The pandemic has caused havoc on economies all over the globe, however, India has fared well despite the turmoil faced. According to a recent report released by Boston Consulting Group (BCG), India’s financial wealth has grown by 11% per annum from 2015-2020 to $ 3.4 trillion. The report also mentioned that India’s financial wealth is expected to grow by 10% per annum to $ 5.5 trillion by 2025.
Key highlights of the report released by BCG are:
- India represented 6.5% of the Asian region’s wealth in 2020.
- The report also reveals growth in prosperity and wealth significantly throughout the crisis in addition to the expectation of expansion over the next 5 years.
- Asia has the largest concentration of wealth in real assets, $84 trillion, contributing 64% of the regional total. Asia will see financial asset growth exceed real asset growth, 7.9% as compared to 6.7% respectively in the near future.
- Primarily, investment funds in the region are expected to become the fastest-growing financial asset class. Its projected compounded annual growth rate (CAGR) is 11.6% through 2025.
- The report identifies 2 attractive market opportunities for wealth managers:
- Individuals with simple investment needs, those whose financial wealth is between $100,000 and $ 3 million.
- Retirees, known to be one of the world’s fastest-growing demographics.
- The “simple-needs segment” comprises 331 million individuals worldwide. It holds $59 trillion in investable wealth and has the potential to contribute $118 billion to the global wealth revenue pool.
- Individuals over 65 own $29.3 trillion in financial assets which is accessible to wealth managers. This is expected to grow at a CAGR of close to 7% over the next few years till 2025.
- By 2050, 1.5 billion people globally will fall into the 65+ years old category, creating an abundance of opportunities for wealth managers.
- Liabilities are expected to grow at a lowered level, as compared to financial wealth growth, by 9.4% per annum to $1.3 trillion by 2025.
- Bond markets are expected to grow the fastest with 15.1% growth per annum.
- Another rapidly evolving segment identified by the report is “Ultra’s”. These are those individuals whose personal wealth exceeds $100 million.
- This segment has witnessed a year-on-year growth of 9% since 2015 and holds $22 trillion in investible funds which are 15% of the world’s total.
- Individuals in the “ultra” category range between 20 to 50 years of age and are categorized as having longer investment horizons accompanied by a greater risk appetite.
- These individuals also prefer to use their funds to create a positive societal impact in addition to attaining high levels of returns.
The future outlook for emerging markets such as India according to the report could be bright. It mentioned that North America, Asia (excluding Japan), and Western Europe will be the leading generators of financial wealth globally, accounting for 87% of new financial wealth growth worldwide between now and 2025.
An abundance of opportunities will also present for wealth managers as well in the coming years till 2025. However, wealth managers will be required to personalize their services in order to capture the market. Additionally, they will also have to build their understanding of demographic changes in each of the categories. For example, women now make up 12% of the “ultras” segment. Finally, the report stated that the next-gen segment is also going to be an influential driver of future growth in the next decade or so.