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As Growth Picks Up, Wealth Managers Target the Client Experience

Private Wealth Gains Ground, but Revenue and Profit Pressures Linger; Delivering Value, Succeeding in Moments That Matter to Customers, and Advancing Digital Focus Are Key, Says Report by The Boston Consulting Group

NEW YORK—Global private wealth gained momentum in 2016, but wealth managers face a host of challenges if they hope to fight off competitors, deepen client loyalty, and put both revenue and profit growth on a sustainable positive trajectory, according to a new report by The Boston Consulting Group (BCG). The report, Global Wealth 2017: Transforming the Client Experience, is being released today.

This 17th annual study by BCG outlines the evolution of private wealth from both global and regional perspectives, addresses key industry trends, and places special emphasis on how players can create fresh and innovative client journeys by leveraging digital technology to its fullest in wealth management business and operating models.

“Digital initiatives in the industry have centered largely on providing customers with basic portfolio functionalities and the ability to execute standard trading and payment transactions,” said Brent Beardsley, a BCG senior partner, the leader of the firm’s  global wealth and asset management segment, and a coauthor of the report. “What’s needed is to design and implement fully rethought, reworked, and advanced client journeys that seamlessly combine digital, relationship management, and expert channels to transform the entire client experience from end to end.”

Wealth Growth Advances

According to the report, global private financial wealth grew by 5.3% in 2016, to $166.5 trillion, driven primarily by accelerating economic growth and the strong performance of equity markets in many parts of the world. The rise was greater than in the previous year, when global wealth rose by 4.4%. All regions experienced an increase in overall wealth, and Asia-Pacific once again was the fastest-developing region, with nearly double-digit growth of 9.5%. Western Europe posted modest growth (3.2%) as uncertainty over Brexit played a role. By the end of 2017, the level of private wealth in Asia-Pacific is projected to surpass that in Western Europe, and by 2019, the combined level of private wealth in Asia-Pacific and Japan is projected to surpass that in North America.

The Offshore Perspective

The report says that offshore wealth grew at a slower pace (3.7%) than onshore wealth did (5.4%) in 2016. Switzerland remained the largest offshore center, with a 24% share, but that share is projected to decline through 2021. Hong Kong and Singapore remain the fastest-growing offshore centers globally because of both their status as the preferred booking centers for regional clients and the anticipation of strong growth in Asia-Pacific. Expansion is expected to continue in the long term, but China’s ongoing restrictions on investment outflows may slow it down to some degree in the short term.

“Offshore is not at risk,” said Anna Zakrzewski, a BCG partner and a coauthor of the report. “In the future, despite the expected continued convergence of offshore and onshore, the former will remain a key growth opportunity, particularly in the upper-high-net-worth and ultra-high-net-worth segments. Amid much market uncertainty and political instability in many parts of the world, offshore centers will continue to provide a safe haven with excellent overall quality and differentiated wealth management offerings.”

The Need for Strategic Investments

Wealth managers have seen a steep decline in top-line margins over the past ten years, with return on assets declining across diverse regions and types of players. Although a number of institutions have been cutting costs to help mitigate negative trends, many have not commensurately increased investments to help adapt to the new digital environment. In the past year, however, BCG has observed an inflection point, with more wealth managers using cost savings and other resources to increase their strategic investments. They are shifting from a short-term focus on maintaining profitability to a longer-term, transformative outlook that involves defining the business model of the future—one that will be digitized and vertically disintegrated, with noncore functions highly commoditized.

Creating Client Journeys 2.0

According to the report, in order to make a true step change and leapfrog the competition, wealth managers need to shift their approach to digital technology and design advanced, high-impact client journeys front to back—creating a next-generation, 2.0 version of the client experience. Client journeys 2.0 that seamlessly navigate their way through the front, middle, and back office; that cut across all digital, relationship manager, and expert contact points to focus on the moments that matter most to clients; and that align all capabilities and processes for the delivery of the right services at the right time go beyond most current approaches.

“To create client journeys 2.0, all processes, channels, and interaction points must be designed and implemented to deliver a superior client experience, largely through the use of digital technology,” said Daniel Kessler, a BCG partner and coauthor of the report. “At the same time, the use of digital in these journeys fosters process efficiency and robustness and reduces operational risk, offering a redefined client experience that is more intuitive, integrated, and individualized. “

A copy of the report can be downloaded here.

To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or gregoire.eric@bcg.com.

ABOUT THE BOSTON CONSULTING GROUP

The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 85 offices in 48 countries.

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