Fuelled by global recovery in the equity and real estate markets, the investable wealth of the world’s High Net Worth Individuals (HNWIs) rebounded in 2012, growing by 10 per cent to reach a record high of USD46.2 trillion, after declining 1.7 per cent in 2011, according to the World Wealth Report 2013 (WWR), released by Capgemini and RBC Wealth Management.
One million individuals joined the global HNWI population, which reached 12 million, reflecting an increase of 9.2 per cent.
North America reclaimed its position as the largest HNWI market in 2012 after being overtaken by Asia-Pacific the year prior. North America’s population of 3.73 million HNWIs surpassed Asia-Pacific’s 3.68 million, while its HNWI wealth reached USUSD12.7 trillion, above the USUSD12.0 trillion in the Asia-Pacific region.
“HNWI population increases were strong in 2012,” says Jean Lassignardie, Chief Sales and Marketing Officer, Capgemini Global Financial Services. “However, North America’s lead in both population and wealth is likely to be eclipsed again in the future by Asia-Pacific. Interestingly, while North America led in HNWI population, Asia-Pacific actually had a higher overall wealth growth rate at 12.2 per cent, compared to North America’s 11.7 per cent.”
Global investable wealth growth was led by HNWIs in higher wealth bands, with ultra-HNWIs expanding in wealth and number by approximately 11 per cent, following declines in 2011.
All regions experienced strong growth in HNWI population and wealth except Latin America, which led growth in 2011, but faltered in 2012 due to slow GDP growth and challenged equity markets. The HNWI population country ranking saw the UK as the fifth largest country. In the UK, the total number of HNWIs increased by 5.4 per cent to reach 465,000 in 2012. UK HNWI wealth expanded to USUSD1.6 trillion in 2012, representing a 5.4 per cent increase from 2011.
HNWIs remained cautious in 2012, highlighting a pronounced focus on wealth preservation in the Global HNW Insights Survey introduced this year in the WWR, based on feedback from over 4,400 global HNWIs. Despite recent market improvements, one-third (33 per cent) of HNWIs are more focused on preserving, versus just 26 per cent on growing, their wealth.
Asset allocation trends followed the preservation trend, with almost 30 per cent of HNWI wealth held in cash and deposits. Regional differences were clear with equities taking up the largest portion of North American HNWI portfolios (37 per cent), while HNWIs in Latin America and Asia-Pacific (excluding Japan) preferred real estate (30 per cent and 25 per cent of portfolios respectively). In THE UK, HNWI asset allocations favored cash/deposits at 28 per cent and real estate at 26 per cent.
“Despite a marked focus on capital preservation and high cash allocations, high net worth individuals achieved a record level of wealth in 2012, suggesting further growth lies ahead if trust and confidence in the markets increase further,” said M. George Lewis, Group Head, RBC Wealth Management & RBC Insurance.
Global HNWI confidence in the wealth management industry has improved, with 61 per cent having a high degree of trust in both wealth managers and their firms in early 2013, up four and three per centage points respectively from last year. Increased trust and a cautiously upbeat economic outlook contributed to 75 per cent of HNWIs feeling confident about generating future wealth. At the same time, HNWIs expressed a low level of confidence in markets and regulators, with fewer than half having a high level of trust in each (45 per cent and 40 per cent, respectively).
In terms of meeting wealth management needs, HNWIs indicated preference for a seamless approach, working with a single firm (41 versus 14 per cent preferring multiple firms) and single point of contact (34 versus 24 per cent preferring multiple contacts). While 31 per cent prefer direct in-person contact, almost one in four HNWIs feel digital communication to be more important, a trend driven by younger HNWIs and those in Asia-Pacific (excluding Japan).
Looking forward, with the ongoing economic recovery providing an environment of reduced risk and improving investor confidence, global HNWI wealth is forecast to grow by 6.5 per cent annually over the next three years. This is in contrast to the sluggish 2.6 per cent growth since the financial crisis in 2008. The Asia-Pacific region, which is projected to grow at one and a half times the global average at 9.8 per cent, is expected to lead global growth.