The report described millionaires next door, which represented 90% of the population, as having $1 million to $5 million in investable wealth. Mid-tier millionaires, which accounted for 9% of the population, are those with $5 million to $30 million. And those in the ultra-high-net-worth category, which represented less than 1% (0.9%) are those with $30 million or more.
The report pointed out that cash and cash equivalents were the largest asset class in the first quarter of 2019, when a 3% drop in wealth in 2018 had people shifting to safer assets. But equity regained the top spot as the stock markets grew bullish in 2019 amid an unmoving global economy. Equities became the most significant asset class in January and February to account for 30% of the global high-net-worth-individuals’ financial portfolios, up nearly four percentage points from the first quarter of 2019, the report said.
North America equity allocation, guided by robust equity markets and the financial stimulus, was 39%, significantly higher than in other regions, the report noted. And for the first time since Capgemini began tracking in 2010, equities overtook cash and cash equivalents and became the most favored asset class in Japan. Japanese wealthy individuals allocated 31% of their portfolio to equities, an eight-percentage-point jump over the previous year and the highest among all asset classes, the report said.
Fees charged in 2019 have become an uncomfortable issue for the rich, with one-third registering their concern, the report noted. It added that the percentage of investors balking at these fees is expected to increase further in 2020 because of the volatile markets in the current pandemic, the report said.
Half of wealthy people aged 60 or older indicated they were bothered by the fees charged while only 24% of those under 40 were. Those concerned cited transparency (47%), performance (41%), and value received against fees charged (39%).
As for fee structures, the wealthy preferred performance- and service-based fees instead of asset-based fee structures. Thirty-five percent of them said they would prefer a fee structure based on investment performance compared with 26% whose fees are structured around performance already. Only 13% said they desired an asset-based fee structure (24% are currently bound to asset-based fees).
The report posits that the fee expectation gap could drive the rich to switch firms since they are dissatisfied with fees perceived to be too high. In the next 12 months, 22% of wealthy individuals said they plan to change their primary wealth management firm, with high fees being the top reason for 42% of those who wished to switch firms. North America and Latin America had the highest percentage of wealthy people, 55% and 47%, respectively, citing high fees as their primary reason for switching firms.
There also is growing interest in sustainable investing and value-added services, which offer firms a high-potential product opportunity, the report said. It said 43% of wealthy people globally believe additional services can positively impact their experience with the firm.
Overall, 27% expressed interest in sustainable investing products, with 40% of the ultra-rich willing to put cash into sustainability. Furthermore, the rich plan to allocate 41% of their portfolio to sustainable investing products by the end of 2020, and 46% by the end of 2021. Younger investors, under 40, showed more interest.
Ultra-wealthy people under age 40 (80% of them) also are more interested and willing to pay for value-added services; 55% of millionaires under 40 are interested.