Last year saw the steepest decline of global high-net-worth individuals and their wealth in more than a decade, according to a world wealth report by Capgemini Research Institute.
In the face of the global economic slowdown, inflation, rising interest rates and geopolitical stressors, markets everywhere turned bearish in 2022 and registered significant declines across regions, said the Paris-based research firm’s “World Report Series 2023: Wealth Management.”
As a result, global high-net-worth individual (HNWI) wealth dropped 3.6% to $83 trillion, the sharpest decline since the institute started tracking the data in 2013. And the number of such individuals dropped by 3.3% compared with the prior year, to 21.7 million, the report found.
In North America, however, the declines were more dramatic, with total HNWI wealth falling by 7.4% and the population by 6.9%.
Around the world, portfolio investments shifted from growth to value, as 67% of HNWI made wealth preservation their top priority. The percentage of equities in portfolios dropped to 23% from 29% and fixed income to 15% from 18%, while cash and its equivalents jumped to 34% from 24%, the report said.
The global wealth management outlook wasn’t all bad, however. According to Capgemini, the number of affluent individuals—those with $250,000 to $1 million in investible assets—rose 2.3% to become a nearly $27 trillion demographic. Roughly 46% of these investors reside in North America.
“Wealth management firms hesitate to target and serve the segment because of profitability concerns,” the report said, labelling the affluent as “the next opportunity.” “Embracing new business models may offer providers with a solution.”
For example, accelerating digital transformation to free up advisor and relationship manager time, developing AI-driven tools and augmenting platforms with self-service opportunities could allow firms to reach the affluent market early in their accumulation phase with an eye toward a closer relationship in the future, Capgemini said.
ESG continues to be of high interest to HNWIs, with 63% saying they had asked for reliable and traceable ESG scores for their investments. Yet nearly 50% of wealth managers said they need more ESG information to effectively engage with their clients and 40% said they needed more data themselves to understand ESG impacts.
And when it comes to their relationships with their advisors, 71% of HNWIs would like to see the firm offer value-added services such as tax planning, inheritance advice and estate planning. But only half thought their advisory would be able to deliver fuller service, and this is one area where clients and advisors were in alignment. Half of wealth managers reported that personalizing client services to this extent was challenging.
One reason could be that workflow is still bogged down by manual processes, the report found. Advisors and relationship managers spend roughly two-thirds of their time on non-core activities that do not generate revenue and only one-third on pre-sales and client interactions.
The Capgemini survey was taken in January 2023 and included more than 3,171 high-net-worth participants, 3,203 affluent participants and more than 895 wealth managers, wealth management executives and relationship managers. Produced in partnership with Aon’s Client Insight group, the survey covered high-net-worth investment behavior, value-added services and preference for wealth management providers.