After a stellar year of growth in 2021, 2022 was always going to be a tough act to follow for private wealth managers. However, macroeconomic conditions and geopolitical tensions have conspired to create a near perfect storm for private wealth managers. Client assets are on track to end the year down – the first decline since the aftermath of the global financial crisis.
GlobalData’s tracking of the top 50 international private wealth managers had their cumulative client assets up 14.7% at the end of 2021. This was fuelled by both rising stock markets and record net inflows. Following up such exceptionally good numbers with another year of outstanding growth was always going to be a challenge.
Supportive monetary policy, loose fiscal policy, and the reopening of key economies as the COVID-19 pandemic was brought under control all created a heady mix of growth conditions for investment portfolios in 2021.
2022 is shaping up to be an equally exceptional year – but this time for the wrong reasons. High inflation has spurred multiple rounds of sharp interest rate increases for leading central banks, with more still projected to the end of the year. Rolling lockdowns in China have dampened growth in Asia and contributed to inflation elsewhere in the world. Meanwhile, the Russia/Ukraine conflict has roiled markets and likewise fed into global price inflation. More directly, a number of major banks have had to cut loose clients or offices in Russia due to multiple rounds of sanctions.
The effects of these factors are only now becoming apparent on wealth managers. The 15 largest private wealth managers (representing $13.5trn in client assets at the end of 2021) that report half-year figures are down by 9%. That’s more than $1trn in assets wiped from the books, even with modest net inflows mitigating this to some extent.
GlobalData does not expect the private wealth industry to end 2022 down by quite so much, as the big declines in the stock market appear behind us. However, it looks certain that client assets will be down overall for the year. With lower asset values, revenue and profits are sure to fall – crimping the efforts of many private banks with expansive and costly plans; namely expanding into the ultra-competitive (and increasing costly) Asia Pacific market.