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Asia-Pacific continues to dominate HNWI population and wealth

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Despite a slight deceleration, Asia-Pacific maintained its No1 spot in both high net worth individual (HNWI) population and wealth, and is on target to surpass USD40 trillion in HNWI wealth by 2025, according to the 2017 Asia-Pacific Wealth Report (APWR) by Capgemini.

Although Asia-Pacific (excluding Japan) HNWI investments held by wealth managers grew an extraordinary 33 per cent in 2016, overall satisfaction with wealth managers remained muted as HNWIs sought holistic value beyond investment returns.
 
Outperforming all other regions, Asia-Pacific remains the global leader in HNWI population and wealth, but its pace slowed slightly in 2016 with population and wealth increasing 7.4 per cent and 8.2 percent, respectively, down from 9.4 per cent and 9.9 per cent in 2015.
 
Previously, China and Japan have powered Asia-Pacific HNWI population growth, but their 2016 slowdown affected the region overall. China came in as the 33rd fastest-growing market globally, up just 9.1 per cent compared with 16.2 per cent in 2015. Japan was the 41st fastest-growing market in 2016, growing 6.3 per cent compared with 10.9 per cent in 2015. The slowdown is significant, because China and Japan are the two largest markets in the region, together accounting for 73 per cent of the Asia-Pacific HNWI population and 68 per cent of HNWI financial wealth in 2016.
 
Only the United States added more HNWIs (337,000) than Japan (171,000) and China (95,000) in 2016, but Asia-Pacific leads North America by 360,000 HNWIs and USD863 billion in HNWI financial wealth.
 
Anirban Bose, Head of Global Banking and Capital Markets at Capgemini, says: “We project that Asia-Pacific will surpass USD40 trillion in HNWI wealth by 2025 if Emerging Asia capitalises on its tremendous potential to grow at 12.9 per cent annually – exceeding the 10.2 per cent rate of 2016 – and if Mature Asia grows at 6.4 per cent or higher, which it accomplished in 2016 at 6.9 per cent.”
 
The average Asia-Pacific (excluding Japan) wealth manager-held HNWI portfolio had a return of 33 per cent in 2016, well above the 24.6 per cent increase for HNWIs in the rest of the world. This robust performance helped drive highly-liquid assets, such as equities, to a five-year high, although cash allocations increased as well. HNWI allocations to equities and cash increased significantly year over year, up 4.4 percentage points and 4.3 percentage points, respectively, and was the highest annual rise in the last five years.
 
However, Asia-Pacific HNWI overall satisfaction was somewhat muted, as fee transparency and overall value delivered by wealth managers were top concerns. Asia-Pacific HNWIs showed a high Net Promoter Score® 4 (31.4), but this encouraging metric masks underlying problems in specific markets. Negative scores in Japan (−51.3), Hong Kong (−19.8), Singapore (−11.0), and Malaysia (−14.4) may become worrisome for the industry. Younger Asia-Pacific HNWIs are far more likely to recommend their wealth service providers than older individuals, with an NPS of 32.0 for the ‘under 40s’ HNWIs, and an NPS® of 1.0 for HNWIs aged 60 and above. The majority of HNWI wealth in the region is believed to remain with first- and second-generation wealth creators, therefore lower Net Promoter Scores among older individuals may become an issue, especially in emerging markets.
 
Asia-Pacific (excluding Japan) HNWIs hold 44.7 per cent of assets outside their home market as compared to 41.8 per cent of HNWIs in the rest of the world. Hong Kong has by far the most internationally-minded HNWIs, although HNWIs from all markets within the region hold at least one-third of their financial wealth abroad.
 
Asia-Pacific HNWIs prefer a variety of offshore destinations, but Hong Kong and Singapore are preferred overall. For example, HNWIs in China, Malaysia, and Indonesia prefer Hong Kong and Singapore while New York and London are favourites of HNWIs in Japan, Australia, and Hong Kong.
 
The industry, especially in the key financial centres of Hong Kong and Singapore, will need to accelerate investment in digital technology to meet Asia-Pacific HNWI demand for offshore wealth management, hybrid5 and self-service advice delivery to improve client satisfaction, unlock financial benefits, and protect against BigTech6 disruption.
 
The Asia-Pacific Wealth Report from Capgemini is the industry-leading benchmark for tracking high net worth individuals (HNWIs) in the Asia-Pacific region, their wealth, and the global and economic conditions that drive change in the Wealth Management industry. The 12th annual edition includes findings from an in-depth primary research on global HNWI perspectives and behaviour. The 2017 Asia-Pacific Wealth Report focuses on nine core markets: Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, Singapore, and South Korea. The market-sizing model includes 18 countries and territories (ie, the nine core markets plus New Zealand, Kazakhstan, Myanmar, Pakistan, Philippines, Sri Lanka, Taiwan, Thailand, and Vietnam.)
 

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