Covid-19 will destroy 4% of the wealth of families whose assets amount to at least one million dollars (from English, high net wealth or HNW). In a base scenario of economic analysis, the report made “After the storm”, made jointly by the North American bank Morgan Stanley and the consultant Oliver Wyman, the pandemic will take out 3,1 billion dollars this year to the wealthiest families.
Before the pandemic, Oliver Wyman's estimates pointed to a 6% growth per year from 2019 onwards in wealth management, reaching $ 85 billion this year. But, due to the impacts of Covid-19, “our base scenario projects that wealth management will reach only US $ 83 billion in 2021. Consequently, we anticipate that Covid-19 will represent about a lost year” in the management of fortunes, says the report.
Due to the economic uncertainty caused by the pandemic, Morgan Stanley and Oliver Wyman outlined three alternative scenarios.
“After a golden decade in which wealth managers benefited from an average annual growth of more than 8%, Covid-19 brought a different reality. The global economy has entered a period of uncertainty: asset prices have been revised, interest rates have fallen and market volatility has increased, ”says the report.
"The duration of the pandemic, the response measures and the extent of the economic impacts are uncertain", stress Morgan Stanley and Oliver Wyman.
In the pre-Covid-19 period, in 2024 the assets under management of households with assets of at least one million dollars were expected to approach 110 billion dollars. Now, counting on the economic effects of Covid-19, in the base scenario those assets will reach 101 billion dollars in 2024, that is, a 5,1% growth, after a 4% drop in 2020 compared to the year past.
In the most optimistic scenario, assets under management grew by just 0,9% this year compared to 2019, to 80 billion dollars, followed by a 5,6% recovery between 2019 and 2024, to 104 billion dollars.
In the most pessimistic scenario, Oliver Wyman and Morgan Stanley anticipate a 10,2% drop in 2020 compared to the previous year, from $ 79 billion to $ 71 billion. And, between 2020 and 2024, the recovery will be modest, of just 1%, reaching some 83 billion dollars.
In the baseline scenario, which the report's authors dubbed “Recession and rebound”, response measures against Covid-19 are “effective” in mitigating contagion, while “declining interest rates and fiscal stimuli support the U-shaped or similar economic recovery ”.
In the optimistic scenario, or “Accelerated rebound”, Morgan Stanley and Oliver Wyman anticipate a “modest” recovery compared to the base scenario, marked by a strong short-term recovery in asset prices, due to support central banks. In this scenario, the report anticipates a 1% growth in wealth management in 2020.
At the opposite extreme, in the pessimistic scenario, entitled “Sustained downturn” (sustained contraction), economic stimuli are “unable” to stimulate the world economy. "This outlook anticipates a significant contraction in 2020, followed by a slow recovery." Falling about 10% this year, only after four years will wealth management reach pre-Covid-19 levels.