Capgeminis World Wealth Report 2018: Global High Net Worth Individual Wealth Surpasses US$70 Trillion for the First Time

The World
Wealth Report 2018 (WWR), released today by Capgemini,
found the improving global economy spurred high net worth individual1
(HNWI) wealth to surpass the US$70 trillion threshold for the first
time. Registering its sixth consecutive year of gains, HNWI wealth grew
10.6 percent, making 2017 the second-fastest year of HNWI growth since
2011. The new report also highlighted the anticipated entry of BigTechs2
into wealth management as well as growing HNWI interest in
cryptocurrencies3, which reached an all-time
high market capitalization in January 2018.4

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World Wealth Report 2018 Infographic (Photo: Business Wire)

Global HNWI growth continues across regions

The HNWI population continued to grow across global regions, with
Asia-Pacific and North America accounting for 74.9 percent of the total
global increase in the HNWI population (1.2 million new HNWIs) and 68.8
percent of the rise in global HNWI wealth (US$4.6 trillion in new HNWI
wealth). Europe also realized a strong performance in 2017 with 7.3
percent of HNWI wealth growth. The largest markets, comprised of the
United States, Japan, Germany and China, represented 61.2 percent of the
global HNWI population in 2017 and accounted for 62 percent of all new
HNWIs globally.

Wealth managers delivered another year of strong returns

According to the report, global HNWI investment returns (on the assets
managed by wealth managers)5 were up 27.4 percent in 2017.
Equities remained the largest asset class in the first quarter of 2018
at 30.9 percent of HNWI financial wealth, followed by cash and cash
equivalents at 27.2 percent, and real estate at 16.8 percent (increase
of 2.8 percentage points.) Younger HNWIs (under aged 40) claim to have
achieved much higher investment performance than their older
counterparts (37.9 percent versus 16.9 percent), possibly because of the
need to focus on wealth creation at this early stage of their lives,
compared with the higher focus toward wealth preservation of those HNWIs
aged 60 and above.

Robust investment returns are not increasing HNWI satisfaction

Strong investment returns in 2016 and 2017 did not yield an overall HNWI
satisfaction level globally, in contrast to significantly high trust and
confidence levels in wealth managers and firms, suggesting that returns
alone cannot sustain a wealth management business. North American HNWIs
appeared the most satisfied with their wealth manager (75.2 percent),
while no other region passed the 70 percent threshold. In 2018, only
55.5 percent of HNWIs said they connected very well at a personal level
with their wealth managers, despite substantial investment returns
delivered over the past two years. The majority of HNWIs (64.3 percent)
globally said they would use an improved system for locating a wealth
manager, whether this is a firm-specific initiative or provided by a
third party or parties.

“There is clear opportunity for wealth management firms to strengthen
their relationships with their high net worth clients as nearly half say
they don’t connect well with their wealth managers. Providing an
innovative digital client experience is one way to strengthen the bond
between wealth managers and their clients,” said Anirban Bose,
member of the Group Executive Board and Head of Capgemini’s Financial
Services Global Strategic Business Unit.

Cryptocurrencies gain global attention

While not yet a major part of HNWI portfolios, there is growing interest
in cryptocurrencies as an investment tool and store of value.
Cryptocurrency investments gained global attention in 2017 and peaked in
market capitalization in early January 2018. However, HNWIs are
cautiously interested in holding cryptocurrencies, with 29 percent
globally having a high degree of interest, and 26.9 percent saying they
are somewhat interested. Cryptocurrency’s potential for investment
returns and as a store of value are driving HNWI interest, with 71.1
percent of HNWIs aged 40 and below placing high importance on receiving
cryptocurrency information from their primary wealth management firms,
compared to 13 percent of HNWIs aged 60 years and above. But wealth
management firms have been ambivalent when it comes to providing
cryptocurrency information to HNWI clients, with only 34.6 percent of
HNWIs globally saying they have received cryptocurrency information from
their wealth managers.

Wealth management firms prepare for BigTech entry

Although widespread global entry of BigTechs into wealth management
remains uncertain, leading firms (nearly three-quarters of all
interviewed firms) are investing in innovative technologies such as
intelligent automation and artificial intelligence (AI) over the next 24
months, as they prepare for BigTechs to play a larger role in the
industry. The most likely approach for BigTech entry will be based on
building partnerships through the white labeling of incumbent firms’
products and services or employing models that support wealth management
firms with back- and middle-office processes. Regardless of the BigTech
entry model and time horizon, the report highlights that wealth
management firms must transform the way they invest for the future as
well as move away from traditional budgeting models to a more dynamic
portfolio-based approach.

Research Methodology

The World Wealth Report from Capgemini is the industry-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 year’s 22nd annual edition includes
findings from in-depth primary research on global HNWI’s perspectives
and behaviors. Based on responses from more than 2,600 HNWIs across 19
major wealth markets in North America, Latin America, Europe and
Asia-Pacific, the 2018 Global HNW Insights Survey explores HNWI
investment behavior including asset allocation, fee models and
investment preferences. The survey also measured current HNWI investment
behavioral patterns of global HNWIs, including their asset allocation,
HNWI confidence levels and asset allocation decisions.

For more information or to download the report, visit www.worldwealthreport.com.

About Capgemini

A global leader in consulting, technology services and digital
transformation, Capgemini is at the forefront of innovation to address
the entire breadth of clients’ opportunities in the evolving world of
cloud, digital and platforms. Building on its strong 50-year heritage
and deep industry-specific expertise, Capgemini enables organizations to
realize their business ambitions through an array of services from
strategy to operations. Capgemini is driven by the conviction that the
business value of technology comes from and through people. It is a
multicultural company of 200,000 team members in over 40 countries. The
Group reported 2017 global revenues of EUR 12.8 billion.

Visit us at www.capgemini.com.
People matter, results count.

1 HNWIs are defined as those having investable assets of
US$1 million or more, excluding primary residence, collectibles,
consumables and consumer durables.

2 BigTech is a general term for data-driven tech firms
not traditionally present in Financial Services, such as Amazon,
Google/Alphabet, Alibaba, Apple, and Facebook.

3 Cryptocurrencies (such as Bitcoin, Ethereum, Litecoin
and Ripple) are digital currencies in which encryption techniques are
used to regulate the generation of units of currency and verify the
transfer of funds.

4 “Total Market Capitalization Global Charts,”
CoinMarketCap, accessed May 14, 2018 at https://coinmarketcap.com/charts/

5 Wealth managers oversee 32.1 percent of HNWI wealth,
according to the World Wealth Report 2016. Other HNWI assets are
generally held as cash and in retail bank accounts, businesses, real
estate, and self-directed investments.

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