The report titled "The Battle to Regain Strength: Global Wealth 2012" states that in the times of low-growth and high regulation markets, wealth managers must be able to take action on pricing, costs, risk, and client-centricity.
The challenges that may be faced by the wealth managers in the wake of trying industry trends are facing volatile equity and bond markets, increasing demands of clients, and scrutiny of the regulatory agencies.
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In the words of Monish Kumar, a coauthor of the report and the global leader of BCG’s asset and wealth management segment, "Only those wealth managers that take action, as opposed to adopting a wait-and-see attitude, will be in a position to thrive regardless of which direction the markets ultimately take."
The report states that the global private financial wealth grew by just 1.9% in 2011 to a total of $122.8 trillion and the increase was weaker than in either 2009 or 2010 due to economic uncertainty and struggling equity markets in developed economies.
Further, though number of millionaire households decreased by a combined 182,000 in the United States and Japan, globally the number grew by 175,000 as many households crossed the millionaire threshold in developing economies, particularly China and India.
Offshore wealth was known to have increased to $7.8 trillion in 2011, up 2.7% from the previous year and the increase was attributed to flight to safe havens by investors in politically unstable countries and partly by inflows from UHNW families based in rapidly developing economies.
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By GlobalDataPeter Damisch, a coauthor of the report and the global leader of BCG’s wealth-management topic opined that there could be a general recovery in equity markets.
"But wealth managers will still need to continue their cost-cutting and pricing initiatives, refocus on client discovery, master the ever-shifting regulatory environment, bolster risk management, and find ways to use alternative business models to their advantage," he remarked.
Wealth Insight is of the opinion that during times of market crisis, where investor behavior seems to be unforeseeable, it is crucial to improve the advisory processes and enhance sound customer communication.
Moreover, since market crisis is the time when the demand of low-margin products is low and the demand for exclusive advice and offshore banking is on a high; wealth managers seeking new business must offer clients exclusive and transparent advice to reflect the investor’s personal values.
Additionally, though the wealth managers face the challenge of simultaneously cutting costs and restoring earnings, they must be realistic so as to assess the real costs of individual investment products and offer transparency with regard to risk classification, rather than aiming to maximizing profits.
The advisors may also try to integrate reliable technologies into their advisory model to offer clients added value.
