Institutional Asset Manager Newsletter 07.06.24

The rich get richer

Good news from consultancy CapGemini this week which reports that not only are there more ultra-wealthy individuals in the world, but they are getting even wealthier.
The firm’s World Wealth Report 2024 reveals the number of high-net-worth individuals (HNWIs) and their wealth reached" unprecedented levels in 2023", apparently sparked by a rebound in the global economic outlook.
Reversing the decline shown in the previous year’s report, global HNWI wealth expanded by 4.7 per cent in 2023 to reach a staggering USD86.8 trillion. Meanwhile the HNWI population increased by 5.1 per cent to 22.8 million globally and continues to grow despite what CapGemini calls "market unpredictability".
Of these super rich, the ultras account for 34 per cent of the total HNWI wealth and make up just over 1 percent of its population.
The biggest wealth increases were in the US, a country where 37.9 million people live in poverty – driven by the burgeoning domestic equity markets, while Africa was the only region to experience falls in HNWI wealth fell due to dwindling commodity prices and declining foreign investment.
The spoils for wealth management firms are clear but as Nilesh Vaidya, Global Industry Head of Retail Banking and Wealth Management at Capgemini, says "the stakes have never been higher".
McKinsey research shows that the US wealth management industry experienced a "significant contraction" in 2022, and today’s HNWI are choosing to spread their considerable wealth across different providers.
The CapGemini report shows that in 2020 UNHWIs employed three wealth management firms, by 2023 that number had risen to seven.
Vaidya says this trend signals that the industry is "struggling to deliver the expected range and quality of services demanded by this segment".
To secure a position in today’s HNWI market, wealth managers will need to utilise every tool in the box - including AI-powered behavioural finance techniques - and ensure they can deliver expert support from legal services, philanthropic planning, intergenerational advice and even lifestyle services.
And Vaidya warns that wealth management firms will also need to "strike the balance between competition and collaboration" with family offices as UHNWI seek support in setting up these structures to oversee their portfolios.
So, while there might be a larger market for wealth managers to service, only the strongest and most versatile will get a piece of the action.

Gill Wadsworth, Editor, Institutional Asset Manager
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