The GenAI Era Unfolds

Global net wealth staged a significant recovery in 2023, growing by 4.3% after a difficult year in 2022.

Much of the growth was due to a rebound in the financial markets, accompanied by a rise in the volume of assets under management (AuM). Financial wealth—a subset of global wealth—rose by almost 7%, following a decline of 4% in 2022. The gains were especially strong in North America and Western Europe, while growth in China remained more subdued. Cross-border wealth followed a similar pattern. Key booking centers such as Switzerland, Singapore, the US, and the United Arab Emirates (UAE) grew in line with recent trends, while Hong Kong witnessed a notable slowdown—growing by just 3.2%—due to reduced inflows from mainland China.

Yet in spite of the upswing, profitability continues to be a concern. Wealth managers improved their profitability margins modestly, which was a notable achievement compared to both their asset management peers and the 2-basis-point decline that the wealth management industry endured in 2022. Most of the improvement, however, is attributable to windfall profits from net interest income. That trend is not likely to continue in the current environment, with funding costs rising and interest rates expected to fall—especially as inflation, operational inefficiencies, and tightening regulations continue to bite. We therefore anticipate that profit margins will not increase dramatically in the near term unless the industry experiences a positive shock.

In fact, that positive shock could be on the horizon if wealth managers tap into the full potential of generative AI (GenAI). This technology can unlock efficiencies across the value chain and allow greatly enhanced client interaction and personalization at scale. In this report, we examine GenAI’s transformative power, as well as the crucial role that an effective compliance setup can play in ensuring a successful transformation.