Standing Still

Is Not an Option
Global Wealth 2022

June 2022
By Anna Zakrzewski, Bruno Bacchetti, Kaj Burchardi, Dean Frankle,
Andrew Hardie, Michael Kahlich, Daniel Kessler, Stephan Knobel,
Sumit Kumar, Hans Montgomery, Edoardo Palmisani, Olivia Shipton,
Akin Soysal, Jhun Boon Tan, and Tjun Tang
Boston Consulting Group partners with leaders
in business and society to tackle their most
important challenges and capture their greatest
opportunities. BCG was the pioneer in business
strategy when it was founded in 1963. Today,
we work closely with clients to embrace a
transformational approach aimed at benefiting 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.
Contents

01 | Preface 25 | D
 igitization Is the Path to Value
Creation

03 | Market Sizing: Wealth Creation

Continues Despite Crises 31 | A
 bout Our Methodology

09 | Net-Zero Will Be a Net Positive 32 | A

 bout the Authors
for Wealth Managers That Act
Now
33 | A
 cknowledgments

15 | Is the $1 Trillion (and Counting)

34 | F
 or Further Reading
Crypto Opportunity Right for
You?

21 | The Secret to Effective

Personalization at Scale
Preface
The wealth management agenda is getting more Roughly $80 trillion in new wealth will be created over the
crowded—and the items on it more urgent. Net-zero, next five years. These are life-changing, career-changing,
crypto, personalization, and digitization are not merely and world-changing sums. For WMs that are prepared to
arenas that leaders can simply consider. They are seize the opportunity, the blueprint for growth is there for
imperatives whose outcomes will determine which the taking.
institutions grow client share over the next five years. The
most important question facing wealth managers (WMs) We hope our report provides food for thought on how WMs
right now is not which initiatives to prioritize—but how can plan and construct their future prosperity, and we look
best to execute on all of them. forward to continuing a dialogue with you.

This is the question that my colleagues and I at Boston

Consulting Group take up in our 22nd annual Global
Wealth Report. Our chapter on market sizing proves that
the industry—as diverse as it is globally—is more than up
to the challenges facing it. Although not impervious to
economic, political, and social events, wealth development
is resoundingly resilient, demonstrating its ability to adapt
and grow even in the face of massive systemic shocks.

But WMs that conflate resilience with complacence will be

in for a rude awakening.

As our chapters on crypto and personalization make clear,

wealth clients are in no mood to wait for next-generation
offers and next-level service. They want them now—and
they know that what they want is available—if not from
their current WMs, then from others.

Far from setting off alarm bells, however, these findings

have the potential to herald enormous growth
opportunities for WMs that are ready to move decisively.
Clients are eager to put their assets to work. And, as our
chapter on net-zero illustrates, many are motivated to
propel climate transition and financial returns through
novel net-zero investment themes and portfolios.

Proof that change is worth the risk comes from what might
seem to be a paradoxical source, as our chapter on the
digital value premium shows. Digital WMs have seen their
valuations skyrocket over the past decade—and not just
because tech is exciting. Fundamentally, it’s because
digitization delivers what wealth clients want and what
managers need: excellence in experience and excellence in
execution. These businesses, often seen as competitors to
wealth management firms, provide a helpful and scalable
framework for success that traditional WMs can emulate.
By picking up the pace of their own digital transformations,
WMs can deliver on their expanded agendas, offer clients Anna Zakrzewski
the solutions they want, personalize interactions, and drive Managing Director and Partner
sustained, above-average performance. Global Leader, Wealth Management

1 STANDING STILL IS NOT AN OPTION

In the middle of difficulty
lies opportunity
- Albert Einstein’s third rule of work

2
Market Sizing
Wealth Creation Continues Despite Crises

Global financial wealth grew by a staggering 10.6% from Physical goods in the form of real estate, wine, art,
2020 to 2021—the fastest rate in over a decade. The watches, and related holdings remain the destination of
double-digit growth created $26 trillion in new wealth and choice for much of the world’s wealth—and investor
took total financial wealth and the real asset pool close to interest continues to intensify. Over the past year, demand
$530 trillion. (See Exhibit 1.) for real assets surged by 9.4% ($22 trillion), bringing the
total to $256 trillion. Taken together, these assets now
Strong equity markets helped propel the gains. Driven by account for almost 50% of the total wealth pool.
healthy corporate profits, the S&P 500 index soared by
26.9% in 2021, a remarkable rise given the record-setting
levels of 2020. Real assets were another source of growth.

3 STANDING STILL IS NOT AN OPTION

Exhibit 1 – Absolute Financial Wealth and Real Assets Growth, 2020–2021
MARKET SIZING - EXHIBIT 1
Absolute ∆ in financial wealth, 2020–2021 ($trillions)
Absolute ∆ in real assets, 2020–2021 ($trillions)

Global
26.2 Asia
(excluding Japan) Middle
21.9 5.1
4.6
Latin
America
East
0.4 Japan
0.6 0.5 0.9
0.5 Oceania 1.2
0.5
1.2

Africa
0.2
North 0.2
America Western
Europe Eastern Europe
15.0 and Central Asia
6.9 3.1
0.4
5.0
1.9

Source: BCG Global Wealth Market Sizing - Global Wealth Report 2022.
Note: Wealth in local currency was converted to US dollars at the 2021 year-end exchange rate across all time periods.

The Five-Year Outlook: Will Wealth To understand the likely impacts of these forces on wealth
Development Pass the Battle Test? development, we developed two models looking out over
the next five years:
Wealth growth has proven to be extraordinarily resilient to
extreme events. Although not immune to market volatility, • Base Case. In this scenario, Russia halts its invasion of
global wealth portfolios have rebounded from recent shocks, Ukraine in 2022, gas and oil exports resume, and inter-
including the Great Recession and the COVID-19 pandemic. national sanctions on the country remain in place until
2025. Global political tensions then ease and Russia re-
But potential destabilizers loom. gains access to SWIFT in 2026, although it continues to
be barred from access to central bank assets. Economic
The first is inflation. Only a few years ago, many analysts growth slows in the short term, but recovers from 2023
declared the threat of global inflation to be extinct. But in onward.
the wake of the pandemic, inflation has roared back from
its decades-long dormancy, amplified by a perfect storm of • Prolonged Impact. In this scenario, Russia’s invasion
supply chain constrictions, government stimulus, and lasts well into 2023. Existing sanctions become more
radically altered demand patterns. In the US, headline severe, and Russia retaliates by restricting natural gas
inflation, which measures the change in the value of all supplies, but there is no military escalation or NATO
goods, stood at 7.0% at the end of December 2021—the involvement. Russia remains barred from SWIFT and
highest rate in 40 years. And core inflation rose to 5.5%. from access to central bank assets. These circumstances
negatively impact the global economy through 2024, but
The second potential destabilizer is Russia’s invasion of the effects are not as severe as the 3.3% GDP dip that
Ukraine. This unprovoked attack has created a massive occurred during the peak of the pandemic in 2020. Re-
humanitarian and political crisis. International food covery then resumes and picks up pace at mid-decade.
shortages are looming. Energy sources have been
disrupted. Commodity prices are rising sharply. And
shipping, logistics, and freight channels are under pressure.

BOSTON CONSULTING GROUP 4

What do these scenarios tell us? To our surprise, the The Middle East and Africa (ME&A) could see the biggest
modeling revealed less divergence than we initially leap in wealth growth. Buoyed by the region’s massive
expected. In the base case, nominal wealth development energy holdings, wealth is on track to rise by a CAGR of
takes a short-term hit but then grows at an average annual 5.4% over the next five years. Wealth growth in North
rate of 5.3% through 2026, adding $80.6 trillion to the wealth America will be slower than in years past. Our estimates
pool. In the prolonged impact scenario, wealth expands at a suggest a CAGR of 4.7% through 2026, down from the prior
slower five-year CAGR of just 5.0% and generates $5 trillion five-year average of 9.1%. Western Europe is also likely to
less in global wealth (a figure roughly comparable to the see wealth growth slow, from roughly 4.5% over the past
total financial wealth in Eastern Europe today.) But in both five years to less than 4% annually until 2026 in our base-
scenarios, the overall trajectory remains positive. case scenario.

We expect inflationary pressures to stay elevated for the Real assets—and real estate in particular—will remain
rest of 2022, with rates rising as high as 5.5%. But these attractive destinations for wealth, especially in Latin
pressures should then ease, and we forecast a return to a America, ME&A, and Asia-Pacific, where we expect this
more normal 2% inflation increase from 2023 through asset class to grow by more than 5% annually from 2021 to
2026. Interest rates have long been the main lever that 2026.
regulators use to fight inflation. But we don’t expect to see
dramatic hikes above the current global average of 2%,
owing to high debt levels globally. In view of potential
macroeconomic volatility, however, we recommend that
wealth managers (WMs) employ real-growth estimates as
well as nominal growth in their planning forecasts. (See the
sidebar, “Real Wealth Growth Provides a Reality Check.”)

Finally, although stock markets globally have fallen far

from their 2021 highs, we expect performance to snap
back and for major indices to grow by about 7% annually
through 2026. In fact, under the prolonged-impact
scenario, stock markets might grow by more than 7% in
2022 as individuals and institutions shift additional deposit
holdings into equities to counter the effect of rising inflation.

The regional wealth outlook is encouraging, too. (See

Exhibit 2.) As was true before the crisis, Asia-Pacific—
which consists of Asia (excluding Japan) and Oceania—will
see the fastest rates of wealth growth, with asset values
expected to rise by a CAGR of 8.4% through 2026. If that
rate holds, Asia-Pacific could become home to nearly 25%
of the world’s wealth by 2026.

5 STANDING STILL IS NOT AN OPTION

Exhibit 2 – Financial Wealth Is Poised to Grow in Every Region

Total assets and liabilities, by region Global 2016 2021 2026 2026
($trillions) base pro-
longed

326.0 472.7 608.9 600.1

Financial
188.6 274.4 355.0 349.7
wealth

Real
179.8 255.5 328.2 342.2
assets

Liabilities -42.3 -57.2 -74.3 -73.8

North 2016 2021 2026 2026 Western 2016 2021 2026 2026 Eastern 2016 2021 2026 2026
America base pro- Europe base pro- Europe base pro-
longed longed longed

100.6 158.9 202.3 199.6 83.3 105.9 129.1 127.4 6.5 12.0 16.3 15.9

Financial
81.8 126.6 159.4 157.5 42.9 53.3 64.4 63.5 2.8 4.8 6.6 6.4
wealth

Real
34.8 52.0 66.4 65.5 51.6 65.7 80.5 79.6 4.3 8.2 11.0 10.8
assets

Liabilities -16.0 -19.8 -23.5 -23.4 -11.2 -13.2 -15.8 -15.7 -0.6 -1.0 -1.3 -1.3

Japan 2016 2021 2026 2026 Middle 2016 2021 2026 2026 Asia 2016 2021 2026 2026
base pro- East base pro- (excluding base pro-
longed longed Japan) longed

24.4 27.8 30.1 29.8 8.7 11.4 15.1 15.2 82.7 127.0 174.3 171.5

Financial
15.9 18.1 19.6 19.4 3.8 5.0 6.5 6.3 31.6 52.3 79.2 77.7
wealth

Real
11.2 12.8 14.0 13.9 5.5 7.2 9.8 10.0 59.6 90.5 119.3 117.8
assets

Liabilities -2.6 -3.1 -3.4 -3.4 -0.6 -0.8 -1.2 -1.2 -8.5 -15.8 -24.2 -24.0

Latin 2016 2021 2026 2026 Africa 2016 2021 2026 2026 Oceania 2016 2021 2026 2026
America base pro- base pro- base pro-
longed longed longed

8.5 12.9 18.6 18.2 2.8 4.4 6.2 6.1 8.5 12.5 16.8 16.4

Financial
4.2 6.2 8.7 8.5 1.4 2.1 2.8 2.7 4.2 6.0 7.9 7.7
wealth

Real
5.1 8.0 11.7 11.4 1.6 2.6 3.9 3.8 6.0 8.5 11.6 11.4
assets

Liabilities -0.8 -1.3 -1.7 -1.7 -0.2 -0.3 -0.5 -0.4 -1.6 -2.1 -2.7 -2.7

Source: BCG Global Wealth Market Sizing - Global Wealth Report 2022.
Note: Wealth in local currency is converted into US dollars using the 2021 year-end exchange rate across all time periods. Because of rounding, not all bar totals equal the
sum of the identified segment values.

BOSTON CONSULTING GROUP 6

The Booking Center Landscape Aided by healthy inflows from Hong Kong, Singapore could
Will Adapt to Shifting Flows see annual growth of 9% to 10% from now through 2026.
And Russia could edge out Saudi Arabia and Turkey as the
Globally, we expect cross-border activity to rise by roughly largest source country to book in UAE, with total assets on
5.0% to 5.6% through 2026. But crisis effects could track to more than triple over the next five years, albeit
reshuffle the leader board, with Hong Kong replacing from a very small starting base. By contrast, booking
Switzerland as the world’s largest booking center next year, centers in Western Europe may experience outflows.
and Singapore coming close to ousting Switzerland from Switzerland alone could see upward of $6 billion annually
second place. (See Exhibit 3.) exit the country through 2026, and asset growth will
struggle to exceed 2.4% during this period. Still,
Switzerland’s booking center base is huge, and 2.4%
growth will generate roughly $320 billion in additional
assets by 2026.

Exhibit 3 – Global Cross-Border Financial Centers

Channel Islands UK
Switzerland Hong Kong Singapore US and Isle of Man UAE mainland Luxembourg Monaco Liechtenstein

Cross-border
financial center
2.5 2.3 1.5 1.1 0.6 0.6 0.5 0.4 0.3 0.2
wealth 2021
($trillions)

Ranking 20261 2 1 3 4 6 5 7 8 10 11

Base scenario 2% 8% 10% 7% 2% 9% 2% 2% 2% 3%

CAGR
2021–2026
Prolonged
impact scenario 2% 7% 9% 6% 2% 8% 2% 2% 2% 2%

>90 82 >90 >90

73
60 62
51
Dependency on
13
cross-border 1.5
wealth (%)

Top source region Western Latin Western Middle Western Western Western Western
Asia Asia
of cross-border wealth Europe America Europe East Europe Europe Europe Europe

Source: BCG Global Wealth Market Sizing - Global Wealth Report 2022.
Note: Wealth in local currency is converted into US dollars using the 2021 year-end exchange rate across all time periods.
Because of rounding, not all bar totals equal the sum of the identified segment values.

7 STANDING STILL IS NOT AN OPTION

 Real Wealth Growth
Provides a Reality Check
Factoring in inflation and variable exchange rates is crucial to understanding the real wealth growth picture, especially
in markets or regions that have suffered extreme events or are prone to exchange rate volatility. On a fixed rate basis,
for example, nominal financial wealth in Eastern Europe and Central Asia appears on track to grow from $4.76
trillion to $6.56 trillion over the next five years. But such heady growth defies reason, given the brutal and costly
invasion that Russia is waging. So what gives?

The answer comes down to the difference between nominal and real wealth growth. When you factor in the region’s
inflation and exchange rates over multiple shorter periods rather than applying one fixed rate across the entire
period, real wealth projections reflect likely conditions more accurately. In this case, they show that real wealth in
Russia is likely to stay almost flat, going from $4.76 trillion to $4.85 trillion from now through 2026. (See the exhibit.)

High Inflation and Exchange Rates Can Turn Positive Nominal Growth into
Negative Real Growth

$trillions Nominal wealth growth Real wealth growth

+29% +15%

80.6 355.0 -43.6

3.5 314.9
274.4

Global

+38% +2%

Eastern
1.80 6.56 -1.38 -0.33
Europe 4.76 4.85
and
Central
Asia 2021 Nominal 2026 Inflation Exchange 2026
growth rate effect

Source: BCG Global Wealth Market Sizing - Global Wealth Report 2022.

BOSTON CONSULTING GROUP 8

 et-Zero Will Be a Net Positive
N
for Wealth Managers That Act Now

Net-zero is often cast as an ambition directed toward 2050. This growth could provide WMs with exciting opportunities.
But for wealth managers (WMs) globally, it’s an immediate But while many institutions recognize the importance of
imperative. Sustainable investing—of which net-zero is a net-zero, few have internalized the capabilities necessary
key component—is growing three to five times as fast as to meet this burgeoning opportunity.
traditional investing. By 2026, we project, this asset class
will account for 8% to 17% of privately invested wealth, up
from 4% to 11% today. (See Exhibit 4.)

9 STANDING STILL IS NOT AN OPTION

Exhibit 4 – Sustainable Investments Account for a Growing Share of Total Investment Wealth

2021-2026: Rising share of sustainable invested assets 2026 projection details: Estimated size of the sustainable
in overall investable wealth invested asset market, through an asset class and regional lens

$trillions $trillions
19
2021-2026 1%
CAGR 5%
111
Market:
11 17% Overall sustainable investing
82
6 8 25% Narrow sustainable investing Broad definition
32%
3 of sustainability also
includes exclusion and
engagement
3x
to 5x
faster
growth

74 92 5% Market:
Traditional and Narrow definition
responsible investing of sustainability focuses
62%
on best-in-class, impact,
and thematic assets

2021 2026 Asset class

Sustainability Short-term debt securities

~11% ~17%
market overall
Long-term debt securities
Listed shares
Market with narrower
~4% ~8% Investment fund shares
sustainability definition1

Source: BCG Global Wealth Management market sizing, using the base-case scenario.
Note: Players have different definitions of sustainability. AUM = assets under management. Because of rounding, not all bar totals equal the sum of the identified segment
values; likewise, bar segment percentages may not add up to 100%.
1
Assuming the same growth of sustainable investment, matching the narrow definition, from 2021 to 2026 as from 2017 until 2021.

What It Takes to Make Net-Zero a Sustainable Doing so will require WMs to comprehensively adapt their
Proposition operating model. Everything from strategy to product
development to go-to-market approaches must move in
WMs cannot afford to approach net-zero in piecemeal sync, supported by frameworks, risk management, and
fashion. To consistently provide credible value, WMs must other core enablers. Pulling that off may seem daunting,
embed net-zero across the entire client life cycle. (See especially with 2026 just a few years away, but WMs can
Exhibit 5.) make the transformation manageable by prioritizing a core
set of actions.

BOSTON CONSULTING GROUP 10

NET ZERO - SUSTAINABILITY NEEDS TO BE ...
Net Zero
Exhibit 5 –needs to be
Net-Zero embedded
Practices Must Be Embedded Across the Client Life Cycle
throughout the client lifecycle

Marketing and preparation Profile and onboard

• Build climate into the marketing schedule, using • Collect client preferences via digital tooling during
clear net-zero branding, to target clients with onboarding and risk assessment
aligned priorities • Consider client preferences when matching the client
• Publish thought leadership to reinforce with a relationship manager and investment
priority themes consultant
• Review customer leads and information • Understand the client profile, and set investment
objectives across climate and broader sustainability
impact, financial goals, and lifetime goals

Finalize, agree, and implement Plan and build portfolio

• Present a customized portfolio that addresses priorities • Develop an offering that incorporates priorities in
across impact, financials, and lifetime goals on asset portfolio construction, using climate data
allocation and product level • Advise the client on offerings, explaining implications for
• Formalize documentation, and execute portfolio and proof points and case studies to evidence
trade/investments solutions
• Monitor conversion of net-zero products and solutions • For ultra-high-net-worth clients, bring deep experts in
areas of interest (e.g., a specific sector or
decarbonization technology) to support conversion; have
a holistic conversation on the portfolio and business

Monitor, review and evolve

• Monitor impact and overall portfolio performance,
receiving and acting on alerts
• Report impact and performance to the client, and
receive feedback
• Proactively bring new investment ideas tailored to the
client’s values and financial goals
• Adjust the portfolio to reflect the latest net-zero thought
leadership, evolving client preferences, and goals

11
Start with client-led strategy, and identify themes Use net-zero goals to shape portfolio construction,
and targets for 2026 and 2030. The competitive bar for develop offers, and measure impact. WMs can help
excellence in net-zero is likely to rise quickly. Leaders need clients translate their values into specific data-backed
to anticipate how the market will shift over the next targets. An example could be accelerating net-zero
decade and set a bold aspiration leading to long-term transition by helping to fill the $15 trillion in financing
strategic advantage, such as deciding to make certain needed to scale alternative decarbonization technology.
net-zero investments a default offer. They also need to WMs can then use those targets to shape portfolio
establish a set of portfolio and revenue targets for 2026 construction, taking into account a client’s risk-and-return
and another, more ambitious set for 2030. Especially expectations, investment horizon, and life goals, such as
advanced WMs can even start to calculate their overall their desire to buy a house, start a new business, or retire
portfolio emissions and assess their likely trajectory on the at age 50. Incorporating net-zero into portfolio models will
basis of anticipated client behavior and changes in the require WMs to build asset allocation capabilities that can
WM’s solution offering. calculate the impact of decarbonization in a systematic
and repeatable fashion.
Zero in on your net-zero definition. Clients will want to
know exactly what they’re investing in—and how net-zero As clients grow more interested in net-zero, plain-vanilla
fits into their WM’s calculus. So it’s incumbent upon products won’t be enough to attract them. For example, a
institutions to clarify their posture on net-zero and on WM might talk to a client about how climate transition
sustainable investment more generally. Responsible efforts are spurring innovations in alternative fuel sources
investing—which loosely considers environmental, social, for the aviation industry and bring associated investment
and governance (ESG) factors—is not the same as opportunities that meet the client’s portfolio criteria. WMs
sustainable investing. The latter comes with different and must work closely with AMs to develop net-zero products
more prescriptive expectations, depending on whether the suitable for a broad customer base. AMs are likely to be
WM defines sustainability narrowly or broadly: eager for this collaboration. Many have joined the Net Zero
Asset Managers Initiative, which requires them to set
• Narrow Sustainable Investing. This approach uses targets for net-zero-aligned assets under management
the most stringent interpretation of sustainability and is (AUM) and create products that focus on climate
the least open to challenge. The WM defines sustainable transition.
investments as those with a best-in-class designation—
for example, companies that earn top sustainability Because demonstrating the impact that a net-zero-directed
scores in their sector or that fall under a thematic cate- portfolio generates is crucial to clients, WMs should
gory such as renewable energy. The definition also cov- prioritize simple, transparent reporting. But this takes
ers sustainable impact investments such as green and considerable design and planning effort, since impacts
social bonds, and private equity or illiquid investments vary widely. For example, a degree of carbon intensity (or
that seek to generate positive environmental and finan- consumption) can be attributed to just about any asset
cial returns. For instance, whereas wider sustainability type, but reporting absolute impacts such as reduced
goals might include investments that support increased fossil-fuel consumption or carbon sequestration apply to
biodiversity, investments with net-zero impact should only some investments. Discerning these specific impacts
include carbon reduction. requires close partnership with AMs, as well as sourcing
data from third-party providers.
• Broad Sustainable Investing. WMs that apply a broad
interpretation of sustainability incorporate exclusions Equip client advisors with the necessary training and
into their practice and screen out investments that fail tools to engage knowledgeably. Clients will expect their
to meet sustainability criteria, such as companies that relationship managers to bring an informed point of view
have no credible plan to deliver net-zero by 2050. These to discussions of net-zero investments. Although WMs can
criteria need to go beyond typical ethical investment provide experts for some client meetings, such occasional
exclusions for activities such as weapons manufacture. support will not be sufficient for engagement at scale.
WMs that apply this definition should systematically in- Instead, to support their sales teams, WMs must revamp
tegrate sustainability and net-zero data into their invest- the training curricula they provide. Online courses can be
ment decision making—for example, into the cash-flow an efficient way to provide foundational knowledge at
models they prepare and, in the case of asset managers scale, but live training is essential as well. Role playing,
(AMs), into voting and engagement strategies. coaching, and, ideally, on-the-job shadowing with experts
can give teams the experiential learning they need to
engage effectively with clients. Such deep expertise is
especially important in preparing pitches for and engaging
with ultra-high-net-worth individuals, many of whom come
to the table with a sophisticated understanding of net-zero
topics.

BOSTON CONSULTING GROUP 12

WMs must also provide sales teams and clients with ensuring common labeling for all net-zero investment,
helpful digital tools—or upgrade their existing robo- regardless of whether funds are sourced internally or
advisory offering. Web- and app-based enablers can help externally. Likewise, to help with reporting, WMs must
capture client preferences, model the impact of different codify protocols for tagging and tracking their net-zero
net-zero investment choices, and provide a convenient investments. They may do this manually at first, but WMs
self-service way to share pertinent news and research. They will quickly need to move to automated reporting to
can also function as an educational tool for clients. (See achieve the required scale and cost efficiencies—especially
Exhibit 6.) These enablers may be particularly relevant to as their net-zero investment AUM grows. In addition, risk
mass-affluent and high-net-worth clients, the most active frameworks must evolve to include relevant alerts and
users of digital wealth management applications. remediation plans suitable for overseeing net-zero
solutions and advisory work.
Before rolling digital features out to clients, WMs can
deploy them to their sales teams as a training aid, giving To credibly advise on net-zero, most WMs will also have to
relationship managers and others the opportunity to test acquire new data from more sources. WMs that are part of
and learn different features and become more nimble in a larger bank may be able to gain synergies by liaising with
advising their clients. others across the institution and by building data utilities
that enable them to house and share information easily.

Investing in the Right Enablers for Net-Zero Given the speed with which clients are embracing
net-zero and the urgency of climate transition,
In addition to the steps outlined above, WMs need to lay WMs must pick up the pace of their own net-zero
the operational groundwork for success. That includes efforts, taking quicker and more decisive action to
aligning on standard governance practices—for example, upgrade their offering and service.

NET ZERO - CLIENT TOOLING INCLUDES ...

Client tooling includes preference selection, reporting and education
Exhibit 6 – Client Tool Enablers Can Address Preference Selection, Portfolio Reporting,
and Education

22:47 22:47 22:47

Where do you want to focus Your Portfolio Composition How your investment could help
your portfolio impact? Responsible decarbonise the metal industry
Impact What are the priority opportunities?
Global Net Zero
ESG Adopt new technologies
Thematic
Scaling Scaling new integrated Use hydrogen
new green decarbonisation instead of fossil fuels and
technologies technologies 3x higher thematic allocation capture carbon produced
2x higher impact allocation from processes
Your top Decarbonisation technology, More info Include in portfolio
Renewable Low carbon themes: sustainable agriculture
energy transport More info Electrify businesses' transport fleet
Help businesses
Your Portfolio Impact
switch to electric
Low carbon Regenerative Emission Trajectory
Your trajectory: 1.8˚C vehicles for transport
construction agriculture More info Include in portfolio
1.5˚C Pathway Renewable energy sources
2022 2030 2040 2050 Help businesses
Nature
switch to renewable
Biodiversity Clean water Trajectory 20% above 1.5˚C scenario
comparison: Peer average: 2.2˚C energy sources
See more options More info Include in portfolio
Your impact: 6.1 tCO2 More info

Preference selection Portfolio reporting Sustainability education

Source: BCG experience.

13 STANDING STILL IS NOT AN OPTION

For wealth managers
globally, net-zero is now
an immediate imperative
14
Is the $1 Trillion (and Counting)
Crypto Opportunity Right for You?

Crypto is capturing the imagination—and wallets—of this value could grow four to five times bigger before the
younger and wealthier investors. Clients want it, but banks end of the decade, despite recent bearish sentiment.
can’t advise on it. Still, crypto hasn’t yet captured the full
attention of most WMs. Is that a missed opportunity? Until recently, however, many WMs have observed this
market from the sidelines. Digital coins and their derivatives
Crypto assets reached a market cap of over $2 trillion, at can be a risky business, as the May 2022 collapse of a
the end of December 2021, a figure larger than the gross leading algorithmic stablecoin demonstrated. Regulatory
domestic product of Canada.1 Our forecasts suggest that scrutiny is also likely to escalate, and the technologies that
underpin the crypto market are extremely complex.

1. The market capitalization of cryptocurrencies reflects the total price of virtual currencies as of May 2022 by the total number of coins in the
market, with the numbers collected and calculated by Statisa using data from BitInfoCharts and Coingeckgo.
2. Sharpe ratio is a measure of risk-adjusted returns, calculated by taking the excess return of the portfolio over a risk-free asset, and dividing that
number by the standard deviation of the portfolio returns.
15 STANDING STILL IS NOT AN OPTION
Despite these challenges, crypto offerings and the learning Crypto Is Gaining Currency
curve around them have matured in recent years, and we Nontraditional WMs currently manage as much as $0.8
expect that progress to continue. Forward-looking hedge trillion to $1.0 trillion in crypto-related wealth. (See Exhibit
funds and family offices have improved their Sharpe ratios 7.) That’s a significant amount of value up for grabs,
through measured allocations to crypto assets.2 And with representing roughly 2% to 3% of total wealth AUM as of
newer products such as nonfungible tokens (NFTs) 2021. In addition, crypto has the potential to deliver
generating mass interest and mind-boggling sums, there’s attractive revenue margins. For example, in 2021, the crypto-
no denying the appeal for wealth clients and WMs alike. native platform BlockFi earned three to five times as much
revenue per dollar in AUM as a typical private bank did.

Contours of the Crypto Landscape Furthermore, WM clients are ready to engage. Nearly 80%
of those we surveyed in April 2022 said that they’d
Is this the time for WMs to make the leap to crypto? Let’s consider increasing their crypto holdings if WMs offered
consider some factors relevant to the business case. advisory and education services. And two-thirds of WM
clients who sourced their crypto investment with third
parties said that they did so because they didn’t think their
WM offered such services.

Exhibit 7 – Up to $1 Trillion of Crypto Wealth Is at Stake for Wealth Managers

About 95% of crypto wealth is bypassing … putting significant value at

traditional wealth management channels … stake for wealth managers

Retail
(<$250,000
personal wealth) 80

84 Crypto-native platforms
(CEX + DEX), DeFi protocols)
(e.g., Binance, Coinbase,
Affluents Uniswap + Metamask) $0.8
($250,000
to $1 million
81
trillion
personal wealth)
to $1.0
79 trillion

(~2% to 3% of total global wealth AUM)

Lower HNW 15 Wealth management or
($1 million 11 Estimated size of crypto wealth
roboadvisor fintechs
to $20 million 13
(e.g., Kristal.ai, Wealthsimple) AUM going to nontraditional
personal wealth) 14
wealth managers1

5
5 Traditional wealth managers
6 (e.g., private banks)
7
Upper HNW
(>$20 million
personal wealth)

Allocation of crypto wealth (%)

Sources: BCG Global Wealth Benchmarking Database 2021; BCG survey of crypto investor behavior, April 2022; BCG analysis.
Note: AUM = assets under management; CEX = centralized exchange; DeFi = decentralized finance; DEX = decentralized exchange; HNW = high net worth.
1
Estimate based on the percentage of investors’ total personal wealth placed in crypto assets and on the holding split of crypto wealth into crypto-native platforms,
wealth manager fintechs, and traditional wealth managers, by level of personal wealth.

BOSTON CONSULTING GROUP 16

Coins Are Just the Start Investment theses are broadening, too. Although the
To date, digital currencies have been the predominant popular perception is that crypto investors are making
crypto investment vehicle, accounting for about 90% of all speculative bets, our survey found that many of them are
assets in the space. (See Exhibit 8.) But new products— engaging in low-volatility, high-yield crypto investments
including NFTs, crypto custody and insurance, approved such as stablecoin lending and liquidity pooling. And the
crypto ETFs and mutual funds, and crypto options and returns are appealing. Platforms such as Celsius and Aqru,
futures—are proliferating, and their value and appeal are for example, allow retail investors to earn 7% to 12% in
growing. In 2021, the weekly trade volume of art and annual percentage yield on their crypto stablecoin
gaming NFTs consistently exceeded $150 million. deposits.
Blockchain-based decentralized finance (DeFi) offerings
are also gaining interest. These products emulate the
function of traditional financial institutions and for
transactions ranging from lending to deposits. Since April
2022, DeFi has attracted more than $200 billion in assets.

Exhibit 8 – Cryptocurrencies Account for About 90% of All Crypto Assets

Crypto holdings by asset type
3
(% of global wealth)
1 2
2 1
3

23

Others
30
NFTs1

Crypto mutual funds

Cryptocurrency ETFs

Crypto stock/equity ETFs2

Stablecoins3

Altcoins4

Ethereum

Bitcoin

35
Source: BCG survey of crypto investor behavior 1Q 2022; n = ~6000.
Note: ETF = exchange-traded fund: NFT = nonfungible tokens.
1
Including other tokenized digital assets.
2
Listed equities/stocks with indirect exposure to crypto (e.g., MicroStrategy).
3
Stablecoins are crytpocurrencies whose value is pegged to a currency,
commodity or financial instrument.
4
Altcoins comprise all other cryptocurrencies besides Bitcoin, Ethereum,
and stablecoins.

17 STANDING STILL IS NOT AN OPTION

Crypto’s Audience Is Young, Wealthy, and For WMs that conclude now is not the right time to engage,
Globally Diverse leadership could identify a set of triggers that might
With crypto, as with most things digital, interest skews prompt reconsideration of the business case and task
young. Investors 35 years old and younger are 1.5 to 2 strategic planning teams with monitoring and reporting
times as likely as individuals over 45 years old to own key developments. Leaders could also commit to
digital assets. And those in the upper wealth bands have deepening their knowledge of the space—since learning
shown an openness to exploring sophisticated crypto the intricacies of the topic takes time.
products. As much as 10% of the average high-net-worth
crypto portfolio consists of cryptocurrency ETFs, crypto- In settings where the fundamentals are favorable, however,
linked equity ETFs, crypto-linked mutual funds, and NFTs. management can advance discussion of what their crypto
offering should look like.
Regionally, investors in emerging markets have flocked to
crypto at higher rates than investors in mature markets, What to Play
with Southeast Asia a particular hotspot. Investors in Use cases are available to suit different levels of business
Indonesia, Malaysia, Singapore, and Vietnam have higher engagement and operational readiness—from light-touch
crypto ownership than the global average by 10 to 15 offerings that require little change to an organization’s
percentage points. In fact, in Indonesia, the number of existing business model to DeFi products that demand
individuals in the retail wealth bracket who own crypto greater expertise and investment. (See Exhibit 9.)
exceeds the number of investors who can trade on the Blockchain technology, for instance, can present
Indonesian stock exchange. opportunities for WMs to distribute tokenized noncrypto
assets, including pre-IPO funds, private equity funds, and
Market Permission Is High agriculture commodities. These offerings can democratize
A few WMs have begun to test the waters in crypto. Julius access to previously inaccessible asset classes.
Baer, for example, allows customers to trade and hold
crypto assets in conjunction with its partner digital asset
bank (SEBA Bank). HSBC has begun to offer its wealthy
clients a thematic fund that invests in metaverse-linked
activities such as virtualization. DBS offers accredited
investors buy-sell and custody services using its in-house
digital asset exchange. And fintechs such as StashAway are
starting to incorporate crypto exposure into their advisory
services for accredited investors.

But clients are granting others permission to enter the fray

and take much bigger leaps. Our survey found that more
than 80% of the average WM’s audience is “warm” in lead
generation terms. That pent-up interest could lower
customer acquisition costs and present WMs with a large
market for crypto offerings inside their own customer base.

Decrypting the Crypto Opportunity

Crafting the business case for engaging with crypto can

quickly become complex. Not only must the WM factor in
market, reputational, and regulatory considerations, but
also they must deal with issues of basic feasibility.

To determine if crypto is right for their business, WMs

should address three questions: whether to play, what to
play, and how to play.

Whether to Play
Although the crypto ecosystem has matured greatly in
recent years, it remains susceptible to confidence-denting
events (such as recent instability in one of the main
stablecoin ecosystems). WMs need to weigh the risk of
losing customers to crypto-enabled WMs or crypto
exchanges against these reputational and regulatory risks.

BOSTON CONSULTING GROUP 18

Exhibit 9 – Wealth Managers Can Offer Crypto Services in Different Forms and at Varying
Levels of Complexity

Level of Potential Example

complexity plays products

Equip relationship managers to discuss

Educate customers on crypto topic
crypto topics with customers

Light-touch; minimal
Offer indirect exposure to crypto Listed equity/stock ETFs with indirect
changes to operating
(upon reverse inqury) exposure to crypto (e.g., BLOK)
model

Offer access to tokenized financial Tokenized bonds, pre-IPO funds,

instruments tokenized hedge fund/PE fund

Maintain custody of customer crypto

Direct custody/trading of crypto assets; perform crypto trades on behalf
of customer
Offering direct
exposure
Offer direct exposure to crypto Approved crypto spot ETFs; crypto-based
(reverse inquiry) mutual funds

Advise customers on crypto exposure,

Offer advisory services around crypto given their risk appetite, with fiduciary
duty
Offering leading-edge
use cases
Offer access to complex crypto products Low-volatility-yield farming product based
(e.g., staking, liquidity pooling, DeFi, NFTs) on locking up customer crypto

Sources: Press search; expert interviews.

Note: DeFi = decentralized finance; ETF = exchange-traded fund: NFT = nonfungible tokens.

Scoping the ambition requires a detailed understanding of In jurisdictions that ban crypto, WMs might be able to offer
pertinent regulatory restrictions, as different jurisdictions noncrypto products such as tokenized pre-IPO funds and
have different rules. (See Exhibit 10.) At one end of the ETFs that have only indirect crypto exposure. In countries
scale, China has banned its nationals from owning private with a moderate stance toward crypto regulation, WMs
digital currencies and has imposed restrictions on crypto could focus on facilitating crypto custody and buy-sell
mining and trading. At the other end, Switzerland openly transactions, distributing crypto-ETFs and mutual funds,
encourages crypto investments for retail and institutional and building crypto advisory services for accredited
players. Other countries, including the US, Germany, and investors. In doing so, they should take into account any
Singapore fall somewhere in the middle. regulatory restrictions on what they can offer to accredited
and institutional investors as opposed to retail investors.

19 STANDING STILL IS NOT AN OPTION

Exhibit 10 – Regulatory Considerations Set Constraints

Regulatory
Increasing support for crypto adoption
continuum

Example Austria Germany Japan

China Algeria Switzerland
countries Singapore US Italy

Moderate regulatory clarity but often Support crypto investment and

Defining Largely ban private digital currencies;
fast-shifting, select incentives for investors are open to retail adoption
features restrictions on crypto activities
and organizations

• Equities/stock ETFs with indirect crypto • Crypto custody and buy/sell facilitation • Resell a full range of crypto products
Possible exposure (e.g., BLOK) • Crypto products with regulatory clarity (including DeFi and NFTs)
use - cases (e.g., approved ETFs and MFs) • Explore potential to serve retail customers
(preliminary) • Explore crypto wealth advisory • Crypto wealth advisory to clients

• Adopt a risk-based approach to new • Start offerings with regulatory clarity • Explore leading-edge crypto
Potential crypto products; monitor regulatory • Explore tie-ins with licensed third parties innovation for wealth managers
path forward developments • Partner with regulator • Position as a key player in the
crypto ecosystem

Sources: Press search; expert interviews; BCG analysis.

Note: DeFi = decentralized finance; ETF = exchange-traded fund: MF = mutual fund; NFT = nonfungible token.

In markets with an open stance, WMs could explore a full sales teams with relevant expertise and product
range of crypto use cases and innovations—including DeFi knowledge. Forward-thinking banks and financial
products such as staking rewards (passive returns gained institutions such as Goldman Sachs, JP Morgan Chase,
by depositing tokens in liquidity pools), NFT custody and Fidelity, and Well Fargo have added roughly 1,000 crypto-
advisory, and structured crypto products to hedge against related jobs since 2018, according to Revelio.
the risk of volatility of coin price movements. These
markets can also function as affiliate crypto-service Supporting data and technology are crucial as well. Certain
locations to serve customers in other jurisdictions. products, such as crypto trading using outsourced
processes, may not require significant changes to the WM’s
How to Play data and technology backbone; but others, such as
To develop the product proposition, WMs must think custodial wallets and staking, will. WMs must assess these
through the entire customer journey, including risk needs and prioritize investment accordingly.
disclosures and fact sheets to educate customers.
Partnerships can also be valuable. They can take the form Finally, risk management is essential. WMs will need a
of technology collaborations, such as BNY Mellon’s strong compliance team with requisite regulatory
partnership with Fireblocks on digital asset custody knowledge to minimize exposure, monitor ongoing
capabilities, or educational collaborations, such as Julius regulatory developments, and conduct stress tests to
Baer’s partnership with SEBA Bank. identify and mitigate crypto-related risks proactively.
Regulatory decisions and positions are evolving rapidly in
WMs will also need to adapt their sales practices. The many jurisdictions, and WMs must stay on top of the latest
process of onboarding crypto wallets requires specialized developments if they are to shape their crypto offerings to
anti-money-laundering and know-your-customer processes. be in compliance.
Relationship managers will need new training, lead-
generation processes, and sales enablers. These supports Crypto investing has the potential to be a major
should extend to the after-sales stage to help relationship wealth making opportunity for WMs worldwide.
managers understand cross-selling and upselling pathways. But leaders need to assess the opportunity
systematically, determine whether the time is right
Given the high demand for crypto talent, WMs should to invest in this space, and identify the best ways
approach hiring and upskilling strategically—such as by to structure their approach.
hiring crypto specialist product teams that can support

BOSTON CONSULTING GROUP 20

The Secret to Effective
Personalization at Scale

Getting personalization right can be a significant driver of However, WMs that outperform on personalization are the
top-line growth. WMs that excel at customizing offers and exception rather than the rule. We still see firms that insist
interactions see higher rates of client satisfaction and on in-person meetings and long-form, paper-based
lower rates of churn. Those metrics translate into documentation, even though clients explicitly tell them
increased returns on client assets and liabilities and that they do not like those interactions. To quote one client
annual growth of more than 10%, well above peer average. from a recent research effort: “It’s as if they don’t care. … I
have flat out told them [the WM] I don’t want to sit there
for two hours going through the same thing as we did last
year, but they insist as it’s the only way!”

21 STANDING STILL IS NOT AN OPTION

Why is it so difficult for WMs to deliver? A major sticking Prioritize Capabilities That Recur Across
point is complexity. Personalization requires new data and Journeys
analytics; connecting processes across the front, middle,
and back offices; and changing ways of working. Each of There are dozens of discrete client journeys in wealth
these tasks is significant. Stringing them together can management, but broadly speaking they fall into four main
become overwhelming. clusters: relationship initiation; advice and planning;
execution and servicing; and relationship expansion. When
The best way to address these challenges is to break bold we incorporate our client insights into these journeys, we
aspirations into bite-size pieces. Here’s how. can see where some repeatable personalization elements
begin to appear. (See Exhibit 11.) Prioritizing these areas
can help WMs increase satisfaction, broaden scale, and
achieve above-average returns.

Exhibit 11 – Some High-Value Personalization Elements Cut Across Multiple Client Journeys

Initiate a Provide advice Execute and Broaden and deepen

relationship and planning deliver service the relationship

Client Curated communications, Pertinent and engaging

Empathy, understanding, Rapid, relevant service that
optimal frequency, and opportunities for new
aspiration and seamless onboarding
format
meets anticipated needs
propositions

• Portfolio • Portfolio • Goal tracking • Portfolio

health check health check health check
• Advanced
• Portfolio • Portfolio simulation performance • Portfolio
simulation reporting simulation
Personalzation • News, research, and
elements that • News, research, market data • Targeted portfolio • News, research,
and market data alert and market data
can help • Data-driven nudges
• Product guidance on portfolio • Targeted
and education portfolio alert
• Tailored investment
ideas

Source: BCG experience.

BOSTON CONSULTING GROUP 22

Portfolio health checks, for example, are relevant to most improving their portfolio diversification and realizing better
core client journeys. WMs can use a sample one for returns. The WM is now working on expanding its nudge
prospecting, a highly individualized one for advice and program, building a catalogue of campaigns, nudges, and
planning, and an automatically updated monthly version education content that can encourage cross-selling and
to share with clients as part of ongoing service and deeper engagement in the relationship expansion journey.
relationship building. Likewise, they can use portfolio
simulations as an educational outreach tool to support
multiple journeys. Design for Value and Scale

Knowing its clients were interested in timely advisor At this stage, the bite-size pieces begin to come together.
interactions, one WM spotted an opportunity to employ WMs have obtained insights from clients that show what
technology in a distinctive way—using digital nudges personalization moments matter most to them, and they
(alerts that pop up on a mobile app) to let clients know possess the critical journey insights to know where to
when they needed to diversify their portfolio. Partnering repurpose their investments. Armed with that knowledge,
with a tech firm, the WM designed its app to trigger a WMs can turn their attention to building those
smart phone vibration or send a text alert when conditions personalization moments. Adopting a systematic approach
warranted the client’s attention. The initiative was a is key to doing this effectively. (See Exhibit 12.) Leaders
success: clients loved the nudges, finding them both and their teams should articulate a theme and set of
informative and fun. And more than one in four clients objectives for each personalization element they seek to
who received a nudge took action after receiving it, build, including “year one impact.” They should then map

Exhibit 12 – Leaders Align Personalization Themes and Objectives with Value

Theme Objective and key results Initiatives Value delivered

Client and AUM

Data-driven nudges
retention
Improve client's
portfolio diversification
... ...

Improve client Personalized Client and AUM

Improve NPS score
outcomes educational content retention

Portfolio health Client and

check AUM growth
Initiate new
relationships
Hyperpersonalized Client and
communications AUM growth

Increase Improve share

Data-driven nudges AUM growth
asset inflow of wallet

Personalized advice
... ...
and planning

... ... ... ...

Source: BCG analysis.

Note: AUM = assets under management.

23 STANDING STILL IS NOT AN OPTION

out the initiatives needed to support those objectives and Personalization will play a key role in determining
the expected value they hope to see from each element. future wealth management returns. Clients expect
Exercising process discipline helps ensure that WMs back it. Other industries have set the bar. And retail
only use cases that deliver tangible client outcomes such banks and others have shown that it can succeed
as “increase retention by 2%.” in financial services. By following the above steps,
WMs can leapfrog slower-moving peers,
Focusing first on the relationship initiation journey, one marshaling the right data, analytics, technology,
WM aligned on a theme of delivering fresh ideas in near and human intervention to deliver individualized
real time, with the objective of increasing asset inflow. To service at scale.
support this effort, the WM funded investments in data
and analytics that allowed it to create more than 1,000
individualized messages. It also invested in a distribution
engine to help mix and match the WM’s messaging in
15,000 formats, employing different channel parameters
and rules. In just nine months, the WM attracted 10%
more clients to its platform than it had before the
personalization effort. Having proved the concept, the WM
then deployed the newly acquired tools and learning to
improve messaging and outreach in the advice and
planning journey.

Back Good Ideas with the Right Enablers

Personalization involves intensive work with data and

analytics, and most WMs will need to bulk up their sources
of information. In addition to using core client account
data, leading organizations will gather information on
broader lifestyle habits—including spending on and
frequency of travel, and preferred merchants—as well as
on stage-of-life details such as whether the client has
children, runs a business, or is nearing retirement age.

Second, WMs need to put the right people to work in data

and analytics functions to help develop personalization
algorithms and use machine-learning engines. Working in
cross-functional teams is essential. Because this approach
can differ from traditional norms, leaders may have to lean
into change management methods and tailor training and
incentives. An agile governance mindset that focuses on
breaking long-term goals into smaller pieces can help
drive adoption.

Crafting strategic partnerships with fintechs, technology

companies, platform providers, application developers, and
other experts can give WMs a running start in developing
their personalization programs, supplying needed expertise
and technologies and accelerating time to market.

BOSTON CONSULTING GROUP 24

Digitization Is the Path
to Value Creation

Digital WMs command a significant market premium. Private funding in wealth tech has also soared. Digital
Their valuation multiples, based on price over AUM, are six WMs attracted $14.5 billion in funding in 2021, 11% of
or seven times as high as those of traditional WMs.3 (See total global investments. (See Exhibit 14.)
Exhibit 13.) And even though valuations have softened in
2022, the spread between traditional and digital WMs This chapter examines the sources and drivers of digital
remains significant. advantage and shows what traditional WMs can do to reap
similar above-average returns.

3. Price is defined as market capitalization for listed or equity value, based on 2021 funding rounds or M&A transactions for nonlisted players.

25 STANDING STILL IS NOT AN OPTION

Exhibit 13 – Digital Wealth Managers Outperform Traditional Wealth Managers in Multiples
VALUATION - EXHIBIT 1
Wealth
management
multiple1

Average 1.6

0.4%

0.9%

1.2% Traditional wealth managers

Private banks or wealth management
units of large “universal” banks
1.3%

2.6%

3.0%
Price/AuM multiple, 2021 (%)2
1.6%

2.3%

2.9%

3.0%

Digital wealth managers

3.6% Online platforms offering wealth
management services
mainly with a digital-first (or
5.2%
digital-only) service model

5.2%

8.2%

19.8%

28.0%

33.3%

Average 10.3

Source: BCG analysis.

1
Each bar represents one wealth management institution.
2
Price” refers to market capitalization for the listed or equity value based on the latest funding round or M&A transaction for nonlisted players.

Unpacking the Digital Premium customizable discretionary mandates at scale. They began
by offering simple model portfolios for different risk
Digital WM institutions are youngsters compared to legacy categories, and then they expanded rapidly into other
institutions. But they are running circles around their areas. Now they include everything from alternative
elders, delivering faster customer growth, cheaper cost investments to cryptocurrencies in discretionary portfolio
structures, and superior innovation. Here are some of the management (DPM) solutions. This customization could
practices that set them apart. undermine the value of traditional WM discretionary
offerings and advisory mandates that involve constructing
Customizable Discretionary Mandates. In the past, bespoke portfolios jointly with an advisor.
creating bespoke discretionary mandates entailed large
investment amounts and high levels of complexity. But Access to a Wider Array of Investment Opportunities.
digital WMs have found ways to provide clients with Private equity, private debt and pre-IPO participation used

BOSTON CONSULTING GROUP 26

Exhibit 14 – Private Funding of Digital Wealth Management Reached New Heights in 2021

Share of wealth
5% 5% 5% 7% 11% management in
total digital funding

Private funding invested in wealth management fintechs ($billions) 14.5

3.0 3.2 Asia-Pacific

2.4
1.9 EMEA
Americas
2017 2018 2019 2020 2021

Source: BCG Fintech Control Tower report.

Note: EMEA = Europe, Middle East, and Africa.

to be out of reach for the average individual investor, given drive performance. Digital WMs manage the sales funnel
the high investment minimums and subscription required. differently. (See Exhibit 15.) They create teams that focus
But digital WMs have brought these “haute investment” on specific marketing, sales, and client conversion
opportunities within reach by creating feeder funds that domains. These teams work together closely and use data
bundle investments from multiple individuals and by and analytics to improve performance. For example, they
streamlining the subscription process. We expect digital may base scoring leads on a client’s likelihood to convert,
WMs to continue to look for new opportunities to make helping teams use their time efficiently. This codified,
exciting investment products accessible to large groups collaborative structure enables teams to build expertise,
of investors. share common best practices, and boost productivity.

Hybrid Models That Bring the Best of Digital and Almost Zero Ops. Digital WMs automate the majority of
Human Advice. Although most digital WMs originally operational work, improving risk and cost performance and
offered digital-only models, many have subsequently creating a more streamlined and pleasing client
introduced human advisors who can interact with clients experience. By reducing labor-intensive back-office tasks,
over remote and virtual channels. Most of these remote digital WMs also improve compliance, reduce the risk of
advisors counsel clients on how to use their company’s errors, and create auditable and traceable work streams.
digital products and customize solutions. But this remit is
likely to expand considerably, and over time we expect
hybrid digital-human service to become the new normal A Digital Agenda for Wealth Managers
for WM delivery.
Given the premium that digital WMs earn and the
A Wholly New Approach to Client Acquisition. In the competitive advantages that their models create,
traditional WM organization, relationship managers are traditional WMs will need to evolve their own
responsible for managing each element of the sales approaches in several ways. (See Exhibit 16.)
funnel. But that approach can lead to redundant efforts
and suboptimal use of time. These drawbacks are
compounded by a lack of readily accessible analytics to

27 STANDING STILL IS NOT AN OPTION

Exhibit 15 – Digital Wealth Managers Reinvent the Sales Funnel

Traditional sales funnel Sales funnel of digital wealth managers focused on

data-driven sales and efficient conversion and service

Marketing

Marketing

Digital marketing team

• Primarily via Awareness Awareness
nontargeted TV, Marketing
ads, etc.
• Data-driven
Interest targeted solutions
• Personalized
Lead generation
value proposition
Sales Research
• Customer education

RM team
• High-touch model Sales and conversion
• Client’s advisor provides Evaluation • Efficient, scoring-based
information, influences lead conversion

Sales
team
Client conversion
product evaluation, • Analytics-driven sales
closes sale Purchase and customer engagement

Relationship management

team
AUM growth AUM growth • Analytics-driven sales

RM
and customer engagement

Source: BCG analysis.

Note: RM = relationship management.

Innovate the client experience. WMs need to elevate Like their digital WM peers, traditional WMs will need to
the role that their digital development teams play in their explore hybrid models and determine which segments and
organization, and they must bring the voice of the services such models can best support. For example, a WM
customer into their solution and service design. Although may decide to use remote advisors as a way to provide
most leaders understand that customer feedback is more access on demand to select investment specialists. But
important than the “highest paid person’s opinion,” HIPPO establishing remote-advice capabilities is not a simple
mindsets can still pervade business planning. In addition, matter of setting up a Zoom call. Planners must work
some WMs mistakenly think that they can acquire ready- through various technical and regulatory considerations.
made solutions to fix the client experience. But there is no WMs should also develop immersive experiences that offer
off-the-shelf way to package personalization. WMs must a feeling of intimacy and allow clients and advisors to run
experiment with different approaches to create tailored simulations and engage in detailed modeling seamlessly.
digital interactions at scale.
Increase the rate of product innovation. Many
Redesign acquisition and advice models. Although the innovations that digital WMs have brought to market will
traditional client acquisition model can work well for some soon become basic client expectations. These include
segments, WMs should mirror the growth marketing digitally customizable DPMs, easy access to private market
practices employed by digital WMs, creating a strong cross- investments, and exposure to cryptocurrencies. Traditional
teaming culture and specific knowledge-sharing and WMs should consider introducing a similar slate of
collaboration processes. They should also study client offerings and set bolder aspirations and a faster
journey interactions to understand where digital or human development tempo in order to compete effectively.
engagement can add value and which technologies to
employ to support different experiences. In addition, WMs Secure the right digital talent. Digital transformation
will need to upgrade the advisor toolkit to support their can deliver a massive boost in value, but success depends
sales teams. Data-driven tools can provide relationship heavily on marshaling critical skill sets. These skill sets are
managers and others with instant access to client profiles in high demand, and many companies courting this talent
and enable them to provide better advice and service. are ambitious, innovative entities that have a reputation for
being cool places to work. Traditional WMs must consider

BOSTON CONSULTING GROUP 28

Exhibit 16 – Five Levers to Capture the Digital Premium

Innovate the Give digital development Bring the customer’s

1
client experience teams a seat at the table voice into design

Redesign acquisition Adopt digital marketing Develop digital Offer remote

2
and advice models features tools for advisors advice

Increase the rate Introduce customizable Provide access to Consider offering crypto
3
of product innovation DPM private markets investments

Bring in
Recruit new
Secure the right Hire growth Fill digital product additional
4 types of
digital talent architects and engineering roles data
advisors
scientists

Determine which Pursue acquisition Invest in a digital

5
inorganic moves to back opportunities portfolio

Source: BCG analysis.

Note: DPM = discretionary portfolio management.

new approaches to recruitment and must shore up their Traditional WMs have known for years that they
employee value proposition. Likewise, WMs must adapt need to accelerate the pace of their own
their teaming structures and embrace digital ways of digitization. Now they have additional incentive.
working. These substantial shifts will require careful Digital WMs are outperforming them in the
process redesign and change management. markets, out-innovating them in client service, and
outclassing them in core operational efficiency. To
Determine which inorganic moves to back. Traditional protect their future growth, WMs must begin to
WMs can use mergers and acquisitions to acquire new emulate the practices of these digital leaders.
competencies, digital platforms, and customers. In light of
the high multiples that many digital WMs command,
however, buyers should ensure that they can properly
maintain the acquired company’s growth engine, keep
integration costs low, and preserve a strong digital culture
to attract and retain key talent.

29 STANDING STILL IS NOT AN OPTION

 About Our Methodology
In preparing this report, we used a segment nomenclature based on the following measures of personal
wealth:

• Retail: from $0 to $250,000

• Affluents: from $250,000 to $1 million

• High-net-worth individuals: from $1 million to $100 million

• Ultra-high-net-worth individuals: more than $100 million

Historical personal wealth represents the wealth of the total adult resident population, collected by market
and by asset class from central banks or equivalent institutions, based on the global System of National
Accounts (SNA). For markets that do not publish consolidated statistics about financial assets, real assets,
or liabilities, we perform a bottom-up analysis with market-specific proxies in line with the SNA. Proxies
originate from the central bank or equivalent institutions.

We forecast personal wealth at the individual sub-asset class level, using a fixed-panel multiple-regression
analysis of past asset-driving indicators and applying these patterns with forecast indicator values.

Our two scenarios consider multiple variables and contain the following assumptions:

• The base case scenario predicts that the impacts of the Russia-Ukraine crisis and of inflation on global
GDP will be strongest in 2022 and 2023, and then start to normalize in 2024. Inflation will be above
historic levels and above prewar estimates in 2022 and then will flatten from 2023 onwards. Other
economic indicators will follow a similar pattern and display the biggest impact from 2022 to 2024.

• The prolonged impact scenario assumes a longer duration of the crisis and more severe economic
effects. Global GDP will suffer more and will grow about 5% less thn under the base case scenario in
2022. In 2023 this will increase to a 10% reduction in growth until the difference begins closing from
2024 onward, with only 7% reduced GDP growth. Inflation will be stronger than in the base case scenario
in 2022 and will reach its peak in 2023 and 2024, before normalizing on equally high levels in the
following years.

We consistently source indicator values from public data for the whole time series, both past and future,
and we adjust future values on the basis of local market expertise and expectations, where needed.

We include cross-border wealth as part of total wealth, calculating it on the basis of triangulations of
different data sources, including publications by national financial monetary authorities, the Bank of
International Settlements, and BCG project experience. We estimated growth of cross-border wealth on the
basis of assumptions regarding net inflows and outflows, appreciation and performance of current cross-
border assets, and shifts of existing cross-border assets between financial centers.

Data on the distribution of wealth reflects resident adult populations by market, as well as econometric
analysis to combine various sources of publicly available wealth distribution data, including rich lists.
Growth rates of wealth segments account for shifts of individuals in and out of segments over time as they
get richer or poorer; thus, for example, negative growth in the lowest segment generally means that people
have become richer and moved up into a higher wealth segment.

BOSTON CONSULTING GROUP 30

About the Authors

Anna Zakrzewski is a managing director and partner in Michael Kahlich is a partner in BCG's Zurich office
the Zurich office of Boston Consulting Group and the and a member of the leadership team for the wealth
global leader of the Financial Institutions practice’s wealth management segment. You may contact him by email at
management segment. You may contact her by email at kahlich.michael@bcg.com.
zakrzewski.anna@bcg.com.

Bruno Bacchetti is the wealth management segment Daniel Kessler is a managing director and senior partner
manager in the firm's Milan office. You may contact him by in the firm’s Zurich office and leads the Financial
email at bacchetti.bruno@bcg.com. Institutions practice in Switzerland. You may contact him
by email at kessler.daniel@bcg.com.

Kaj Burchardi is managing director and head of emerging Stephan Knobel is a solution delivery manager in BCG's
technology with Platinion. You may contact him by email at Frankfurt office. He is also responsible for BCG GAMMA's
burchardi.kaj@bcgplatinion.com. Global Wealth Data Assets. You may contact him by e-mail
at knobel.stephan@bcg.com.

Dean Frankle is a managing director and partner in Sumit Kumar is a managing director and partner in the
BCG's London office and leads the wealth management firm's Kuala Lumpur office and is a global leader in crypto,
segment in the UK. You may contact him by email at digital assets, and blockchain technologies. You may
frankle.dean@bcg.com. contact him by email at kumar.sumit@bcg.com.

Andrew Hardie is a managing director and partner in the Hans Montgomery is a managing director and partner in
firm’s Singapore office and leads the wealth management BCG's Chicago office and leads the wealth management
segment in Asia-Pacific. You may contact him by email at segment in North America. You may contact him by email
hardie.andrew@bcg.com. at montgomery.hans@bcg.com.

31 STANDING STILL IS NOT AN OPTION

Edoardo Palmisani is a managing director and partner in Jhun Boon Tan is a principal in the firm's Singapore office
the firm's Rome office and the IGTI (Italy, Greece, Turkey, and a core member of FI and TMT practice areas. You may
and Israel) leader of the wealth management segment of contact him by email at tan.jhunboon@bcg.com.
the Financial Institutions practice. You may contact him by
e-mail at palmisani.edoardo@bcg.com.

Olivia Shipton is a principal in BCG's London office Tjun Tang is a managing director and senior partner in
and a member of the leadership team for the wealth BCG's Hong Kong office and is a senior advisor in the
management segment. She also leads our efforts around wealth management segment. You may contact him by
sustainability and net-zero in wealth management. You email at tang.tjun@bcg.com.
may contact her by email at shipton.olivia@bcg.com.

Akin Soysal is a BCG Digital Ventures managing director

and partner and expert in digital investing in BCG's Zurich
office. He co-leads digital ventures work in wealth
management in Europe. You may contact him by email at
akin.soysal@bcgdv.com.

BOSTON CONSULTING GROUP 32

Acknowledgments
The authors thank their BCG colleagues for their invaluable
assistance to this report. Global contributors include:

Core operational team: Kevin Keim, Felix Werner, Nisha

Mittal, Stefan Gotzev, and Sanket Toor

Chapter-by-chapter contributors:

• “Market Sizing: Wealth Continues Despite Crises”:

Neil Pardasani, Thomas Foucault, Federico Muxi, Lukas
Haider, Mohammad Khan, Mustafa Bosca, Jacky Lai,
Chaojung Chen, Ernest Saudjana, Sharon Weng, Penny
Law, and Matthias Egler

• “Net-Zero Will Be a Net Positive for Wealth

Managers Who Act Now”: Estelle Vlasselaer

• “Is the $1 Trillion (and Counting) Crypto

Opportunity Right for You?”: Ching Fong Ong, Ian
Ze Yan Lai, Sukand Ramachandran, Christian Schmid
(Munich), Bernhard Kronfellner, Matthew Leybold, David
Wood, and Johnny Kao

• “The Secret to Effective Personalization at Scale”:

Francien Akkerman and Emma Zaraisky

• “Digitization Is the Path to Value Creation”: Enrico

Tanduo, Krisztian Horvath, Graziano Pace, Ted Bonanno
(Value Science), and Sarah Torp (Value Science)

Marketing and media: Flavio Cuva, Kerri Holmes,

Matthias Haymoz, Jatta Lindstrom, Brian Bannister, Eric
Gregoire, Heintzelman, Kendal Kosten, Cassandra Haenggi,
and Andrej Krajnc

The authors also express a special thank you to Philip

Crawford, Marie Glenn, Kim Friedman, Steven Gray, Jessica
Collado, Carlos Lucas, and Cristina Cabos for their editorial
and design support.

33 STANDING STILL IS NOT AN OPTION

For Further Reading
Boston Consulting Group has published other reports and Persistence Pays Off: Insights from BCG’s Biennial
articles that may be of interest to senior financial Treasury Benchmarking Survey
executives. Recent examples include those listed here. An article by Boston Consulting Group, September 2021

Global Asset Management 2022: From Tailwinds Global Asset Management 2021: The $100 Trillion
to Turbulence Machine
A Report by Boston Consulting Group, May 2022 A Report by Boston Consulting Group, July 2021

It’s Time for Institutional Investors to Embrace Global Wealth 2021: When Clients Take the Lead
the S in ESG A Report by Boston Consulting Group, June 2021
An article by Boston Consulting Group, February 2022

Global Guiding Principles for Developing Climate

Seven Trends at the Frontier of Blockchain Banking Finance Taxonomies
An article by Boston Consulting Group, December 2021 A Report by The Global Financial Markets Association
and Boston Consulting Group, June 2021

Preparing Bank Compliance for Future Complexities

An article by Boston Consulting Group, November 2021 Global Risk 2021: Building a Stronger, Healthier Bank
A Report by Boston Consulting Group, May 2021

From Relationship Manager to Client Whisperer

in Commercial Banking Financial Institutions Need to Pursue Their Own
An article by Boston Consulting Group, November 2021 Path to the Cloud
An article by Boston Consulting Group, May 2021

Global Payments 2021: All in for Growth

A Report by Boston Consulting Group, October 2021 Can Banks Find the Cost Savings Hiding in Plain
Sight?
An article by Boston Consulting Group, May 2021

Unlocking the Potential of Carbon Markets to

Achieve Global Net Zero
A Report by The Global Financial Markets Association How Financial Institutions Can Find Organizational
and Boston Consulting Group, October 2021 Advantage in PMI
An article by Boston Consulting Group, May 2021

Working in a Retail Bank Will Never Be the Same

An article by Boston Consulting Group, September 2021 Digital Assets, Distributed Ledger Technology,
and the Future of Capital Markets
A Report by The World Economic Forum and Boston
Consulting Group, May 2021

BOSTON CONSULTING GROUP 34

Nonfinancial Risks Reshape Banks’ Credit Portfolios
A Report by Boston Consulting Group and The
International Association of Credit Portfolio
Managers, April 2021

Racial Equity in Banking Starts with Busting

the Myths
An article by Boston Consulting Group, February 2021

Beethoven, Schubert, and Bank Technology

Modernization
An article by Boston Consulting Group, February 2021

Global Retail Banking 2021: The Front-to-Back

Digital Retail Bank
A Report by Boston Consulting Group, January 2021

35 STANDING STILL IS NOT AN OPTION

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