One of a cluster of annual measures of how well – or not – the global wealth sector is faring, the Capgemini report noted how falling markets hit HNW wealth in 2022, and also highlighted how firms should take the affluent segment more seriously.
Wealth management firms talk often of how digital technology and other approaches can boost advisors’ productivity and ability to find and keep clients, but the annual Capgemini report on wealth trends suggests that they have a steep mountain to climb. Separately, the World Wealth Report showed how falls in global markets during 2022 dented total assets of high net worth individuals.
The report, which covers 71 markets, surveyed 3,171 high net worth individuals in 23 markets, while its 2023 Global Affluent Insights Survey questioned 3,203 affluent individuals in 11 major markets.
For the purpose of this report, “high net worth” individuals have at least $1 million of investable assets; affluent persons have at least $250,000. (This news service has remarked on how inflation affects the parameters of what counts as being “rich”.)
Some 67 per cent of relationship manager time is spent on administrative, non-core activities, and 18 per cent of affluent segment investors are satisfied with their wealth management service provider, the report said.
The global HNW individual population dropped by 3.3 per cent to 21.7 million in 2022, while the value of its wealth fell by 3.6 per cent to $83 trillion. According to the report, this marks the steepest drop in 10 years (2013 to 2022) triggered by events such as Russia’s invasion of Ukraine in February 2022, the rises in global interest rates, and concerns over China’s relations with the West, among other factors. In all, the equity market slump cost HNW individuals a total of $3 trillion in 2022. For example, the US S&P 500 Index of equities dropped almost 20 per cent in 2022.
The report said that wealth firms must grasp how the affluent segment of individuals outnumbers their HNW peers by 2.5 per cent, and they oversee almost $27 trillion (or 32 per cent of total HNW wealth), representing a big growth opportunity. But wealth firms don’t serve 95 per cent of the affluent segment and 34 per cent don’t plan to do so because they are worried about profitability.
The study said that as HNW populations get squeezed, the affluent segment offers a “unique opportunity to create value” by serving a “highly digitised setup” and concentrating on high digital maturity across the wealth management value chain. They can also build “wealth-as-a-service" capabilities and use retail banks to connect and serve the affluent segment.