Global wealth hits new highs but growth slows

Both the number of global high net worth individuals (HNWIs) and the level of their investable wealth expanded in 2014, growing to 14.6m and $56.4tn (€50.4tn) respectively, according to the World Wealth Report 2015, released by Capgemini and RBC Wealth Management. 

Although both these figures represent record highs, 2014 was a much more measured year for growth, with the population (6.7 per cent) and wealth (7.2 per cent) expansion rates both well down on 2013’s levels (14.7 per cent and 13.8 per cent respectively).

The report defines HNWIs as those with more than $1m in investable assets, while ultra high net worth individuals have more than $30m. 

Although North America remains the largest region in terms of HNWI wealth, with $16.2tn, Asia-Pacific registered the greatest gain and overtook North America to become the region with the largest HNWI population at 4.69m.

“There has been a changing of the guard,” said Eric Lascalles, chief economist at RBC Global Asset Management at the report’s London launch. “Asia-Pacific has now claimed the lead and is likely to pull further ahead going forward.” 

India emerged as a key driver of Asian growth, with its HNWI population rising by 26.3 per cent and wealth by 28.2 per cent, indicating confidence in prime minister Narendra Modi’s reforms, claimed Mr Lascalles, along with being a clear beneficiary of lower oil prices. 

Latin America, on the other hand, was hit hard by falling commodity prices, and saw its HNWI population fall by 2.1 per cent, and levels of wealth shrunk by 0.5 per cent. Europe also suffered from below par growth of just 4 per cent and 4.6 per cent respectively.

Global HNWI wealth is forecast to reach $70tn by 2017, growing at an annualised rate of 7.7 per cent, while Asia-Pacific is expected to overtake North America in terms of wealth in 2015.

In terms of asset allocation, equity weightings pulled slightly ahead of cash as the dominant asset in HNWI portfolios. “Investors are more accepting of a risk-on environment but cash is still a vital component,” said Daniel Ellis, head of UK investments at RBC Wealth Management. 

Although the levels of cash HNWIs are holding is way in advance of what a wealth manager would recommend, at around 25 per cent, this is unlikely to fall, he explained. “This is not really about market worries, rather it is more about funding a lifestyle.”

The report also found that while HNWIs are generally satisfied with their wealth managers, it is the younger clients who have a range of specific needs and expectations that are not being met. 

“Younger clients are far more likely to leave a firm, while the levels of wealth being transferred from one generation to the next means these people have to be engaged with,” said David Wilson, head of market intelligence at the strategic analysis group of Capgemini Global Financial Services.

There is also a significant gap between HNWIs’ propensity to use automated advisory services, at 48.6 per cent, compared to wealth managers’ belief in their clients’ appetite to use these services, at 20 per cent. “Demand here is being driven by the younger HNWIs,” said Mr Wilson. “This is a bit of a blind spot for wealth managers, but it is here to stay.”