Artificial Intelligence is poised to have significant impacts on the financial sector. However, a new study reveals that four out of five providers in this field lack a long-term strategy. Generative AI, meanwhile, presents promising prospects for mitigating margin erosion.
Switzerland remains the number one financial hub for cross-border assets, yet managed offshore assets in Singapore and the United Arab Emirates (UAE) grew faster in 2023.
This is one of the key findings from the latest «Global Wealth Report», an annual study by consulting firm Boston Consulting Group (BCG) on the global trends in financial assets and tangible assets held by individuals, along with corresponding liabilities.
According to Michael Kahlich, BCG Partner in Zurich and co-author of the study, Switzerland benefits from investors seeking safe havens abroad during times of crisis. Foreign assets managed in Switzerland grew to 2.2 trillion Swiss francs ($2.2 trillion) in 2023, marking a 4.8 percent increase from the previous year.
Financial Hub Hong Kong Weakens
However, Singapore and the UAE saw even greater growth last year, with increases of 7.8 and 8.9 percent, respectively. BCG attributes this trend to «rising demand for geographical diversification and increasing wealth in the Middle Eastern and Asian markets.» Hong Kong, with assets totaling 2 trillion Swiss francs, saw a slightly weaker growth of 3.2 percent, placing it directly behind Switzerland in this regard.
BCG anticipates that Switzerland will maintain its leading role as an international financial center despite growing competition and expects it to «capture a significant share of newly generated cross-border assets by 2028.»
Further Growth Forecasted
Switzerland's total net wealth rose by 1.7 percent to 5 trillion Swiss francs in 2023. Financial assets, comprising cash, deposits, bonds, stocks, funds, and pensions, grew significantly by 3.3 percent to 3.2 trillion Swiss francs. Meanwhile, tangible assets such as real estate and precious metals stagnated at around 2.8 trillion Swiss francs. Net wealth calculation deducts liabilities, which slightly increased to 1 trillion Swiss francs.
The study forecasts Switzerland's financial assets to grow annually by an average of 3.1 percent from 2023 to 2028, reaching up to 3.7 trillion CHF during this period. This scenario assumes global stock market recoveries, declining inflation rates, and sustained investor confidence in the Swiss financial system.
One-Seventh Owned by the Super-Rich
Switzerland is home to 800 super-rich individuals, also known as Ultra-High-Net-Worth Individuals (UHNWI), with financial assets exceeding $100 million each. Globally, these 73,000 individuals own 14 percent of the world's financial assets, with over 26,000 residing in the USA, followed by China (8,200), and Germany (3,300). Collectively, this group possesses financial assets totaling 32 trillion Swiss francs, nearly 14 percent of the global total.
After a weak previous year, global financial assets grew by 7 percent to 231 trillion Swiss francs in 2023, driven by improved market conditions worldwide. The United States led with a 9 percent increase, reaching 100 trillion Swiss francs in financial assets, followed by China (27.4 trillion), Japan (13 trillion), and Germany (7.8 trillion). The authors predict global financial assets will increase by 77.1 trillion Swiss francs by 2028.
Generative Artificial Intelligence, an Implementation Challenge
The BCG report not only compiles data but also examines the transformative potential of generative artificial intelligence (AI) in asset management. Given ongoing margin pressures in asset management, wealth managers should explore the capabilities of generative AI. According to study author Akin Soysal, «The industry does not lack insight but rather struggles with implementation.»
85 percent of wealth managers expect AI to have significant impacts on the industry, yet four out of five providers have not yet established a long-term strategy. Soysal suggests that generative AI could increase productivity by up to 30 percent while significantly enhancing advisory quality.
For the «Global Wealth Report,» BCG analyzes 97 markets, representing 98 percent of global GDP, and incorporates data from over 100 asset managers.
