indicators, such as the sale ually adapting engagement, WMs earn the loyalty of
of a business, can suggest which clients are about to younger ultras.
experience a life change. These insights allow the
WM to make timely recommendations. The ability to
view a client’s aggregated positions can be a power-
ful advantage, allowing RMs to offer holistic invest-
ment advice that helps clients avoid overindexing,
while also growing wallet share.
32 GLOBAL WEALTH 2021: WHEN CLIENTS TAKE THE LEAD BOSTON CONSULTING GROUP 33The Decumulation
Phase Is a Golden
Opportunity for
Retirees and WMs
Marisa is a 73-year-old Chicago native who retired eight As a result, her wealth has grown, not shrunk, leaving
years ago after a successful career as an attorney. With Marisa to wonder if she was living unnecessarily below her
total wealth of just over $2 million, she felt that she was on means. Could she afford to take that painting course in
a secure financial footing and hoped to leave a six-figure France? Should she help her kids with their expenses now
inheritance to each of her children. She and her now- rather than leaving them to wait for an inheritance? She
deceased husband received continued support from their had other lifestyle concerns beyond her finances. A recent
Wealth managers partner most financial advisor when planning their retirement, so they knee injury had sidelined her, depriving her of her custom-
could live comfortably without fear of running out of mon- ary gym routine and leading her to spend more time alone
actively with clients during ey as they aged. When she retired, most of Marisa’s wealth at home watching TV. Before retiring, she had several eye-
came from equity in her home and money she had saved opening discussions with her financial advisor about how
their accumulation phase, but in a defined contribution plan during her law career. Marisa to make the post-work chapter of her life rich and produc-
is conservative by nature, and in the early years of her tive. But she hasn’t heard from her financial advisor in
interactions often wind down as retirement she has been careful with her spending, just as nearly two years, and she now feels unsure about what her
clients reach their middle and she was throughout her working life. next move should be.
late retirement stages, leaving
many retirees asset rich and
advice poor at a time when
their needs are most complex.
34 GLOBAL WEALTH 2021: WHEN CLIENTS TAKE THE LEAD BOSTON CONSULTING GROUP 35The Decumulation Dilemma That’s particularly true for individuals in the affluent and
lower-end HNWI bands ($250,000 to $5 million in wealth).
Marisa is not alone. In fact, she is a member of one of the Individuals in these segments who are at least 65 years old
world’s fastest-growing demographics: retirees. By 2050, hold $10.3 trillion in financial assets accessible to WMs,
1.5 billion people globally—approximately one in every six (35% of the total retirement asset pool), and they generate
individuals—will be at least 65 years old. That’s twice the $13.7 billion in annual WM revenues. These individuals are
size of today’s retiree population, and it represents an especially impacted by the advisory gap in the decumula-
enormous wellspring of wealth. tion phase. Their wealth gives them options, but it also
introduces lots of questions, from tax and estate planning
Individuals in this age band today own $29.3 trillion in finan to broader life planning. Often, they have few reliable out-
cial assets accessible to WMs. Over the next five years, that lets to consult in trying to gather answers. And those that
Retirement
figure will grow at aassets
compoundandannual
population agedto65
rate of close 7%,or older in 2020often
are available and require
2025 ($trillions)
them to chase down specialists
which means that WMs globally will be able to target close in particular domains, such as accountancy and estate
to $41.1 trillion in financial wealth by 2025. (See Exhibit 8.) lawyers—a time-consuming and often frustrating exercise. Accessible retirement assets as a share Retirement assets held by affluents
of total financial assets, 2020 (%) and lower-end HNWIs, 20201
A wealth pool of this size would seem to be hard to ignore. The rising popularity of defined contribution plans adds to
Nonaccessible assets
Yet decumulation often marks the denouement of the WM the complexity. (See the sidebar, “The Pan-European Per-
4.8 interactions with $10.3 trillion
relationship. As was true in Marisa’s case, sonal Pension Product—Finally!”)
5.2 Retirees may feel ill World 12
2020 accessible retirement assets
WMs often wind down as clients reach4.0
Total retirement assets
their middle and prepared to decide how to dispose of large lump sums
4.2
late retirement stages, leaving many retirees asset rich and when they arrive, especially as the use of annuities de-
Accessible assets
3.9 Japan 22
advice poor at a time when their needs are most complex. creases. WMs have an opportunity to help affluent and
42.4
Accessible assets
lower-end HNWI retirees manage these dimensions. Western Europe 13
+7.0% 35.9
In the hurly-burly of working life, few individuals map their
25.4 2020
vision of retirement or think through the financial and
2025
Until now, however, several factors have prevented WMs
North America 12
nonfinancial concerns that attend its various stages. As a
result, the changes that accompany a person’s golden
from effectively serving the holistic retirement needs of
these segments during their decumulation phase. One is
Eastern Europe and Central Asia 12
35%
Oceania 10
29.3and stress.
years can make it a time of great opportunity 41.1
cost. WMs have traditionally directed their retirement
Asia (excluding Japan) 7
Population aged 65+ 722 million 846 million Latin America 6
Exhibit 8 - The Composition of Retirement Assets Middle East 5 Share of total accessible
Cash, equities, bonds, retirement assets
Defined contributions Defined benefits Government pensions Life insurance Africa 3
and other investments
Retirement assets and population aged 65 or older in 2020 and 2025 ($trillions)
1
Affluents and lower-end HNWIs are defined as those with financial wealth of $250,000 to $5 million.
Accessible retirement assets as a share Retirement assets held by affluents
of total
efforts financial
at clients assets,
in higher 2020
asset (%) These wealthier
categories. andaspirations,
through her lower-end HNWIs,
note 20201and communi-
her concerns,
Nonaccessible assets
individuals present a lower risk of using up a significant cate her priorities for each stage of her retirement journey.
4.8 share of their assets, so they offer the potential for multi- The WM would aggregate $10.3 trillion
Marisa’s accounts and capture
5.2 World 12
4.0 generational wealth transfers, and their remaining wealth all of these inputs on a2020
tablet and then
accessible feed them
retirement into a
assets
Total retirement assets
4.2 generates higher revenues—factors that compensate for client analytics engine. In a follow-up conversation, the
Accessible assets
3.9 the typically high cost ofJapan
serving retirement needs. 22
advisor, using an all-in-one dashboard, would give Marisa
42.4
Accessible assets
Western Europe 13 an overview of her asset portfolio and walk her through
+7.0% 35.9 The retiree advice gap also has roots in the industry’s potential decumulation scenarios. In addition to helping
25.4 2020 2025 overemphasis ofNorth America
clients’ accumulation needs. Financial 12
Marisa, the digital backbone underlying this model would
advisors typically
Eastern Europe andhave material
Central Asia incentives to keep growing
their clients’ assets, even during their decumulation phase.
12
35%
address key pain points for WMs—making it easy for them
to update information and support clients in this large
Another barrier is the Oceania
complexity of the decumulation 10
demographic in a sustainable, scalable fashion.
29.3 41.1 phase. Not only do retirees’ financial questions tend to be
Asia (excluding Japan) 7
tangled—with asset drawdowns raising tax implications, Revisiting this plan at least once a year would enable the
Population aged 65+ 722 million 846 million for example—butLatin theirAmerica
nonfinancial needs 6
can be chal- financial advisor to help Marisa rebalance her portfolio
lenging as well, whether they
Middle East involve finding
5 a sense of and adjustShare
her decumulation rate accordingly. Frequent
of total accessible
Cash, equities, bonds, community, pursuing a part-time job, or something else. touchpoints would helpassets
retirement Marisa gain a trusted sounding
Defined contributions Defined benefits Government pensions Life insurance Africa
and other investments Such needs vary by person 3
and by stage of retirement. board. In some respects, her financial advisor would serve
as a life coach, suggesting ways for her to invest her time
Introducing an Advisor-Led, Digitally as well as her money.
Enabled Decumulation Model
Sources: BCG market sizing; World Bank; OECD.
Imagine how differently Marisa might feel now if, a year
Note: Retirement assets are defined as all financial assets, excluding loans and unlisted equity, held by people aged 65 or older. Government pen-
sion estimates are based on OECD’s yearly pension spending as percentage of GDP, global GDP, and average years of reserves in the US and OECD. before her retirement, her WM had invited her to a next-
HNWI = high net worth individuals. All dollar figures are expressed in US dollars. stage meeting—a conversation designed to help her think
36 GLOBAL WEALTH 2021: WHEN CLIENTS TAKE THE LEAD BOSTON CONSULTING GROUP 37You can also read
