Capgemini’s World Wealth Report (WWR), published today, reveals the global High Net Worth Individual (HNWI) population grew 7.8 per cent and their wealth grew 8 per cent in 2021 owing to recovering economies being boosted by the stock market.
North America continued along its growth trajectory, boasting the highest increase in HNWI population and wealth, 13.2 per cent and 13.8 per cent respectively. From an overall growth rate standpoint, APAC’s lacklustre 2021 HNWI growth in population (4.2 per cent) and wealth (5.4 per cent) put the region, which had dominated HNWI growth over the last decade, into third place. Capgemini’s 2022 World Wealth Report examines global wealth movements in the past year, exploring trends and influences on the HWNI population.
In 2021, the top-four positions in HNWI population by market were retained by the United States, Japan, Germany, and China respectively, comprising 63.6 per cent of the global HNWI population, an increase of 0.7 per cent from 2020. Ultra-HNWIs (USD30 million>) led global wealth and population growth, at the rates of 9.6 per cent and 8.1 per cent. While the Millionaires Next Door (USD1-5m) population (7.7 per cent) and wealth (7.8 per cent) grew the slowest, witnessing an acceleration in population and wealth growth rates. Conversely, the Mid-Tier Millionaire (USD5-30 million) population and wealth increased to 8.5 per cent and 8.4 per cent. The report also indicates that the growth gap across wealth bands is shrinking, indicating a more level playing field, due to improved information access for investors and democratization of asset classes.
To capture emerging client segments, firms must rethink their engagement strategies, the firm says.
The demographic of HNWIs has continued to evolve, with increasingly more women, LGBTQ+ individuals, millennials and Gen Z’s now seeking wealth management services., the firm writes. These emerging client segments each have their own values, preferences, and requirements which many wealth management firms are currently unequipped to provide for, resulting in many of these HNWIs pivoting to more adaptive competitors or smaller family offices. For example:
· Women across all wealth brackets are set to inherit 70 per cent of global wealth over the next two generations. They are seeking firms that not only provide fee transparency and data security, but also education in how to grow this wealth.
· Similarly, 39 per cent of millennial HNWIs had switched providers in the past year due to a lack of transparency. They are frequently seeking new wealth managers as they demand greater digital interaction, education and convenience.
· The tech boom and surge in VC-backed unicorns has created a unique group of tech-wealth HNWIs, and this sizeable mass-affluent segment offers huge potential for wealth management firms, however only 27 per cent of firms say they actively pursue these prospects.
The new wave of HNWIs possesses unique client needs which require wealth managers to adjust their business strategies. To unlock this largely untapped client segment, cites the report, wealth management firms must focus on providing greater convenience, personalised experiences and building trust through approaches such as ecosystem collaboration, comprehensive digital solutions, and greater diversity when hiring new talent.
Wealth management firms must embrace data-driven capabilities, the firm says.
The wealth management sector is undergoing a diversification of investment options, from Sustainable Investing (SI) to the growing prevalence of digital assets. As the ESG imperative continues to grow, wealth management firms must strive to make educational support and expansive product selection for HNWIs, key pillars of their strategies. The report found that globally, 55 per cent of HNWIs have stated that investing in causes with a positive ESG impact is critical, with 64 per cent of HNWIs asking for ESG scores to learn about a fund’s societal impact. However, 40 per cent of wealth managers find it challenging to showcase an ESG impact.
“The influx of new investment avenues such as sustainable investing and digital assets is having a crucial impact on the wealth management industry. Wealth management firms must prioritize providing timely education around this trend to retain their customers,” says Nilesh Vaidya, Global Industry Head, Retail Banking and Wealth Management, Capgemini’s Financial Services Strategic Business Unit. “Additionally, as we usher in the new era of digital assets, wealth management firms should leverage ecosystem partnerships, to prioritize a diversified digital portfolio of offerings for clients.”
Create Chief Customer Officer roles to deliver a superior experience
An increasing number of wealth management firms have been establishing a new Chief Customer Officer (CCO) role, aimed at nurturing client intimacy, and putting them at the heart of the wealth management process. The role focuses on orchestrating both data and digital benefits across the organization to meet evolving and complex client demands and drive loyalty.
The report finds that by prioritising automation and data-driven insights, wealth managers can provide hyper-personalized customer experiences to meet the expectations of new-age customers. It cites that the CCOs will play an integral role in building an inclusive client ecosystem while also enhancing their advisor capabilities through actionable data analysis. In doing so, firms can work towards adopting a one-stop-shop approach to meet all customer needs conveniently, which accommodate for unique lifestyle and preferences, ultimately driving business growth.