HNWI are defined by the report as individuals who have investable assets of one million US dollars or more, excluding primary residences, collections, consumables and consumer durables.
Asia-Pacific HNWI wealth also grew for a second straight year in 2010; rising 12.1% to US$10.8 trillion.
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According to the report, the top three countries – Japan, China and Australia – accounted for 74.4% of the HNWI population in the Asia-Pacific region and 68.2% of wealth in 2010.
Japan and China together were home to 68.6% of HNWI in the region and 62.8% of regional HNWI wealth, down from 70.4% and 64.7% respectively a year before.
The research also stated that Hong Kong saw the greatest jump in the number of millionaires in 2010: The port city’s millionaire ranks swelled by 33% to 101,000, outpacing Singapore, which had a 21% increase to 99,000.
India’s HNWI count grew much faster compared with 9.7% growth for the Asia Pacific region. Its population of HNWIs grew 20.8% in 2010 to 1,53,000 in 2010.
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By GlobalDataAccording to the report, 57% of Asia-Pacific (ex-Japan) HNWI are entrepreneurs, compared to 47% globally. Similarly, 23% have inherited their wealth, compared to 17% globally.
As more international wealth management firms enter the Asia-Pacific market, the increasing competition could impact client retention and reduce profit margins. The challenge in managing the wealth of Asia-Pacific HNWI is also due to the fact that they are increasingly exploring the use of more complex investing strategies as they seek to balance their conflicting desires for both yield and stability in the wake of the global financial crisis, the report said.
The report also highlighted the point that a large fraction of the region’s HNWI feel concerned that their offspring will be unable to manage their inheritance. According to the report, 88% of financial advisers polled said that their Asia-Pacific (ex-Japan) clients believed that the next generation will be unable to manage their inherited wealth.
The report added that only 30% of family businesses in the region survive into the second generation, and only 10% survive to the third generation.
Dwelling upon the challenges, the report says that the Asia-Pacific excluding Japan will remain the engine of global economic growth in 2011 and 2012, but increasing capacity constraints are likely to slow the rate of expansion, keeping GDP growth to an estimated 6.9% in 2011 and 6.8% in 2012. This, in turn, is likely to restrain global GDP growth to an estimated 3.2% in both 2011 and 2012.
In its conclusion, the report says that the Asia-Pacific will continue to be the engine of global growth through 2012 at least, but the actions Asia-Pacific governments take to restrain inflation, control foreign-capital inflows, and deflate potential asset bubbles will certainly affect the pace of that expansion.
Given the prevailing volatility in markets and bleak economic forecasts, we believe that Asia will not see strong gains in HNWI in 2011 and that thedepreciating value of the dollar will be one of the major catalysts aiding the growth in the HNWI population In the region.
From the perspective of the wealth management industry, we do notbelieve that the market is as rosy as the report suggests. indeed, competition among wealth management and private banking firms fighting for the business of Asia’s HNWI has heated up significantly over the past year while, at the same time, the appetite of Asia’s HNWI for wealth sector services has increased only moderately.
Fierce competition has driven up costs to what many industry participants say are unsustainable levels, and it is likely to shoot up further in the near future.
