Global HNWI Wealth And Population Expanded, Though At A Slower Pace by Capgemini
Global HNWI Population and Wealth Expanded, though at a Slower Pace
- Global HNWI population and wealth expanded at moderate rates of 6.7% and 7.2% respectively in 2014, the second slowest rates of the last five years.
- Asia-Pacific and North America drove the majority of growth, and Asia-Pacific overtook North America to become the region with the largest HNWI population at 4.69 million.
- Global HNWI wealth is forecast to cross US$70 trillion by 2017, growing at an annualized rate of 7.7% from the end of 2014 through 2017.
Equities Lead HNWI Allocations, and Credit Emerges As a Key Demand and Opportunity
- Equity allocations moved slightly ahead of cash as the dominant asset in HNWI portfolios, with HNWIs in Japan and Latin America expanding their equity holdings the most.
- Allocations to international investments remained at a high level, holding steady at 35.8%. This compares to 36.6% a year earlier, with Asia-Pacific and Latin America HNWIs investing the most internationally.
- Credit figures prominently in HNWI portfolios, and its availability is a big selling point for some HNWIs, although demand varies by region and demographic.
Social Impact: A Great Opportunity for Wealth Managers
- Despite their interest in driving social impact, HNWIs do not have a single preferred source to help them navigate its complexities, with near-equal support currently received from wealth managers and families/friends.
- Wealth managers, who are the most sought-after professionals on driving social impact, are best positioned among all professionals to capitalize on the fragmented advice landscape, and to fulfill HNWI demand for greater guidance across all areas of social impact.
- To overcome challenges related to social impact and to keep up with HNWI demand for guidance, wealth management firms need to develop more sophisticated in-house capabilities, starting with embedding social impact discussions into the overall wealth management approach.
Wealth Manager Role and Value Proposition Undergoing Major Evolution, Requiring Service Model and Capability Re-Think
- While all HNWIs are generally satisfied with their wealth managers, younger HNWIs have a wide range of specific needs and expectations that are not being met.
- Firms and wealth managers face a host of industry challenges, including ongoing issues and more recent threats from new entrants, all of which are driving the evolution of the wealth manager’s role.
- To compete in the new environment, wealth managers can reorient their roles and value proposition to deliver goals-based financial planning and act as a conduit to a full range of capabilities, both inside and outside of the firm.
- Wealth management firms have a major role to play in the transition by setting a clearer strategic direction, communicating with wealth managers, and empowering them by investing in key capabilities and resources.
Global HNWI Population and Wealth Expanded, though at a Slower Pace
- Driven by robust growth in Asia-Pacific and North America, global HNWI population and wealth expanded at moderate rates of 6.7% and 7.2% respectively in 2014, the second slowest rates of the last five years, and more modestly than 2013 HNWI population and wealth growth (14.7% and 13.8% respectively). Asia-Pacific and North America were the only regions in 2014 to outpace their five-year (2009 to 2014) annualized growth rates of HNWI wealth.
- Asia-Pacific overtook North America to become the region with the largest HNWI population at 4.69 million. While the two have traded places before, Asia-Pacific is expected to retain and extend its leadership position.
- Ultra-HNWIs, who make up only 1.0% of all HNWIs, but account for roughly 35% of HNWI wealth, were again significant drivers of global HNWI population and wealth growth. Asia-Pacific grew ultra-HNWI wealth and population the most, while slow expansion for Latin American ultra-HNWIs continued to constrain overall wealth growth for both HNWIs and ultra-HNWIs globally.
- The HNWI population became increasingly concentrated in 2014. The U.S. and China helped drive more than half the global HNWI population growth, while other top-10 markets expanded less than the global average. India was the fastest growing market in 2014, climbing 26% and jumping five places to be ranked 11th globally.
- Global HNWI wealth is forecast to top US$70 trillion by 2017, growing by 7.7% annually from the end of 2014 through 2017. Having already overtaken North America in terms of HNWI population, Asia-Pacific is forecast to surpass North America in HNWI wealth in 2015.
Asia-Pacific, North America Drove HNWI Growth in 2014
Both the number of global HNWIs and the amount of their investable wealth expanded in 2014, although at a slower pace than in both 2013 and the five-year period prior to 2014. HNWI population and wealth grew at the second slowest rate of the last five years (2009 to 2014), though the global population of HNWIs increased for the sixth consecutive year, expanding at a rate of 6.7% during 2014 to 14.6 million (see Figure 1) compared to growth of 14.7% in 2013. HNWI wealth expanded by 7.2% to US$56.4 trillion (see Figure 2) compared to growth of 13.8% in 2013. While the global economy expanded and equity markets rose in 2014, their growth was constrained by Eurozone concerns, decelerating emerging-market economic performance, and ongoing geopolitical tensions in the Middle East and Ukraine.
As in previous years, robust growth in Asia-Pacific and North America helped drive global HNWI population and wealth.
Asia-Pacific recorded the highest HNWI population increases in 2014 (8.5%) and, as predicted, edged past North America to become the region with the most HNWIs (4.69 million, compared to North America’s 4.68 million).
On the wealth front, North America continued to have the greatest amount of HNWI wealth (US$16.2 trillion, compared to Asia-Pacific’s US$15.8 trillion), but Asia-Pacific registered the greatest gain (11.4%, compared to North America’s 9.1%).
Asia-Pacific and North America were the only regions to outpace their five-year (2009 to 2014) annualized wealth growth rates (10.4% and 8.8%, respectively) in 2014. North America was helped by strong equity market performance (10.3% vs. a global average of 2.9%), while Asia-Pacific benefited from superior economic performance. Asia-Pacific’s GDP growth, led by the region’s emerging economies, reached 5.8% vs. 2.5% globally (see Figure 6).
India emerged as a key driver of Asia-Pacific’s growth in 2014. Following increases of only 2.0% in HNWI population and 4.0% in HNWI wealth in 2013, India recorded the highest growth rates across the globe for HNWI population (26.3%) and wealth (28.2%) in 2014. A decisive mandate in the mid-2014 elections proved critical in creating a more business-friendly environment in India. That, combined with sound monetary policies, ushered in a wave of positive investor sentiment. This sentiment led the country’s equity markets to new highs, including a 21.9% increase in the Indian MSCI Index. India also benefited from the global decline in oil prices, given that it imports about 70% of its oil. Another positive was a reduction in the retail inflation rate from double digits to mid-single digits.
China was another engine of growth in Asia-Pacific, adding to HNWI population at a rate of 17.5% and HNWI wealth by 19.3%. Even though China’s 7.4% GDP growth was lower than previous years, it remained relatively high compared to other major economies (see Figure 6). Additionally, Chinese equity markets performed better than in 2013, and the country benefited from an increase in overall exports in 2014.
The strong performance from India, China, and other emerging economies in Asia-Pacific is expected to drive global HNWI growth over the next few years. North America and Asia-Pacific have gone head to head in HNWI population over the last few years, with Asia-Pacific surpassing North America in 2011 and falling back again in 2012. Now, despite possible near-term setbacks, Asia-Pacific is expected to pull ahead for the long haul.
The solid performance of Asia-Pacific and North America contrasted with below-par performance in Latin America and Europe. This led to constrained global HNWI growth, which fell far short of the double-digit rates recorded during 2013 when HNWI population increased 14.7% and HNWI wealth increased 13.8%. The 2014 rates were also below the annualized growth rates logged from 2009 to 2014, which were 7.8% for HNWI population and 7.7% for HNWI wealth.
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