Fueled by global recovery in the equity and real estate markets, the investable wealth of the world’s High Networth Individuals (HNIs) rebounded in 2012, up 10% to reach a record high of $46.2 trillion (Rs 2,679.60 lakh crore). This is according to the World Wealth Report 2013 (WWR), released today by Capgemini and RBC Wealth Management. HNIs' investable wealth had declined 1.7% in 2011.
One million individuals joined the global HNI population, which reached 12 million, reflecting an increase of 9.2%.
This report is the benchmark for tracking HNIs, their wealth, and the global and economic conditions that drive change in the wealth management industry.
North America reclaimed its position as the largest HNI market in 2012 after being overtaken by Asia-Pacific the year prior. North America’s population of 3.73 million HNIs surpassed Asia-Pacific’s 3.68 million, while its HNI wealth reached $12.7 trillion (Rs 736.6 lakh crore), above the $12 trillion (Rs 696 lakh crore) in the Asia-Pacific region.
“HNI population increases were strong in 2012,” said Jean Lassignardie, Chief Sales and Marketing Officer, 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 HNI population, Asia-Pacific actually had a higher overall wealth growth rate at 12.2 percent, compared to North America’s 11.7 percent.”
Global investable wealth growth was led by HNIs in higher wealth bands, with ultra-HNIs expanding in wealth and number by approximately 11%, following declines in 2011. All regions experienced strong growth in HNI population and wealth except Latin America, which led growth in 2011, but faltered in 2012 due to slow GDP growth and challenged equity markets.
HNIs remained cautious in 2012, highlighting a pronounced focus on wealth preservation in the Global High Networth Insights Survey introduced this year in the WWR, based on feedback from over 4,400 global HNIs. Despite recent market improvements, one-third (33%) of HNIs are more focused on preserving, versus just 26% on growing, their wealth.
Asset allocation trends followed the preservation trend, with almost 30% of HNI wealth held in cash and deposits. Regional differences were clear with equities taking up the largest portion of North American HNI portfolios (37%), while HNIs in Latin America and Asia-Pacific (excluding Japan) preferred real estate (30% and 25% of portfolios respectively).
“Despite a marked focus on capital preservation and high cash allocations, HNIs achieved a record level of wealth in 2012, suggesting further growth lies ahead if trust and confidence in the markets increase further,” said M George Lewis, Group Head, RBC Wealth Management & RBC Insurance.
Global HNI confidence in the wealth management industry has improved, with 61% having a high degree of trust in both wealth managers and their firms in early 2013, up four and three percentage points respectively from last year. Increased trust and a cautiously upbeat economic outlook contributed to 75% of HNIs feeling confident about generating future wealth. At the same time, HNIs 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, HNIs indicated 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 HNIs feel digital communication to be more important, a trend driven by younger HNIs and those in Asia-Pacific (excluding Japan).
Looking forward, with the ongoing economic recovery providing an environment of reduced risk and improving investor confidence, global HNI wealth is forecast to grow by 6.5% annually over the next three years. This is in contrast to the sluggish 2.6% growth since the financial crisis in 2008. The Asia-Pacific region, which is projected to grow at one and a half times the global average at 9.8%, is expected to lead global growth.
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