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Global high net worth wealth jumps to $64trn

The global wealth of high net worth individuals rose by 7.5% in 2016, presenting an opportunity for wealth managers and technology firms, according to the Capgemini World Wealth Report 2017.

HNWI wealth hit $63.5trn in 2016, with the global population of high net worths up 8.2% to 16.5 million people.

Capgemini defines HNWIs as those with investable assets of $1m or more, excluding primary residence, collectables, consumables and consumer durables.

Global high net worth wealth is projected to pass $100trn in 2025.

Wealth management returns

The consulting, technology and outsourcing firm found that, on average, the investments overseen by wealth managers produced returns of 24.3% in 2016.

Globally, the asset class of choice remains equities (31.1%), but it is followed closely by cash and cash equivalents (27.3%).

However, Japan and Latin America bucked this trend and favoured cash and cash equivalents, 46.5% and 26%, respectively. Additionally, equities (20%) in Latin America fell to third place after fixed income (21.8%).

Geographical breakdown

The largest number of HNWIs is in North America, accounting for 25.8% of all high net worths last year, followed by western Europe (17.5%) and Asia excluding Japan (15.4%).

All three big markets, Asia Pacific, North America, and Europe grew their HNWI populations by about 7.5% and associated wealth by about 8.2%, representing large leaps in both North America and Europe and a slightly decelerated growth in Asia Pacific.

Two markets charging ahead were Russia, which recorded growth of about 20% for both its HNWI population and wealth following modest 2015 decreases; and Brazil, which had double-digit increases in both population and wealth following a significant decline last year.

BigTech disruption

Capgemini believes the growth momentum is a positive development in the face of the potential entry of BigTechs, such as Google, Amazon, Alibaba, Apple and Facebook, into wealth management.

More than half of HNWIs say they are open to using BigTech services for wealth management, expecting efficiency, transparency, innovation, and excellent online capabilities, the report found.

Formidable competitor or partner?

While BigTechs have not formally announced their wealth management entrance, they could emerge as formidable competitors.

Alternatively, they could also act as true partners, helping wealth management firms overcome tepid satisfaction rates among HNWIs.

High net worth satisfaction levels with their firms and wealth managers is muted at 58.5% and 56.3%, respectively, with limited service options and fee structures emerging as possible reasons.

Only 47.8% of HNWIs say they are fully comfortable with the level of fees charged for wealth management services.

Executive vice president Anirban Bose, head of global banking and capital markets at Capgemini, said: “Firms that are able to combine their wealth management expertise with BigTech customer experience skills could lead the way by offering truly innovative services.”

Part of the Mark Allen Group.