Global population of high net worth individuals and their wealth hit new highs
Posted: 17 June 2015 | Capgemini / RBC Wealth Management | No comments yet
North America and Asia-Pacific led the way in 2014, with European growth expected to accelerate in next few years, finds World Wealth Report 2015…
59 per cent of bank executives surveyed believe Asia offers the greatest opportunities outside of their home market
Strong economic and equity market performance helped create nearly a million (920,000) new millionaires globally in 2014, as High Net Worth Individuals (HNWIs 1) grew in both number and wealth to 14.6 million and US$56.4 trillion, respectively. This reflects an increase of about seven percent, roughly half the growth rate of the previous year, according to the World Wealth Report 2015 (WWR) released today by Capgemini and RBC Wealth Management. The report found that while the vast majority of the HNWI population and wealth is relatively evenly distributed between North America, Europe and Asia-Pacific, the Asia-Pacific region grew at the fastest rate and is now home to more HNWIs than any other region.
While North America continues to rank first overall for HNWI wealth at US$16.2 trillion vs. Asia-Pacific’s US$15.8 trillion and Europe’s US$13.0 trillion, Asia-Pacific’s wealth growth (11 percent vs. North America’s nine percent and Europe’s 4.6 per cent) is expected to continue. In fact, Asia-Pacific is expected to take top spot for HNWI wealth before the end of 2015.
Asia-Pacific also expanded its HNWI population at the fastest rate globally (nine percent), pushing it past North America as the region with the most HNWIs at 4.69 million. North America’s HNWIs grew to 4.68 million (eight percent growth) and Europe’s grew to 4.0 million (up four percent).
“2014 was the sixth consecutive year of growth for the High Net Worth market, with robust equity returns and economic performance enabling wealth to grow by about seven percent, following double digit growth the year prior,” said George Lewis, Group Head, RBC Wealth Management & RBC Insurance. “Asia-Pacific led the growth in wealth this year and just edged out North America as the new leader in High Net Worth population. Looking ahead to the next few years, we expect Europe to be a large driver of HNWI wealth as the region recovers economically.”
From a country-level perspective, China and the U.S. drove more than half (52 percent) of global HNWI population growth. India led the world in growth for both HNWI population (26 percent) and wealth (28 percent) due to strong equity market performance and the reduced cost of its substantial oil imports. China followed, with population and wealth growth rates of 17 percent and 19 percent, respectively, driven by GDP growth, increased exports and moderate equity market performance.
Strong growth in Asia-Pacific and North America contrasted with negative growth in Latin America – the only region with a decline in HNWI population (-2 percent) and wealth (-0.5 percent) in 2014, largely due to falling commodity prices and a resulting decline in equity markets. In Europe HNWI population and wealth grew by roughly four percent due to weak economic performance and falling equity markets in most countries.
Equities and cash dominate HNWI portfolios; use of credit also high
Equities overtook cash as the preferred asset class of HNWIs in 2014, representing 27 percent of portfolios, according to the Global High Net Worth Insights Survey 2 in the WWR.
“Approximately five years into a steady rise in global stock markets, equities have overtaken cash as the dominant asset class in HNWI portfolios,” said Andrew Lees, Global Sales Officer, Capgemini Global Financial Services. “Increased exposure to equities indicates a slowly expanding appetite for risk as High Net Worth Individuals show comfort in equities taking up a larger portion of portfolios, as asset values rise.”
HNWIs continue to hold more than one-quarter (26 percent) of their wealth in cash, doing so primarily to maintain their lifestyle (36 percent) or for security in case of market volatility (31 percent). The balance of portfolios was allocated to real estate (20 percent), fixed income (16 percent) and alternative investments (10 percent).
The WWR also found that the use of credit in HNWI portfolios is widespread, with 18 percent of assets being financed through borrowed money, with higher levels evident amongst women (19 percent), those in higher wealth bands (US$20 million+: 22 percent), and those under 40 (27 percent). Credit is used largely as leverage for investments (40 percent), followed by real estate (22 percent).
HNWIs seek to make a positive impact on society
As shown in the World Wealth Report 2014, HNWIs continue to have an interest in investing their wealth, expertise and/or time to drive a positive social impact, with 92 percent viewing it as important to do so. This year’s report notes that HNWIs turn primarily to wealth managers (30%), family (27%) and friends (22%) for advice on social impact opportunities and approaches. It also shows that of those HNWIs currently receiving social impact support from their wealth managers and firms, more than half (54%) want even more help in setting clear social impact goals, determining which investments will effect the most change, structuring their investments, and measuring the impact of their social efforts.
Global HNWI wealth forecast to top $70 trillion by 2017
Looking ahead, global HNWI wealth is projected to grow by almost eight percent annually from the end of 2014 through to 2017, to reach US $70.5 trillion, led by Asia-Pacific at an anticipated growth rate of 10.3 percent. In a shift from recent years, Europe is expected to act as a more prominent engine of HNWI wealth expansion at 8.4 percent annually, as a result of improved optimism for a more substantial recovery throughout the region, while the wealth of HNWIs in North America is anticipated to grow by a more modest seven percent.
- HNWIs are defined as those having investable assets of US$1 million or more, excluding primary residence, collectibles, consumables, and consumer durables.
- The Capgemini and RBC Wealth Management Global HNW Insights Survey 2015 is the largest and most in-depth survey of high net worth individuals ever conducted, surveying more than 5,000 HNWIs across 23 major wealth markets in North America, Latin America, Europe, Asia-Pacific, the Middle East, and Africa and was conducted in January and February 2015.