Asia speeds ahead in wealth race with North America

High-net-worth individuals in the region will lead the world in population and accumulated wealth as early as next year. They are becoming more digitally focused, too, finds a survey.
Asia speeds ahead in wealth race with North America

Asia Pacific will overtake North America both in terms of high-net-worth population and accumulated wealth as early as next year, according to RBC Wealth Management and consultancy Capgemini.

The research partners, which collaborate on world and Asia-Pacific wealth reports annually, forecast earlier this year that the region would surpass North America by 2015. But increasing GDP, favourable demographics and a high savings rate has sped up the process. RBC WM is now confident the tipping point will be reached next year instead.

The number of high-net-worth individuals (with at least $1 million in investable assets) increased 9.4% year-on-year in Asia Pacific in 2012, behind only North America, which saw 11.5% growth. Asian HNWIs held $12 trillion in investable wealth compared with $12.7 trillion for North America.

RBC WM is tipping Asian wealth to hit $15.9 trillion by 2015, ahead of $15 trillion for North America’s. RBC was unable to provide specific forecasts for 2014.

Last year's Asia-Pacific Wealth Report from RBC WM and Capgemini can be found here.

The wealth accumulation race between Asians and North Americans has been neck-and-neck for years. But once Asia takes the lead next year, RBC Global Asset Management chief economist Eric Lascelles expects the region to pull significantly ahead of North America.

“In five years, the odds are high that there will be a pretty material gap [between Asian and North American millionaires and wealth],” Lascelles tells AsianInvestor.

The survey notes a marked shift in the preference among wealthy Asians' for digital communication with their wealth managers, more so than the rest of the world.

Overall, 38% of HNWIs in Asia Pacific (ex-Japan) prefer digital contact, versus 22% globally. These numbers are reversed for direct contact: 36% of global HNWIs prefer face-to-face meetings, compared with 24% in Asia Pacific.

Rich Indians expressed the strongest preference for digital contact over face-to-face at 46%, followed by rich Chinese (42%). Hong Kong and Singapore were third and fourth at 38% and 34%, respectively.

As generations become wealthier at a younger age, this shift towards communicating digitally is expecte to become more pronounced. The survey finds that most respondents who prefer face-to-face meetings are 60 years or above.

Yet RBC WM believes relationship managers will continue to play a vital role in future.

“While it’s important to note this is a preference, [digital contact] should compliment, not substitute, wealth relationship managers,” says David Wilson, head of the strategic analysis group at Capgemini.

Still, this points to a "burning need" for financial services firms and wealth managers to develop their digital capabilities, streamline their support infrastructure and offer more wealth management options for mobile phones, he adds.

Wealthy Asians also view their financial needs as more complex than global peers, and Lascelles reasons that this is likely due to the disproportionate number of Asian entrepreneurs, who's assets aren't as liquid and who need capital for their businesses. 

“They have money to run in different [business segments], it may not be as liquid, it’s often tilted in the sector they run in,” Lascelles says. “I’d hazard a guess to say that’s why they view their financial needs as being more complex.”

In terms of asset allocation, the survey finds investors in Asia Pacific ex-Japan were more keen on risky assets than the rest of the world last year. They allocated 60% of assets to equities, real estate and alternative investments, two percentage points higher than HNWIs in the rest of the world.

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