The Capgemini Research Institute has published its World Wealth Report 2024, offering a comprehensive and detailed view of the current state of global wealth and the concerns of high-net-worth individuals (HNWI). This report reveals a significant increase in global wealth, while also highlighting HNWI concerns about the lack of personalized advice in managing their investments.
Global Wealth Growth
In 2023, the global wealth of HNWIs grew by 4.7%, reaching $86.8 trillion. The HNWI population also experienced a 5.1% increase, reaching 22.8 million globally. This growth marks an important recovery after the decline observed the previous year, indicating an upward trend in HNWI patterns.
Geographical Distribution of Growth
- North America: North America led the HNWI recovery with a 7.2% growth in wealth and a 7.1% increase in population. This increase is attributed to economic resilience, decreasing inflation, and the recovery of the equity market in the United States.
- Asia-Pacific: This region showed more moderate growth, with a 4.2% increase in wealth and a 4.8% rise in population.
- Europe: Europe recorded a 3.9% increase in wealth and a 4.0% rise in population.
- Latin America and the Middle East: Both regions showed moderate growth in wealth (2.3% and 2.9%) and population (2.7% and 2.1%).
- Africa: Africa was the only region that experienced a decrease in wealth (-1.0%) and population (-0.1%) due to falling commodity prices and foreign investment.
Change in Asset Allocation
With the growth of HNWIs, asset allocations have begun to shift from wealth preservation to growth. Early data from 2024 indicates a normalization in the allocation of liquid and equivalent assets, representing 25% of the total portfolio, in contrast to 34% observed in January 2023. Additionally, two out of three HNWIs plan to invest more in private equity during 2024 to seize growth opportunities.
Importance of Value-Added Services
Ultra-high-net-worth individuals (UHNWI), who make up approximately 1% of the total HNWI population but concentrate 34% of the wealth, are the most lucrative for wealth management entities. Over the next two decades, more than $80 trillion is expected to be transferred from older generations, increasing the demand for value-added financial and non-financial services.
The report indicates that 78% of UHNWIs consider value-added services essential when selecting a wealth management firm, and more than 77% rely on these firms to assist in intergenerational wealth transfer.
Challenges in Wealth Management
- Concerns About Lack of Personalized Advice: As HNWIs seek guidance in managing their wealth, 65% express concern over the lack of personalized advice tailored to their changing financial situation. This need for personalization is crucial for attracting and retaining clients in a competitive market.
- Influence of Biases on Investment Decisions: More than 65% of HNWIs admit that biases influence their investment decisions, especially during significant life events. 79% of these individuals seek guidance from managers to help manage these biases. The integration of client behavior-based finance with AI can help wealth management firms assess clients’ reactions to market fluctuations and make decisions less susceptible to emotional or cognitive biases.
- Increasing Number of Relationships with Wealth Management Firms: UHNWIs have increased the number of relationships with wealth management firms from three in 2020 to seven in 2023, indicating that the sector faces difficulties in providing the range and quality of services required by this segment. Single-family offices have grown by 200% in the last decade, and 52% of UHNWIs wish to establish a family office with advice from their wealth management entity.
Recommended Wealth Management Strategies
- Use of AI-Based Tools: AI-based tools, which use psychographic data, can offer a competitive advantage by better understanding client decisions and providing a higher degree of personalization. Creating real-time communication channels will be crucial for managing biases and offering proactive advice.
- Personalization and Omnichannel: Wealth management firms must take active measures to attract and retain clients by offering personalized and omnichannel experiences. This is especially relevant during wealth transfer and the ongoing growth of HNWIs.
Frequently Asked Questions
- What was the growth of HNWI global wealth in 2023? In 2023, the global wealth of HNWIs grew by 4.7%, reaching $86.8 trillion.
- Which region led the HNWI recovery in 2023? North America led the HNWI recovery with a 7.2% growth in wealth and a 7.1% increase in population.
- What percentage of UHNWIs consider value-added services essential? 78% of UHNWIs consider value-added services essential when selecting a wealth management firm.
- How do biases influence HNWI investment decisions? More than 65% of HNWIs admit that biases influence their investment decisions, especially during significant life events.
- How many relationships with wealth management firms do UHNWIs have on average in 2023? On average, UHNWIs have seven relationships with wealth management firms in 2023.
- What tools can help manage biases in investment decisions? AI-based tools, which use psychographic data, can help manage biases in investment decisions by better understanding client decisions and offering a higher degree of personalization.
Conclusion
The Capgemini Research Institute’s World Wealth Report 2024 highlights the need for personalized advice for HNWIs in a context of global wealth growth. Wealth management firms must adapt to changing client demands, using advanced tools like AI to provide more personalized and proactive advice. The ability to manage biases and offer value-added services will be key to staying competitive in an ever-evolving market.
