Advisers to the wealthy score high in trust but low in performance.
As the global economy continues to grow, so does the number of millionaire investors in the world.
Individuals with investible assets of more than $1 million grew by 15% in 2013, while combined wealth grew by almost 14% to reach a record high of $56.6 trillion, according to the World Wealth Report 2014 released by Capgemini and RBC Wealth Management.
North America's high-net-worth population expanded by 16% to 4.33 million in 2013, while Asia's grew by 17% to reach 4.32 million — with growth in the Asia-Pacific region narrowing North America's lead to less than 10,000 individuals. In Asia, people in the high-net-worth category saw their wealth increase by 18% to $14.2 trillion last year, while the same category in North America saw an increase in wealth of 17% to $14.9 trillion.
“Overall, 2013 was another strong year for the high-net-worth market, with surging equity markets and improving economies contributing to double-digit growth in both population and wealth levels,” said M. George Lewis, group head of RBC Wealth Management and RBC Insurance. “Looking at longer-term growth trends, nearly 40% of the current level of high-net-worth wealth has been created in the past five years alone.”
Europe saw its high-net-worth population grow by 12% in 2013 to 3.8 million, while their wealth increased by 14% to reach $12.4 trillion. Latin America continued to be an exception to strong global growth, with increases of 4% in population and 2% in wealth last year because of slow GDP growth and challenged equity markets.
High-net-worth investors are beginning to think more globally, with more than one-third allocating their assets outside of their home region, up from one-quarter a year ago.
And ultrahigh-net-worth investors are beginning to pay more attention to wealth growth than preservation. Their focus on wealth preservation fell from 45% in early 2013 to 28% in early 2014, in favor of growth, which rose to 31% from 18% over that same period.
The wealthy population's trust and confidence surged, with about three-quarters expressing high levels of trust in wealth managers and firms in early 2014, up from 61% one year prior. But even with strong wealth growth combined with increasing confidence levels, high-net-worth investors gave their wealth managers lower performance ratings than last year, down by four percentage points to 63% in early 2014. Despite having the highest performance score, North America saw the most substantial drop in ratings.
“Even though we are seeing an encouraging environment of high growth and confidence, declining wealth manager performance scores indicate opportunities still exist for firms to tailor their offerings to better meet client needs,” said Jean Lassignardie, chief sales and marketing officer at Capgemini Global Financial Services. “One way to address the evolving demands of current and future clients is to provide digital capabilities that move beyond simply having a digital presence to offering an integrated and seamless client experience that incorporates digital at all touch points.”
Individuals across all ages, wealth levels and geographies expect to manage most, if not all, of their wealth digitally five years from now and would consider leaving their current firm if an integrated channel experience is not implemented.
“These latest World Wealth Report findings reinforce the importance of recognizing digital as a truly disruptive force in the wealth management industry, requiring firms to adapt their business models to meet client expectations,” Ms. Lassignardie said.
High-net-worth investors demanding digital capabilities are led by those in emerging markets, with 82% in the Asia-Pacific region excluding Japan demanding it, 74% in the Middle East and Africa, and 70% in Latin America. North America's wealthy investors are the least anxious to go digital, with just over half expecting a primarily digital wealth management relationship five years from now.
About two-thirds of high-net-worth investors would consider switching firms due to shortcomings when executing transactions and transferring money between accounts.
