The study showed that wealth of millionaires rose at the quickest pace since 2011.
The total wealth held by high net worth individuals globally passed over the $70 trillion mark in 2017, with Asia and North America proving standout regions for millionaire expansion, according to the annual Capgemini survey.
The Paris-headquartered firm’s World Wealth Report 2018 (in its 22nd year) said the combined wealth of HNW persons rose 10.6 per last year, the quickest pace of growth since 2011. The report came out hot on the heels of last week's Boston Consulting Group survey of the same industry trends.
(For the purpose of this report, “high net worth” means a person has $1.0 million or more of investable wealth, excluding primary residence and certain other items. The study is based on responses from more than 2,600 persons across 19 wealth markets in North America, Latin America, Europe and Asia-Pacific.)
Asia-Pacific and North America accounted for 74.9 per cent of the total global increase in the HNW individual population (1.2 million new such persons joined the ranks last year) and 68.8 per cent of the rise in global HNW individual wealth ($4.6 trillion in new HNW individual wealth). A laggard in the past, Europe put in a strong performance in 2017, with the number of millionaires rising 7.3 per cent.
The largest markets - the US, Japan, Germany and China – made up 61.2 per cent of the global HNW individual population in 2017 and accounted for 62 per cent of all new millionaires globally, the report said.
The study also noted that new digital channels and threatened arrival of “big tech” firms into the wealth industry space are starting to become more significant talking points, forcing managers to translate positive numbers into bottom-line financial results.
“There is clear opportunity for wealth management firms to strengthen their relationships with their high net worth clients as nearly half say they don’t connect well with their wealth managers. Providing an innovative digital client experience is one way to strengthen the bond between wealth managers and their clients,” Anirban Bose, head of Capgemini’s Financial Services Global Strategic Business Unit, said in the report.
Nearly three-quarters of all interviewed firms in the report said they are putting money into technologies such as intelligent automation and artificial intelligence over the next 24 months, as they prepare for “BigTechs” to play a larger role in the industry. Already, as this publication has noted, a force that keeps CEOs awake at night is the potential entry of e-commerce and tech players such as Amazon and Google. Already, Chinese e-commerce conglomerate Alibaba has a financial services arm; Amazon is developing services.
“The most likely approach for BigTech entry will be based on building partnerships through the white labelling of incumbent firms’ products and services or employing models that support wealth management firms with back- and middle-office processes,” the Capgemini report said.” Regardless of the BigTech entry model and time horizon, the report highlights that wealth management firms must transform the way they invest for the future as well as move away from traditional budgeting models to a more dynamic portfolio-based approach.”
The report said investment returns for millionaires, on the assets managed by wealth managers, stood at 27.4 per cent in 2017. Equities remained the largest asset class in the first quarter of 2018 at 30.9 per cent of financial wealth, followed by cash and cash equivalents at 27.2 per cent, and real estate at 16.8 per cent. Younger wealthy persons (under aged 40) claimed to have achieved much higher investment performance than their older counterparts (37.9 per cent versus 16.9 per cent), possibly because of the need to focus on wealth creation at this early stage of their lives, compared with the higher focus toward wealth preservation of those HNW persons aged 60 and above, the study said.
Investment returns in 2016 and 2017 did not translate into much happiness among wealthy persons around the world, in contrast to significantly high trust and confidence levels in wealth managers and firms, suggesting that returns alone can’t sustain a wealth management business.
North American HNW individuals appeared the most satisfied with their wealth manager (75.2 per cent), while no other region passed the 70 per cent threshold. In 2018, only 55.5 percent of millionaires said they connected very well at a personal level with their wealth managers, despite substantial investment returns delivered over the past two years. The majority of such persons (64.3 per cent) globally said they would use an improved system for locating a wealth manager, whether this is a firm-specific initiative or provided by a third party or parties.
Cryptocurrency investments surged as prices skyrocketed. So far,
high net worth persons are cautious, but not dismissive. Some 29
per cent of such persons globally have a “high degree” of
interest, the report said and 26.9 per cent said they were
“somewhat interested”, the study added.