Strategy

EXCLUSIVE INTERVIEW: HNWI Assets To Rise Sharply; Industry Must Grasp Generation Differences - PwC

Tom Burroughes Group Editor 25 July 2014

EXCLUSIVE INTERVIEW: HNWI Assets To Rise Sharply; Industry Must Grasp Generation Differences - PwC

HNW individuals will help drive the size of the global asset management industry to a total of over $101 trillion in AuM by 2020 from $63.9 trillion today - but making a living from this is not a cakewalk, says PwC.

An earlier version of this interview has run on the sister publications of this one. As the arguments made here have global relevance, including for the Europe region, we are repeating it here.

High net worth individuals will help drive the size of the global asset management industry to a total of over $101 trillion in AuM by 2020 from $63.9 trillion today but wealth firms must be sensitive to inter-generational differences to capture this growth, according to PricewaterhouseCoopers.

As each age cohort - typically spanning 12 to 14 years apart - comes to the fore in the world of work and saving, it is noticeable how they tend to react against the habits and behaviour of the previous one, which needs to be understood by professionals seeking to capture potential business, PwC told this publication recently.

Steve Crosby, Americas leader, global private banking and wealth management, PwC, recently spoke to Family Wealth Report - a sister publication of this one - about some of the issues thrown up by the firm’s report, entitled Asset Management 2020: A Brave New World, as well as the insights from its wealth management survey published last year.

There is much talk of the aging Baby Boomer generation and its transfer of wealth and the like (there are around 80 million of such people) but there is less awareness of Millennials (90-plus million) and how they are going to put their inheritance to work, he said.

“The next cohort may not talk to traditional managers. A question is how do you get connectivity with the next generation,” he said, referring to the `70/50/40 rule’, Crosby said.

This rule refers to one of the findings from the Global Private and Wealth Management Survey of last year. It deals with the focus financial advisors have on the family eco-system.

“Our research shows that if wealth managers have a relationship only with the patriarch and not the potential surviving spouse we see risk of loss of assets at close to 70 per cent over the next 18 months following passing of the senior. If a firm has no relationship with the children of a wealthy investor they run the risk of 50 per cent loss. If there is no relationship with the fiduciaries (trustees, foundation heads etc), they run risk of another 40 per cent [loss],” Crosby continued.   

Boomers have been even bigger users of technology than PwC had expected when it sought to research this area. “We see again boomer and older affluent as one of the largest users of smart phones and tablets,” he said.

There is, however, a problem in certain groups’ assumptions about technology – security.

“The younger generation has a presumption of trust in what comes over the Web and that is that generation’s Achilles heel," he said, referring to issues of privacy and security. "That is a big deal and why wealth managers make a point about spending on cyber security,” Crosby said.  

Understanding these issues will be key in getting a chunk of the expected rise of HNW assets in North America between now and 2020. PwC predicts that North America HNW individuals will hold $30.6 trillion by the decade’s end ($21.7 trillion in 2012); for Asia, the figure in 2020 is seen at $22.6 trillion ($12.7 trillion in 2012); in Europe, the figure is seen at $21.6 trillion ($17.0 trillion.) Remaining growth comes from regions such as Latin America and Africa.

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