Industry at a 'pivotal juncture' as some traditional levers of growth become unreliable
The wealth management industry is evolving amid a sharp rise in global wealth and shifting demographics and priorities of investors.
While global financial wealth hit an all-time high of US$305 trillion in 2024, growing over 8%, the underlying dynamics of this growth are changing dramatically, creating an opportunity for asset managers who understand and adapt to these shifts and develop strategies for organic growth.
Wealth management AUM expanded by 13% last year, significantly faster than overall financial wealth (8.1%), but revenue growth lagged at 7.1%, as many firms saw falling margins on the back of a changing rate environment.
The stats are from a new report from Boston Consulting Group, which reveals that just 28% of wealth manager asset growth over the past decade came from existing advisors, falling to 22% in mature markets such as North America.
While gains have been seen though M&A, market performance, and advisor recruitment, the report warns this can no longer be relied upon. Bull markets have softened, M&A integrations are complex and costly, and experienced advisors are in short supply, with nearly half of new hires failing to deliver on their initial business case.
This highlights a critical need for financial advisors to focus on cultivating organic growth from within their existing client relationships and through new client acquisition.
“What defines winners today is no longer exposure to market performance or the ability to poach senior bankers, but their ability to grow from within,” said Michael Kahlich , managing director and partner at BCG. “Firms that deliberately invest in advisor enablement, brand identity, and next-gen client strategies are outperforming peers - not just in revenue, but also in valuation multiples.”
But the report shows that many advisors, especially in mature markets, are less focused on new client acquisition, often due to sizable existing books and compensation structures that don't sufficiently incentivize incremental growth.
Rising administrative burdens, particularly compliance and operational tasks, also consume valuable time that could be spent on prospecting and business development.
The report identifies several key levers for financial advisors to strengthen their organic growth muscle:
- Brand Strength: Investing in brand building to enhance trust and differentiation can lead to significant asset growth.
- Digitally Enabled Client Acquisition: Leveraging tools like Generative AI (GenAI) for systematic lead generation can dramatically increase leads and conversion rates.
- Data-Driven Product Distribution and Lead Management: Utilizing integrated client data and analytics can lead to higher product revenue and reduced client churn.
- Next-Gen Engagement: Engaging younger clients early with tailored, tech-enabled experiences can lay the foundation for future growth and improve onboarding efficiency.
“The rules of the game are shifting. Firms that embrace AI-enabled prospecting, personalized onboarding, and digital tools that boost productivity will be the ones to capture the next wave of growth,” said Daniel Kessler, managing director and senior partner at BCG and co-author of the report. “Wealth is being created globally, but the challenge for wealth managers will be to capture it.”
