The $100trn battle for the world’s wealthiest people
wealth management was a niche service, looked down upon by the rest of finance. Now it is the most attractive business in the industry. Capital and liquidity requirements set after the global financial crisis of 2007-09 have made running balance-sheet-heavy businesses, such as lending or trading, difficult and expensive.
By comparison, doling out wealth advice requires almost no capital. Margins for firms that achieve scale are typically around 25%. Clients stick around, meaning that revenues are predictable.
Competition has crushed profits in other formerly lucrative asset-management businesses, such as mutual funds. And whereas the pools of assets managed by BlackRock and Vanguard, the index- and exchange-traded-fund giants, are huge, they collect a fraction of a penny on every dollar invested. A standard fee for a wealth manager is 1% of a client’s assets, annually.
Wealth management is all the more appealing because of how quickly it is expanding. Global economic growth has been decent enough over the past two decades, at more than 3% a year. Yet it has been left in the dust by growth in wealth.
Between 2000 and 2020 it rose from $160trn, or four times global output, to $510trn, or six times output. Although much of this is tied up in property and other assets, the pool of liquid assets is still vast, making up a quarter of the total. Bain, a consultancy, estimates that it will almost double, from just over $130trn to almost $230trn by 2030—meaning that a $100trn prize is up for grabs.
They anticipate the boom will help lift global wealth-management revenues from $255bn to $510bn. It will be fuelled by geography, demography and technology. The biggest managers are attempting to cover ever more of the globe as
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