Wealth management firms only manage one-third of global high-net-worth individual wealth, highlighting the potential for them to grab a greater share of the rising tide of investable capital – of which the Asia-Pacific now accounts for the biggest chunk, finds a new report.
Asia-Pacific ex-Japan follows the global trend, with 31.6% run by wealth managers, though the figure is only 23.7% for Japan, where HNWIs put a much bigger emphasis on retail bank accounts and physical cash than in any other region.
In 2015, for the first time, the Asia-Pacific region overtook North America in terms of both HNWI wealth and population, according to the World Wealth Report 2016*, released yesterday by consultancy Capgemini.
In 2014, Asia Pacific already had the largest HNWI population globally at 4.7 million, as reported, but last year it had $17.4 trillion in wealth and 5.1 million HNWI population. That put it ahead of North America’s $16.6 trillion in HNWI wealth and 4.8 million in population, for the first time.
In 2015, the Asia Pacific region led the world in HNWI wealth growth (10%), compared to 4% globally and 2% in North America.
Asia-Pacific’s HNWI population growth of 9% in 2015 also easily outpaced that of North America (2%), and was nearly double that of Europe (5%).
Japan and China stood out as regional dynamos, driving almost 60% of global HNWI population growth in 2015.
If markets in Asia-Pacific continue to grow at their 2006-to-2015 rate, the region will represent two-fifths of the world’s HNWI wealth in 10 years, said the report – more than that of Europe, Latin America and the Middle East and Africa combined.
Wealth management needs
Meanwhile, HNWIs globally showed substantially more confidence in wealth management firms in 2015 (+17 percentage points) and the financial markets (+30 points) than the previous year. However, more HNWI wealth (35%) was held in bank accounts or physical cash, as against the 32% overseen by wealth managers.
That indicates the big potential for firms that can combine technology with human expertise and relationships, said Anirban Bose, head of banking and capital markets in Capgemini’s financial services business unit.
Asian wealth managers may have the most to gain, if they can get up to speed. A recent report from consultancy PwC suggested that wealth managers in Asia were "dangerously behind" the curve in terms of digital services, mistakenly believing clients preferred the traditional, human-based advisory approach.
Meanwhile, the Capgemini report found that half of HNWIs (48%) were focused on investing for growth. As this means they tend to hold more assets in alternative investments, wealth managers may need to broaden their investment expertise beyond equities.
The report also identified the top three services HNWIs look for when choosing a wealth manager: investment advice (47%), financial planning expertise (40%) and investment access (40%).
Finally, HNWIs are starting to favour pay-for-performance fee models, requiring firms to re-assess the traditional fee-based approach, the report noted.
*The World Wealth Report 2016 was based on responses from over 5,200 high-net-worth individuals across 23 major wealth markets. It’s the 20th annual edition.