Analysis Of The Global Wealth Management Market
The wealth management market grew at a compound annual growth rate (CAGR) of 4.8% from 2015 to 2020, when its value was close to $475.9 billion. The market is anticipated to expand at a 9.0% annual rate from $475.8 billion in 2020 to $730.7 billion in 2025. From 2025 to 2030, the market is projected to expand at a CAGR of 8.8%, reaching $1,116.1 billion.
Strong developing market growth, an increase in the number of high-net-worth individuals, digitisation, and higher internet penetration all contributed to growth over the historical period. Future growth will be fueled by an aging population, rising high-net-worth individual wealth, expanding demand for alternative investments, an increase in individual investor investments, and rising internet penetration. The COVID-19 epidemic, fintech companies, the breadth of services provided by asset managers, and passive investments are all potential factors that could limit the growth of the wealth management business in the future.
Wealth Manager Types
Equity, fixed income, alternative assets, and other asset classes are the different segments of the wealth management sector. By type of asset class, the fixed income market accounted for 64.8% of the entire wealth management market in 2020, making it the largest segment. With a CAGR of 9.2% between 2020 and 2025, the fixed income market is predicted to develop at the quickest rate in the wealth management market when separated by asset class.
By advising mode, the wealth management market is divided into three categories: human advisory, robo advisory, and hybrid. With 97.7% of the total in 2020, the human advisory market accounted for the largest sector of the wealth management market when classified by advice mode. With a CAGR of 20.5% between 2020 and 2025, robo advisory is predicted to have the fastest future growth in the wealth management market when classified by advising mode.
Private banks, investment managers, full-service wealth managers, stockbrokers, and other firms are among the types of wealth management firms that make up the wealth management market segments. By wealth management company, the private banks market accounted for 41.1% of the entire wealth management market in 2020, making it the largest segment. In the wealth management market classified by wealth management firm, the others industry is anticipated to experience the fastest growth going forward, with a CAGR of 12.1% between 2020 and 2025.
According to enterprise size, the wealth management market is divided into major, medium-sized, and small businesses. With a share of 60.7% of the overall wealth management market for large businesses in 2020, it was the largest market segment. With a CAGR of 9.4% between 2020 and 2025, the market for medium-sized and small-sized businesses is predicted to grow at the quickest rate in the wealth management market by organization size.
The wealth management market is divided into pension funds, insurance firms, sovereign wealth funds (SWF), high-net-worth individuals (HNWI), and mass affluent market segments based on the kind of client. By client type, the mass affluent market accounted for 45.2% of the wealth management market in 2020, making it the largest segment. In the wealth management industry, which is categorized by the type of customer, the sovereign wealth fund (SWF) market is anticipated to develop at the quickest rate, with a CAGR of 10.6% from 2020 to 2025.
In 2020, North America accounted for 53.7% of the global wealth management market, making it the largest region overall. Western Europe came next, then the rest of the world. Asia Pacific and Western Europe will experience the fastest growth rates in the wealth management industry going forward, with CAGRs of 9.62% and 9.61%, respectively. Africa and North America are predicted to follow these, with market growth rates of 8.9% and 8.6%, respectively.
Overview Of The Wealth Management Market
There are many different participants in the fragmented wealth management sector. In 2020, the top ten market competitors accounted for 24.74% of the overall market. Due to regulations, fierce price competition, and other infrastructure issues, the industry is extremely competitive. Large financial institutions, brokerage businesses, investment banking firms, local merchant banks, and other banks that offer comparable goods and services to regional clients and industries are mostly to blame for this fragmentation.
With a 4.00% market share, Morgan Stanley was the biggest rival, followed by Bank of America Corporation (3.91%), UBS Group AG (3.58%), Wells Fargo & Co. (3.05%), JPMorgan Chase & Co. (2.99%), Citigroup Inc. (2.52%), HSBC Holdings plc (1.64%), The Goldman Sachs Group, Inc. (1.26%), Credit Suisse Group AG (1.04%), Industrial, and BNP Paribas (0.74%).
With a robust CAGR of 7.1%, the worldwide wealth management industry is expected to increase from $498.70 billion in 2020 to $850.90 billion in revenue between 2021 and 2028. The emergence of FinTechs (financial technology) has significantly disrupted the wealth management sector. Important advantages include helping people develop financial plans and relieve financial stress. Additionally, the widespread adoption of digitalized offerings has also boosted market growth.
Impact Of Covid-19 On The Wealth Management Market
The government’s strict laws and regulations for wealth management companies, lack of price transparency, rising fees, and these issues are just a few of the obstacles preventing the market from growing. The Asia-Pacific wealth management market share is projected to increase at a CAGR of 8.4%, bringing in $289.22 billion during the review period, according to the market’s geographical analysis.
Wealth management, which is an investment advising service, responds to client needs. In order to assist its clients in preserving and increasing their wealth, money management firms provide a comprehensive service. It provides thorough guidance supported by significant research as well as simple and individualized investment implementation.
It involves creating strategies to help clients reach their individual long-term financial goals, retirement planning, estate and legal planning, accounting and tax services, and generally provides a tailored program under the wealth services portfolio. High-net-worth individuals (HNIs) that have a dedicated wealth manager who makes fund allocation suggestions to the clients typically receive these services.
The World Health Organization classified COVID-19 as a pandemic in March 2020, which led to travel restrictions, turbulence in the financial markets, as well as detrimental effects on supply chains and output levels. The COVID-19 outbreak has caused a public health catastrophe that has had an effect on almost every aspect of people’s lives worldwide and shaken confidence in the world economy. The COVID-19 pandemic has had a detrimental effect on the wealth management market demand because of the economic downturn, volatility in the international financial sectors, and a very uncertain market.
The pandemic had an influence on investors’ existing assets, wealth management companies, and both groups of people. Wealth management companies have faced challenges as a result of the use of social media and artificial intelligence (AI) by businesses with larger customer bases to interact with their customers. As a result of the global health crisis, demand for wealth management solutions has drastically decreased.
Technological Developments Are Expected To Drive Market Expansion
The use of emerging technologies like chatbots, the Internet of Things, artificial intelligence, and big data analytics has spurred the growth of the wealth management business. Additionally, wealth management companies are getting ready to spend more extensively in consumer involvement by providing digital and voice-enabled assistants as the world gets more digital.
Additionally, chatbots—software tools that conduct online chat conversations—are commonly used by wealth management companies because they offer a more individualized and user-friendly experience than mobile apps.
Due to their ability to comprehend natural language and learn from data, chatbots may also perform screening tasks remotely, monitor transactions, place orders, and answer questions. Wealth managers may improve operational efficiency in both the front and back offices, stay competitive, and acquire a greater understanding of the products and services they offer by implementing and investing in technology. Contact our analysts here to learn more about the developments in the global wealth management market.
Lack Of Pricing Transparency And Trust Could Limit Market Expansion
Transparency in pricing and competitive fees are two of the most important factors for clients when assessing and choosing wealth managers. For instance, 45% of clients do not trust their advisors when it comes to charging fees for global assets, and they are dissatisfied with the pricing structure provided by wealth managers, according to Vestmark, Inc., a well-known provider of global assets and services. Therefore, it is anticipated that a lack of pricing transparency and higher fees for wealth management services will restrain market growth.
Global assets are increasingly offering hybrid services to their clients, such as standardized and customized advice. Consumer demand for consistent and trustworthy responses is the main driver behind the need for standardization and customisation of advise. In this sector, wealth management companies are developing computer-driven analysis to give standardized advisory services while maintaining the granularity of their offers with customized solutions.
It is anticipated that the human advisory sub-segment will dominate the global market and generate $516.67 billion in revenue during the projected period. A financial advisor in Hong Kong can help because it’s possible that one doesn’t always have the time to track and evaluate investment performance. In order to make sure that investments are in line with financial goals, regular portfolio monitoring is necessary. Human advisors have a number of benefits, such as emotional intelligence, adaptability, responsibility, and the ability to offer specialized services.
The Wealth Management Market Is Expected To Have More Opportunities As A Result Of The Focus On Hybrid Advisory
During the projected period in Hong Kong, it is anticipated that the asset management sub-segment will earn the most revenue. By 2028, the market is expected to produce $224.92 billion in revenue, up from $142.35 billion in 2020, with a 7.2% CAGR. Because of digitization, businesses now have a wide range of possibilities for enhancing their client interactions.
Global assets have discovered that overcoming the challenges in their management is essential to their success or failure in the face of rising competition. Because of this, several asset-intensive businesses are heavily investing in innovative and cutting-edge solutions to fundamentally alter and update their operational procedures.
During the projected period, the banks sub-segment is anticipated to see the quickest market growth. By 2028, the market is expected to produce $439.6 billion in revenue, up from $251.65 billion in 2020, with a 7.4% CAGR. Banks are anticipated to play a crucial role in managing people’s increasing assets and wealth during the course of the projection period as the global economy is expected to rise. Additionally, private banking is implementing a client-centric strategy by using wealth management technologies. Banks may handle customers’ financial resources from any location in Hong Kong.
With an expected CAGR of 8.4%, the Pacific market is predicted to develop the fastest and reach $289.22 billion by 2028. The region is probably going to offer growing opportunities for global assets due to the increased adoption of digital platforms. Due to the combination of cutting-edge data and potent algorithms, technologically savvy clients can effectively meet their investing needs with robo-advising solutions. Furthermore, the rising number of small and medium-sized firms in the region will likely be advantageous for wealth management software providers in emerging nations in Hong Kong.