In terms of the number of HNWIs and total wealth, Asia-Pacific has overtaken North America according to the 20th annual World Wealth Report by Capgemini. The 2016 WWR reveals valuable insights around global wealth growth, geographical performances and behavioural shifts. Meghna Mukerjee explores the findings
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North America’s wealth market has been surpassed, for the first time, by Asia- Pacific, which has become the region with the largest amount of HNW wealth and HNWIs globally, according to the findings of the World Wealth Report 2016
(WWR) by Capgemini.
The global HNWI population and wealth growth continued to be modest throughout 2015, increasing by 4.9% (to reach 15.4m) and 4% (to reach $58.7trn) respectively. Both were primarily sustained by Asia-Pacific’s wealth boom, the report reveals. Japan and China contributed to 60% of the global HNWI population growth, collectively, and emerged as key engines of wealth generation.
HNW wealth in Asia-Pacific grew by approximately 10%, and the region held $17.4trn in wealth with 5.1m HNWI population. In contrast, North America held $16.6trn in HNWI wealth and 4.8m in population in 2015, according to the WWR 2016.
The region saw a wealth growth of 2%, driven by the poor performance of US and Canadian equities. European wealth increased by 4.8% in 2015 to reach $13.6trn.
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By GlobalDataLatin America was the only region to report a slump in both HNWI population and wealth due to the poor performance of Brazilian equities. Brazil, with its myriad socio-political issues in 2015, recorded a slump and its HNWI population tumbled by 7.8%. Mexico also lost 1.8% of its HNWI population in 2015. Latin America’s performance put a “big break” on global wealth growth figures, according to the WWR 2016.
The report also unveiled that the UHNWI population did not lead global wealth growth as it historically has done. However, UHNWI wealth increased more than other wealth segments with the exception of Latin America.
Now in its 20th year, the WWR queried more than 5,200 HNWIs across 23 major wealth markets globally, and covered 71 countries in its market sizing model.
Looking ahead at the next decade, the WWR 2016 projected that Asia-Pacific will represent two-fifths of the world’s HNWI wealth by 2025, which will be more than that of Europe, Latin America, the Middle East and Africa combined.
Under the most aggressive growth scenario, global growth is projected to surpass $100trn by 2025, triple the amount reported back in 2006 when the report debuted.
Equities, cash and real estate continued to be preferred asset classes for HNWIs. Globally, 53.9% of HNWIs said they held investments or accounts outside their home countries.
Following the theme of the 2014 and 2015 WWRs, the 2016 report’s findings also highlighted the increasing interest among HNWIs in driving social impact through investments, which is expected to gain further traction, with
49.3% HNWIs saying they will increase social impact investments over the next two years.
Gaping opportunities for wealth managers
According to the WWR 2016, only 32% of global HNWI wealth is currently held with wealth management firms, which reveals big growth potential. This statistic comes alongside the revelation that HNWIs’ trust and confidence in their wealth managers increased by 17.0 percentage points during 2015.
To appeal to more HNWIs and gain more assets under management, firms need to effectively combine relationships and expertise with digital technology and fintech capabilities to reflect comprehensive and attractive service offerings. The report noted that wealth managers must deliver goals-based planning, while acting as a conduit to a full range of capabilities inside and outside the firm.
The findings reveal that younger HNWIs are likely to prefer bank accounts and cash over specialised wealth management services and a lot of money is tied to their businesses. Therefore, wealth mangers have a lower number of clients in the under-40-years age bracket as opposed to the over-60s. Opportunities are ripe to engage younger clients.
Younger HNWIs are also open and keen to consolidate their assets under one wealth manager as they see it as a way of simplifying wealth management relationships. Globally 27.2% of HNWIs said that investment returns were the most important factor in their decision to consolidate their assets with their primary wealth manager, revealed the WWR 2016.
The WWR found that HNWIs’ demand for digital services continues to increase, and 72.9% of clients cited that digital maturity is “very or somewhat significant” in their decision to increase assets with their wealth management
firms over the next 24 months.
Wealth managers, too, have expressed demand for digital services with more than 80% recognising the positive impact digital tools can have on client interactions, as well as their overall ability to do their jobs.
According to the WWR, digital maturity is only going to continue to escalate in importance, and continuing the theme of last year’s report, HNWIs are increasingly embracing fintech offerings.
Interestingly, demand for social networking has also been highlighted as an interest area for wealth managers – one that is underdeveloped or underused in the wealth management community. David Wilson, head of Strategic Analysis Group at Capgemini Financial Services, says: “Demand for social media tools to prospect for clients is rising among wealth managers. That is really telling about how ready wealth managers are to pitch their clients through social media. That was also the capability that reflected the biggest gap between advisors’ need for it and the firms’ provisions for the necessary tools.”
Wilson adds that Europe could take a cue from North America, where wealth management firms are relatively advanced in effectively utilising social media tools.
