World Wealth Report 2020
The World Wealth Report is the industry’s leading benchmark for tracking high net worth individuals (HNWIs), their wealth, and the global and economic conditions that drive change in the Wealth Management industry. This edition of the report explores how hyper-personalised offerings and operating model optimisation are crucial in today’s extraordinary uncertainty.
North America leads HNWI wealth growth in 2019
Stock markets shine in a slowing economy to drive up HNWI wealth in 2019
In 2019, global HNWI population and wealth increased by 8.8% and 8.6%, respectively. For the first time since 2012, North America surpassed Asia-Pacific’s performance to lead at 11% HNWI population and wealth growth. Global wealth growth was supported by strong stock market performance, driven by accommodative monetary policies in various countries and technology sector optimism. Based on our analysis of various market and economic parameters, a quick estimate shows a decline of 6–8% in the global HNWI wealth till the end of April 2020 (vs the end of 2019).
HNWI Investments and Behaviors
Hyper-personalisation is critical to safeguard customer base and future growth amid volatility
HNWIs report expectation-reality mismatch in fee structures
HNWIs prefer performance- and service-based fees instead of an asset-based fee structure. However, when compared with what they receive from their firms today, there emerges an expectation-reality mismatch. More than a third (35%) of HNWIs said they would prefer a fee structure based on investment performance compared with a quarter (26%) of HNWIs whose fees are structured around performance already. Only 13% of HNWIs said they desired an asset-based fee structure while a much higher percentage (24%) is currently bound to asset-based fees.
Sustainable investing gains prominence
The growing interest in sustainable investing offers wealth management firms a high-potential product opportunity. Globally, 27% of HNWIs overall were interested in sustainable investing products and this interest increased to 49% among ultra-HNWIs younger than 40 years. HNWIs see financial value in sustainable investing products and 26% are interested in such products as they wish to give back to society. Wealth management firms are ready for this trend, with 80% of surveyed firms already offering sustainable investing options and 12% planning to do so shortly.
Value-added services are a potential revenue opportunity
Around 43% of HNWIs globally believe value-added services can positively impact their experience with the firm. A more granular look into the trends across the extremes of age and wealth bands indicated that HNWIs younger than 40 and the ultra-HNWI segment were driving interest in value-added services. In fact, within both wealth bands, younger HNWIs also showed a significantly higher willingness to pay for value-added services. The cross-section of ultra-HNWIs younger than 40 was the most bullish, with almost half interested in value-added services, and 80% of interested individuals also willing to pay for such services.
Safeguard profits through operating model optimisation
Wealth management firms can maximise the impact of their investments during uncertainty through a focused operating model
In the eye of a perfect storm
The wealth management industry is in the midst of great disruption as economic forces, competition from new entrants, and client expectations mount. Wealth management executives consider natural events – such as floods and pandemics – to be the number-one industry disruptor, with almost 60% rating it as high impact. Other high-impact disruptors included changing client expectations and a global economic slowdown.
Wealth management Achilles heel: lack of personalised information
An analysis of the wealth management client journey revealed that firms are lagging behind in delivering personalised information and services. HNW clients are least satisfied with receiving personalised information or services during acquisition, advisory, and value-added services. This is especially concerning as these touchpoints were also found to be the most vulnerable to BigTech firms – high net worth individuals expect BigTechs to perform better than wealth management firms at these touchpoints.
Technology enables growth in acquisition, advisory, and value-added services
Emerging technologies such as AI, analytics, and automation are enabling firms to enhance revenues through better client engagement and to reduce cost by streamlining processes. Emerging technologies are especially pivotal to growth potential in the areas of client acquisition, advisory, and value-added services, where they have numerous applications in driving greater personalisation. With firms facing increasing margin pressures across the value chain, the right mix of build, buy, and partner, depending on critical focus areas, can help maximise profitability.