Global wealth grew at its fastest pace in almost a decade last year, boosted by rising equity markets. However the changing distribution of wealth across the world’s population will damp the associated opportunity for wealth management providers, UBS has said.
Total personal wealth grew by 10.8 per cent last year, expanding at its fastest pace since 2017 and concentrated in Europe, the Middle East and Africa, according to UBS’s latest Global Wealth Report.
But the “pyramid” of wealth distribution — which outlines how household wealth is spread across the population — may be moving towards a “diamond” shape, the report warned, as the surge in wealth creation in emerging markets expands the global middle class.
If a diamond shape is reached, a lot of the growth among the middle class will be tied up in real estate which would limit how much banks and wealth managers could capitalise on growing wealth, said James Mazeau, economist at UBS Global Wealth Management.
“What’s important to wealth management businesses is the bankable assets that you have . . . [a rise in real estate-associated wealth] for a wealth management business is not really good news because we provide services mainly on investments on [clients’] investible or liquid wealth,” he said.
Changes to the wealth pyramid remain “nominal”, said Paul Donovan, chief economist at UBS Global Wealth Management, with rising inflation shrinking the number of those with low-level wealth. Additionally, he said, the calculation of wealth includes housing costs net of mortgage amount.
“With ageing societies, more and more people have paid off their mortgage as time goes on . . . that would move people out of the lower segments,” he added.
Banks are increasingly moving into the wealth management space, which is seen as low risk and high reward, given its sticky revenues and capital-light nature.
But the combination of rising personal wealth and developed countries’ increasing debt burdens have prompted concern over the introduction of wealth taxes as governments try to minimise borrowing costs.
The IMF recently estimated that, since the pandemic, public debt in advanced economies has risen by between 2 per cent and 8 per cent of GDP — more than in some emerging markets.
“Wealth taxes are relatively unlikely [as] they tend not to be effective; inheritance taxes similarly have political and economic problems,” said Donovan. “Capital gains taxes, on the other hand, are a lot easier to administer, a lot more direct . . . we will be seeing more use of that in the future.”
Rising equity markets boosted global wealth — with most major indices rising by double digits in 2025. The tech-heavy Nasdaq and FTSE 100 both rose 20 per cent, with the S&P 500 gaining 16.7 per cent.
Growth was concentrated in Emea at 17.5 per cent, followed by the Americas at 8.5 per cent and Asia-Pacific at 5.9 per cent. UBS acknowledged that, as the rise in wealth is measured in US dollars, the depreciation of the dollar compared with most major currencies makes growth outside the US look unduly strong.
