High Net Worth Individual wealth declined by 3%

22 July 2019 Consulting.us 2 min. read
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High Net Worth Individual wealth fell by 3% in 2018, according to technology consultancy Capgemini’s annual World Wealth Report. The total wealth loss amounted to $2 trillion, with particularly strong losses among China’s elite driving much of the overall decrease.

The 3% decrease in HNWI wealth came after seven consecutive years of growth, as equity markets slumped and regional economies slowed. The global HNWI population, meanwhile, declined by 0.3%.

The Asia-Pacific region accounted for half of the $2 billion worldwide decline, with the region losing 5% of its HNWI wealth and 2% of its HNWI population. China itself was responsible for 53% of Asia-Pacific HNWI wealth loss and more than a quarter of global wealth loss.

HNWI wealth declined in every region except for the Middle East, which saw 4% growth in wealth and 6% growth in HNWI population because of strong GDP growth and financial market performance, according to the Capgemini report.

Global HNWI Wealth

The four countries with the largest HNWI populations (US, Japan, Germany, China) accounted for 61% of the global HNWI population in 2018.

Ultra-HNWIs ($30+ million in wealth) were the hardest hit, with their wealth declining by 6% and accounting for 75% of total global wealth loss. Mid-tier millionaires ($5 million-$30 million) made up 20% of the decline, while the millionaire-next-door segment ($1 million-$5 million), which represents nearly 90% of HNWIs, saw their wealth drop by less than 0.5%.

The report also found that cash became the top asset class in Q1 2019, at 28% of HNWI wealth, beating out equities, which fell 5% from last year and dropped to 26%. Volatile equity markets also pushed more wealth to alternative investments, which rose 4 points to reach 13%.

Wealth management firm’s agility and technology improvements

Despite the wealth declines, HNWI trust and satisfaction in wealth management firms actually increased by 3% over last year, reaching 82% and 68% respectively.

The report found that unsatisfactory service experience was the most popular reason to switch firms in 2018, while fewer than half of HNWIs were satisfied with their wealth manager’s mobile and online platforms. Furthermore, only 62% said they were comfortable with their primary wealth manager’s fees.

“While the volatile economic environment of 2018 led to HNWI wealth decline globally, wealth managers have been extremely successful in maintaining strong levels of client trust,” Anirban Bose, CEO of Capgemini’s financial services, said. “However, future success will depend on the agility of wealth management firms to evolve the client experience and find new ways to add value through more personalized services. Next-gen technology and closing expectation gaps will aid this, but the landscape is shifting so quickly that companies must not be afraid to overhaul their strategy and business models if needed.”