Wealth accumulation shifts from East to West
The World Wealth Report 2021 sees North America back on top as the global leader in population and wealth of high-net worth individuals, ousting Asia-Pacific after five years.
Asia-Pacific’s reign as the leading region for high-net worth individuals (HNWIs) has come to an end, as North America regains its position after five years in second place, according to the 25th edition of Capgemini’s World Wealth Report (WWR). HNWIs are defined as those having investable assets of $1m or more, excluding primary residence, collectibles, consumables, and consumer durables.
In spite of the Covid-19, the HNWI population rose by 6.3% and its combined wealth grew by 7.6% over the course of 2020, supported by rising stock markets and government relief packages. North America overtook Asia-Pacific with a 10.7% increase in HNWI population and 11.9% in wealth, whereas the latter region grew by 5.8% and 8.4%, respectively.
In addition, North America accounted for 55% of the more than 1.2 million new HNWIs added to the global pool, as well as contributing 46% of the global wealth growth.
The report also highlighted changes in investing behaviour. For example, HNWIs have become more involved in their investments, enabled by new fintech providers actively aiming to democratise the wealth management space. According to the report, 34% say they are actively leveraging wealthtech services. Moreover, wealth management firms are finding that wealthtech with consumer lifecycle expertise to be good-fit collaborators that can enhance their capabilities, reach and market trend responsiveness.
According to the report, 72% of HNWIs said they have invested in cryptocurrencies
HNWIs are also looking for yield in new – and potentially riskier – places. According to the report, 72% said they have invested in cryptocurrencies and 74% in other digital assets, such as website domain names or apps. Special purpose acquisition companies are becoming more popular, while non-fungible tokens are slowly gaining asset-class credibility.
The WWR results are indicative of how quickly the wealth management arena is transforming. The report provides suggestions on how wealth management firms need to change to stay relevant in the future.
It advises wealth management firms to build resilient and agile operating models by investing in technologies such as cloud, application programming interfaces and microservices. In addition, firms need to incorporate data-driven insights into their client engagement and investment strategies. “Investment performance will continue to be paramount,” says the report, “but firms will also need to focus on delivering value as well as environmental, social, and corporate governance options.”
The report also addresses the talent challenge and advises firms to adopt new-age tech skills and reskill or hire the right talent that can power wealth management’s transformation. However, 63% of advisors surveyed said they are not satisfied with their firm’s efforts to provide tools/training to meet changing client needs.
While many wealthtech providers believe that the relationship-based business that wealth management is based on isn’t going to disappear, clearly how that relationship is curated and maintained is rapidly evolving and wealth management firms need to up their game to serve the new client profiles, such as millennial HNWIs, women and non-traditional families.
Joy Macknight is editor of The Banker. Follow her on Twitter @joymacknight
Register to receive the Editor’s blog and in-depth coverage from the banking industry through the weekly e-newsletter.
