WM Market Reports

Asia Is Now Richest Region; Wealth Industry Can Boost Share Of Wallet - Capgemini

Tom Burroughes, Group Editor, 23 June 2016

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Asia is now undisputed as the world's richest region, according to the annual Capgemini report. Meanwhile, the global wealth pie expanded in 2015 but the wealth industry could do better in increasing its share, it says.

The Asia-Pacific region has leapfrogged North America as home to the most wealth held by high net worth individuals, with $17.4 trillion, ahead of North America’s $16.6 trillion, according to the Capgemini World Wealth Report issued today.

With many regions of the world, such as North and Latin America, posting modest growth in the number of wealthy individuals and their assets, Asia was a beacon of light, boasting 5.1 million high net worth individuals, ahead of 4.8 million for North America.

The global total wealth of HNW individuals is expected to exceed the $100 trillion mark by 2025 if current growth rates continue, the report, now in its 20th year, said, with Asia being an important driver of such an increase.

The strong performance in Asia helps explain why, with some exceptions, international wealth management firms have been trying to expand their regional presence and enter local markets. Not all banks have succeeded, however, and some, such as Societe Generale and Barclays, have sold local private banking businesses to local players.

While such figures will cheer those who see the wealth management “pie” as expanding, offsetting worries about margin-hitting low interest rates and compliance burdens, the report fired a number of warning shots at the sector. It said the wealth management industry has to change in a strategic way to benefit from this rise in wealth. The report said that high net worth individuals hold less than a third of their wealth with a wealth manager, suggesting the potential “share of wallet” has considerable upside potential.

One stumbling block towards wealth industry progress, the report said, is a “subdued level of engagement with wealth managers”. HNW individuals do not see eye to eye on fees, with clients preferring to pay for performance while firms want to charge a fee based on a percentage of assets under management.

Commenting on potential growth for firms able to expand their "share of wallet", David Wilson, head of the strategic analysis group at Capgemini Financial Services, told this news service that this is "a huge opportunity".

One reason why wealth managers do not have a higher share of potential client assets is because some HNW individuals' assets are tied up in operating businesses or forms of real estate, he said. There are also perceived shortcomings in how wealth managers operate that might be deterrents. 

Digital technology and a move towards a "multi-channel" way of doing things among the younger generation open up possibilities for wealth firms to increase their share of potential business, he added. "That is where the opportunity from a digital point of view comes in." 

The report also warned that businesses are falling short in using digital technology, leaving themselves at a “startlingly high risk of possible net income loss” – in other words, losing out to upstart fintech firms. The report’s “DigiWealth Maturity Assessment Model", introduced for the first time, shows that companies are underachieving on the digital front.

The survey of attitudes was based on more than 5,200 responses from HNW individuals in 23 countries.

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