New report reveals emerging importance of proactive care, sustainable investing, and value-added services
The high-net-worth space has undergone significant growth globally, and wealth firms that want a piece of their business must be prepared to take their personalization game to the next level.
In its newly released World Wealth Report 2020, Capgemini said that the total wealth of high-net-worth individuals (HNWI) around the globe reached US$74 trillion in 2019, reflecting year-on-year growth of 8.6%.
HNWI growth last year was reportedly driven by gains in North America, where HNW population and wealth both increased by 11%. That growth, the report said, made up 39% of global HNWI population gains and 37% of wealth growth totalling US$2.2 trillion.
“In the United States, the HNWI population shot up 11% in 2019 compared with 1% in 2018,” Capgemini said. “In Canada, both HNWI population and wealth posted increases of more than 8% in 2019.”
HNW clients will most likely want to protect those gains going forward, particularly as the unpredictability of 2020 so far has suppressed HNWI risk appetite, according to the report. In line with that, the harsh investment environment fomented by COVID-19 has likely increased client expectations on the amount of value they get from the advisory fees they pay.
Looking at different age groups, 24% of HNW clients under 40 were reportedly uncomfortable with the fees their firms charged in 2019, in contrast to 50% of those aged 60 or older who were similarly uncomfortable. Across all HNWIs, the top concerns on fees included transparency (47%), performance (41%), and value received vs. fees charged (39%).
“Environmental, Social, and Governance (ESG) investments are likely to take on even more significance for HNWIs and wealth management firms in a world increasingly impacted by environmental and social risks,” Capgemini said.
The report also underscored the importance of proactive care to clients’ unique needs during critical life and financial transition points, as it could help wealth management firms tap future growth segments. The critical transition points identified in the report include:
- Young investors entering the HNWI segment;
- Older investors planning to transfer wealth; and
- The mass-affluent segment, who are considered potential future HNWIs and many of whom are being targeted by new digital players.
“Hyper-personalized offerings can address varied HNWI expectations and lock in firms’ future growth during uncertainty,” the report said, highlighting the value of artificial intelligence (AI) and analytics for functions such as generating bespoke risk profiles, personalized portfolio construction, and customized client reporting.
“Emerging technologies are especially pivotal to growth potential in the areas of client acquisition, advisory, and value-added services,” the report said.