Fuelled by the 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% to reach a record high - above pre-crisis levels - of $46.2 trillion, after declining 1.7% 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 a 9.2% increase.
North America reclaimed its position as the largest HNWI market in 2012 after being overtaken by Asia-Pacific the year before. North America’s population of 3.73 million HNWIs surpassed Asia-Pacific’s 3.68 million, while its HNWI wealth reached US$12.7 trillion, above the US$12.0 trillion in the Asia-Pacific region. Europe, with its sovereign debt crisis and stagnant growth, lags behind a little, but reflecting the overall trend of increasing wealth for the few and less for the many; it still has broadly similar numbers of HNWIs.
“HNWI population increases were strong in 2012,” said Jean Lassignardie, chief marketing officer at 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%, compared to North America’s 11.7%.”
The ‘World Wealth Report 2013’ from Capgemini and sponsored by RBC Wealth Management is now in its 17th year and now includes responses from 4,400 HNWI individuals across 21 countries. The associated ‘Global HNW Insights Survey’, carried out with the assistance of the Scorpio Partnership for the first time this year, explores HNWI confidence levels, asset allocation decisions, as well as their wealth management advice and service preferences.
Global investable wealth growth was led by HNWIs in higher wealth bands, with ultra-HNWIs - i.e. those worth more than US$30m instead of ‘just’ $1m - expanding in wealth and number by approximately 11% in 2012, following a decline in the previous year’s survey.
All regions experienced strong growth in HNWI population and wealth except Latin America, which had led growth in 2011, but faltered in 2012 due to slow gross domestic product (GDP) growth and challenging equity markets in certain countries.
The HNWI population country ranking put the UK as the fifth largest country for wealthy individuals. In the UK, the total number of HNWIs increased by 5.4% to reach 465 thousand in 2012. UK HNWI wealth expanded to US$1.6 trillion in 2012, representing a 5.4% increase from 2011, despite the country’s stagnant economic growth.
Wealth Preservation Key Aim
The increase in wealth among HNWIs is happening despite a pronounced cautiousness. Wealth preservation in the ‘Global HNW Insights Survey’ introduced this year in the WWR, was a key aim of one-third (33%) of respondents, versus just 26% who wanted to grow their wealth.
Asset allocation trends followed the preservation trend, with almost 30% 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%), while HNWIs in Latin America and Asia-Pacific (excluding Japan) preferred real estate investments (30% and 25% of portfolios respectively). In the UK, HNWI asset allocations favoured cash/deposits at 28% and real estate at 26%.
“Despite a marked focus on capital preservation and high cash allocations, high net worth individuals still achieved a record level of wealth in 2012,” said M. George Lewis, group head of RBC Wealth Management and RBC Insurance, “suggesting further growth lies ahead if trust and confidence in the markets increase further.”
HNWI Trust in Wealth Management Industry Grows
Global HNWI confidence in the wealth management industry has improved says the WWR 2013 report, with 61% having a high degree of trust in both wealth managers and their firms, up four and three percentage points respectively from last year. Increased trust and a cautiously upbeat economic outlook contributed to 75% 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% and 40% respectively).
In terms of meeting wealth management needs, HNWIs indicated a preference for a seamless approach, working with a single firm (41% versus 14% preferring multiple firms) and single point of contact (34% versus 24% preferring multiple contacts).
While 31% 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. Mobile technology and delivery end points are, therefore, increasingly important.