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Wealth report finds clients turn to wealth managers for social impact advice


The World Wealth Report 2015 from Capgemini and RBC Wealth Management reveals that strong economic and equity market performance helped create nearly a million (920,000) new millionaires globally in 2014, as high net worth individuals grew in both number and wealth to 14.6 million and USD56.4 trillion, respectively.

The report estimates that this reflects an increase of about 7 per cent, roughly half the growth rate of the previous year. While the vast majority of the HNWI population and wealth is relatively evenly distributed between North America, Europe and Asia-Pacific, the Asia-Pacific region grew at the fastest rate and is now home to more HNWIs than any other region.
While North America continues to rank first overall for HNWI wealth at USD16.2 trillion vs. Asia-Pacific’s USD15.8 trillion and Europe’s USD13.0 trillion, Asia-Pacific’s wealth growth (11 per cent vs. North America’s 9 per cent and Europe’s 4.6 per cent) is expected to continue. In fact, Asia-Pacific is expected to take top spot for HNWI wealth before the end of 2015.
Asia-Pacific also expanded its HNWI population at the fastest rate globally (9 per cent), pushing it past North America as the region with the most HNWIs at 4.69 million. North America’s HNWIs grew to 4.68 million (8 per cent growth) and Europe’s grew to 4.0 million (up 4 per cent).  
“2014 was the sixth consecutive year of growth for the high net worth market, with robust equity returns and economic performance enabling wealth to grow by about seven percent, following double digit growth the year prior,” said George Lewis, Group Head, RBC Wealth Management & RBC Insurance. “Asia-Pacific led the growth in wealth this year and just edged out North America as the new leader in High Net Worth population. Looking ahead to the next few years, we expect Europe to be a large driver of HNWI wealth as the region recovers economically.”
From a country-level perspective, China and the U.S. drove more than half (52 per cent) of global HNWI population growth. India led the world in growth for both HNWI population (26 per cent) and wealth (28 per cent) due to strong equity market performance and the reduced cost of its substantial oil imports. China followed, with population and wealth growth rates of 17 per cent and 19 per cent, respectively, driven by GDP growth, increased exports and moderate equity market performance.
Strong growth in Asia-Pacific and North America contrasted with negative growth in Latin America – the only region with a decline in HNWI population (-2 per cent) and wealth (-0.5 per cent) in 2014, largely due to falling commodity prices and a resulting decline in equity markets.  In Europe HNWI population and wealth grew by roughly 4 per cent due to weak economic performance and falling equity markets in most countries.
UK’s HNWI population grew by 4.2 per cent to reach 550,000 and their wealth by 5.7 per cent to USD2.0 trillion. Equities overtook cash as the preferred asset class of HNWIs in 2014, representing 27 per cent of portfolios, according to the Global High Net Worth Insights Survey in the WWR.
“Approximately five years into a steady rise in global stock markets, equities have overtaken cash as the dominant asset class in HNWI portfolios,” said Andrew Lees, Global Sales Officer, Capgemini Global Financial Services. “Increased exposure to equities indicates a slowly expanding appetite for risk as high net worth individuals show comfort in equities taking up a larger portion of portfolios, as asset values rise.”
HNWIs continue to hold more than one-quarter (26 per cent) of their wealth in cash, doing so primarily to maintain their lifestyle (36 per cent) or for security in case of market volatility (31 per cent).  The balance of portfolios was allocated to real estate (20 per cent), fixed income (16 per cent) and alternative investments (10 per cent).
The WWR also found that the use of credit in HNWI portfolios is widespread, with 18 per cent of assets being financed through borrowed money, with higher levels evident amongst women (19 per cent), those in higher wealth bands (USD20 million+: 22 per cent), and those under 40 (27 per cent).  Credit is used largely as leverage for investments (40 per cent), followed by real estate (22 per cent).
As shown in the World Wealth Report 2014, HNWIs continue to have an interest in investing their wealth, expertise and/or time to drive a positive social impact, with 92 per cent viewing it as important to do so.  This year’s report notes that HNWIs turn primarily to wealth managers (30 per cent), family (27 per cent) and friends (22 per cent) for advice on social impact opportunities and approaches.
It also shows that of those HNWIs currently receiving social impact support from their wealth managers and firms, more than half (54 per cent) want even more help in setting clear social impact goals, determining which investments will effect the most change, structuring their investments, and measuring the impact of their social efforts.
Looking ahead, global HNWI wealth is projected to grow by almost 8 per cent annually from the end of 2014 through to 2017, to reach USD70.5 trillion, led by Asia-Pacific at an anticipated growth rate of 10.3 per cent.  In a shift from recent years, Europe is expected to act as a more prominent engine of HNWI wealth expansion at 8.4 per cent annually, as a result of improved optimism for a more substantial recovery throughout the region, while the wealth of HNWIs in North America is anticipated to grow by a more modest 7 per cent.

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