Both the number of wealthy individuals and the value of their assets continues to increase, with North America leading the way.
The world’s high net worth individual (HNWI) population is growing rapidly, according to a new survey, with industry experts warning that wealth managers must do more to keep up with changing client demands.
Numbers of HNWIs surged as their wealth reached record levels in 2023, expanding by 4.7 per cent, according to Capgemini Research Institute's World Wealth Report 2024.
The global HNWI population increased 5.1 per cent to 22.8m globally and continues to grow. North America registered the strongest HNWI worldwide year-on-year growth, with 7.2 per cent growth in wealth and 7.1 per cent in population.
“We’ve seen North America reinforce its position as the most concentrated market in the wealth management and high net worth segment,” says Gareth Wilson, head of UK banking and capital markets at Capgemini. “We've also seen a little bit of a change in that dynamic manner, from inherited wealth to effectively created wealth,” he adds.
The report says solid economic resilience, cooling inflationary pressures, and a strong US equity market rally drove momentum for North America.
According to research by Cerulli, $80tn will be transferred from one generation to the next over the two forthcoming decades, alerting wealth managers to meet increased demands for value-added services.
Required services
The Capgemini report reveals that 78 per cent of ultra-high net worth individuals (UHNWI) consider value-added services essential, and more than 77 per cent count on their wealth management firm to support them with their intergenerational transfer needs
This often requires wealth managers to change strategies, believes Mr Wilson. “The generational shifts reinforce some of the trends we have seen in wealth management over the last number of years,” he says, referring to “the importance of digital, the importance of hyper-personalisation, the importance of real-time and very relevant communication.”
The report suggests 65 per cent of HNWIs are concerned about lack of personalised advice tailored to their changing financial situation.
There is also increasing demand, according to Mr Wilson, for “non-financial related services”, from legal advice and passion investments to handling multiple jurisdictions.
“The third dynamic that I think wealth managers have to consider is how they cater for that market in terms of alternative investments and truly capture the ESG-related opportunity that exists,” he explains.
Changing priorities
A continued emphasis on wealth levels as the driver for services for investors means firms are often still not getting the full picture, believes April Rudin, founder and chief executive officer at The Rudin Group in New York.
“I would say that what firms fail to recognise is that most wealthy families are more interested in wealth preservation, legacy, estate planning, tax mitigation, and successful wealth transfer to next gen than optimising returns,” she says.
Traditional success metrics are “rapidly changing”, she adds, with global wealth management firms needing to “make their own transformation a priority.” This will help them “capitalise” on the “changing behaviours of inheritors”, including women and the next generation.
