Exclusive: HNWI Analysis, Healthcare

PBI has drawn on WealthInsight’s research to analyse a specific industry which plays a major part in driving high net worth wealth creation. This month, PBI looks at the healthcare industry in India, the United States, China and Canada.

The several billion dollar healthcare industry is very lucrative for several reasons. People need to make use of healthcare services on many occasions during their lifetime. In addition, many are willing to pay more than the average amount for better care as it directly affects their well-being. A service of higher quality can demand a higher fee, which is why many high net worth individuals are within the private and not public healthcare sector.

In addition, the industry is one that must be constantly available. It is a service that should be prepared, to a certain high standard, twenty-four hours a day. Through this need, money is generated constantly.

The healthcare industry is vital, and necessary, in all economies. As the demand for medical treatment increases, both for health and cosmetic purposes, a larger number of wealthy individuals are investing in and expanding the industry. As the technology improves, the costs fall and the profit margins grow higher, leading to healthy balance sheets all around the industry. Estimates have predicted the amount of money poured into the sector to be $7.5 trillion by 2020, a 50% increase from 2010.

However, one of the downsides in investing within healthcare is the amount of regulation and testing required before anything becomes official. New pharmaceuticals need to go through lengthy and costly testing periods. Even setting up hospitals can be an arduous process with sixty stamps of approval required in China before launch. A similar system in India needs thirty-seven stamps.
Overall, despite the risks and costs required to enter the field, if successful, it is a strong and solid base for much wealth to be created.

Key Geographies

Countries with a high population, both wealthy and otherwise, are key areas for investors in the healthcare industry.

India has a staggering 9.8% of high net worth individuals (HNWIs), as of 2011, who gain their wealth from healthcare. Due to the public’s preference of private health care to public, there is a lot of money to gain from the market. Mr Dilip Shanghvi is the second wealthiest person worldwide in this field.

The United States is one of the few countries worldwide, along with Mexico, which does not have universal health care, with health insurance a requirement needed for inexpensive medical treatment. Despite the lack of a universal system, it remains highly profitable with 6.6% of HNWIs earning their wealth in this sector. It also constitutes around one sixth of the country’s economy.

China’s healthcare system is currently undertaking reforms which will hopefully make medical care more affordable to the poorer rural regions. As of 2012, 5.3% of HNWIs, and 5.4% of UHNWIs, create the majority of their wealth through the healthcare sector.

Canada has a solid base in healthcare with 4.2% of HNWIs gaining their substantial wealth in this sector. This number rises to 5.4% when only considering UHNWIs. This is due to the large percentage, 27.6%, of the population which choose to undertake private care instead of the public healthcare system in place.

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