HNW population remains steady despite global tremors
High net worth individuals’ investable assets have fallen this year, while the costs associated with managing that money is on the rise
Despite the eurozone crisis unsettling investors by increasing market volatility and slowing global economic growth, the world’s high net worth individual (HNW) population remained unchanged at 11m, though their aggregate investable wealth by asset values slid to $42tn (€33tn), the latest RBC Wealth Management-Capgemini World Wealth Report found.
Europe’s high net worth individual population rose 1.1 per cent to 3.2m, but their wealth decreased by 1.1 per cent to $10.1tn. Though the HNW population in Europe registered declines in Poland and UK, they registered a gain of 13.6 per cent in Russia and 16.8 per cent in Ireland, signalling a recovery.
Asia Pacific surpassed North America as the single largest home to HNWs for the first time, with 3.37m individuals with at least $1m in investable assets in Asia Pacific, compared to 3.35m in North America, boosted by an increase in wealthy people in China, Japan, Thailand and Indonesia.
“While more people surpassed the $1m disposal income level in 2011, the aggregate wealth of high net worth individuals declined overall, as market volatility took its toll,” said George Lewis, group head, RBC Wealth Management.
“It is significant that there are more high net worth individuals in Asia Pacific than any other region, but losses in key markets such as Hong Kong and India meant that wealth contracted in Asia Pacific overall.”
According to industry estimates, while total assets under management have grown since 2008, the costs associated with managing those assets have risen faster than income growth, due to rising client demands and adviser remunerations, compliance costs and pressure from an inability to generate significant fees in the current low interest rate environment, as well as increased client demand for low-risk capital preservation products.
The report highlighted that private banks needed to address costs and revenue challenges through scalability at a time when wealth management firms are faced with a new industry landscape, which includes factors such as rising competition, heightened market volatility and changing client needs and expectations.
“Given the combination of these factors, many wealth management firms are re-evaluating and re-assessing their business models to effectively manage assets under management revenue growth, without adding to incremental resources, costs, or incurring service degradation,” said Mr Lewis.
Capgemini found the hurdles to scalability are far lower in providing advisory and wealth management services than in client acquisition and profiling, so wealth management firms will get more value from leveraging technology to achieve scalability in these areas of the value chain.
The aggregate investable wealth of the world’s high net worth individuals has fallen to $42tn...
...although their number remains unchanged at 11m
