The Asia-Pacific region now has more HNWI than North America for the first time. The 2016 Capgemini World Wealth Report is out, the 20th edition of the report examining high-net-worth individuals (HNWI) in 2015.
How do we classify HNWI?
Someone who has over US$1 million in investable assets outside of their home, collectibles, consumables, cars, and electronics ('consumer durables').
Key findings of the report include:
- Global wealth looks set to hit US$100 trillion by 2025
- There was wealth growth of four per cent last year, but wealth in the Asia-Pacific region grew at 10 per cent
- Australia had 234,000 HNWIs in 2015, up from 226,000 in 2014
- Australia is ranked number nine in markets that are expected to push HNWI growth into 2025
- Asia-Pacific is the leading region with the most HNWI wealth globally - this is the first time our region is ahead of North America
- Asia-Pacific held US$17.4 trillion amongst 5.1 million HNWI, compared to North America which held US$16.6 trillion with 4.8 million HNWI
Who was part of the survey?
Over 5,200 HNWI across 23 countries
Looking at the results in more detail - global wealth set to hit US$10 trillion by 2025?
The report labels the growth of HNWI wealth in our region as 'aggressive' at 10 per cent, the first time we are ahead of North America in both HNWI wealth and the number of these people that exist.
Globally, HNWI wealth hit US$58.7 trillion and the overall population grew by 4.9 per cent to a total of 15.4 million individuals. This group has quadrupled since 1996, and with current growth, wealth is set to hit US$100 trillion by 2025.
An interesting finding was that about 30 per cent of global HNWI wealth is being managed by individual wealth managers, presenting, the authors say, an opportunity for the wealth management industry to consolidate assets.
Philip Gomm, the financial services practice lead at Capgemini Australia had this to say:
“As wealth firms and wealth managers face a number of converging market dynamics, including increased competition from FinTechs, firms need to be making progress on all aspects of their digital capabilities to ensure they remain relevant to clients," says Philip Gomm, Financial Services Practice Lead at Capgemini Australia. "The latest World Wealth Report findings reinforce the need for firms to adapt to meet evolving client and manager expectations alike, as nothing less than a high level of digital maturity will be adequate in the face of digitally-native competitor providers.
Low interest rates, real GDP of 2.3 per cent, and real estate growth of almost 10 per cent in 2015 were the key drivers of wealth, the report says, adding that market capitalisation declines in global commodities prices had a negative impact on both confidence and HNWI.
The Asia-Pacific region is set to drive growth going forward
If markets in Asia-Pacific continue at this current growth rate (between 2006 and 2015), this region will claim two-fifths of the world's HNWI wealth in a decade, which will be more than that of Europe, Latin America, the Middle East and Africa combined. Japan and China are our 'regional dynamos', driving almost 60 per cent of global HNWI growth in 2015.
Global growth by area
- Europe 5 per cent
- North America 2 per cent
- Latin America -8 per cent
- Asia-Pacific 10 per cent
Wealth managers attracting HNWI clients
HNWI had more confidence in wealth management companies (+17 points) and financial markets last year (+30 percentage points) when compared to the previous year. Trust in individual wealth managers stayed static, about 70 per cent were satisfied with their relationship and indicated a willingness to consolidate more assets with wealth managers.
Wealth managers, however, do not have most of HNWI assets under their control, with 35 per cent of HNWI wealth essentially liquid in 2015 (bank accounts, cash), versus 32 per cent managed by an individual wealth manager. Those aged under 40 were less likely than anyone to use a wealth manager (28 per cent), with North Americans favouring wealth managers the most (39 per cent).
Characteristics HNWI seek in a wealth manager
- Investment advisers available (47 per cent)
- Financial planning expertise (40 per cent)
- Investment access (40 per cent)
- Investing for growth (48 per cent)
- Favour pay-for-performance fee models