Even in the face of a global economic slowdown, international trade wars and geopolitical tensions, the world gained a few more millionaires in 2019, as the population of high-net-worth individuals jumped nearly 9%, according to the “World Wealth Report 2020” from Capgemini.

North America had the biggest gains with an 11% increase in both the wealthy individual population and their wealth. The continent accounted for 39% of global population gains and 37% of rich individuals’ wealth growth of $2.2 trillion, the report said. Europe followed with a 9% increase.

This marks the first time since 2012 that North America and Europe have surpassed the Asia-Pacific region to lead global performance in population and wealth growth, the report said (in 2018, North America saw a wealth decline). Capgemini noted that despite robust market performance from a few of its countries in 2019, the growth rate of the Asia-Pacific region expanded just 8%, falling behind the average 9% global growth rate of wealthy people.

And while there was double-digit growth in the wealthy population and their wealth in key countries such as Hong Kong, China and Taiwan, other major Asian markets such as India, South Korea and Singapore posted weak progress in 2019, which led to subpar growth in the population and wealth of the rich for the entire region. The report said these markets were plagued by economic slowdown and weakening local currencies.

The U.S. added 11% in the wealthy population, a stark contrast to 2018 when it was just 1%. The report attributed the jump to fourth-quarter gains in U.S. equities as trade uncertainty faded in December when the U.S. and China rolled out their Phase One trade deal. It said the markets benefited from measures taken by the Federal Reserve to pump billions of dollars into the financial system after tumult in mid-September.

The U.S. also benefited from the optimism surrounding technology companies. The top five contributors in the market surge were tech stocks—Apple and Microsoft accounted for nearly 15% of S&P gains, according to the World Wealth Report 2020, which covered 71 countries accounting for more than 98% of global gross national income and 99% of world stock market capitalization. The “Capgemini 2020 Global HNW Insights Survey” was conducted in January and February and included more than 2,500 high-net-worth individuals across 21 major wealth markets.

Other countries posting gains in both wealthy population and wealth in 2019 included Canada, which saw an increase of more than 8%. The report said diminishing U.S.-Canada trade tension had a significant impact on Canada’s equities market, with the S&P/TSX Composite (the Canadian index) rising more than 19% following a nearly 12% decline in 2018.

The United Kingdom, amid the uncertainty surrounding Brexit throughout 2019, saw a 6% increase in both high-net-worth individuals and wealth. It is noteworthy that within the top 25 markets with a high-net-worth population, Sweden’s gain of more than 10% in wealthy population growth moved it up to a 23rd ranking. And the Netherlands joined the top 10 because of its robust real estate sector growth and an increase in market capitalization.

But the top five are still the U.S., Japan, Germany, China and France, which had the highest total of rich people in 2019, with their contribution increasing significantly over 2018. The top four countries accounted for nearly 62% of the rich population in 2019, and they shouldered more than 67% of global wealth population growth, the report said.

The report noted that both individual wealth and the population growth of the wealthy were more evenly distributed across all wealth bands in 2019 than they were in 2018. However, they grew at an even pace in 2019 for the millionaire-next-door and mid-tier millionaire wealth bands, while the ultra-wealthy growth was oddly below average compared with population growth (8.2% versus 9.1%), it said.

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.

And while the rich value socially responsible investing, 39% expect to receive higher returns from such products, while 33% view sustainable investing as sound and less speculative. Also, 26% of the rich cite a desire to give back directly to society.

Capgemini said its survey, performed before the pandemic, revealed that investors are least satisfied about the personalized information they get from their firm. In fact, nearly a third (60%) of the wealthy reported having an unsatisfactory experience during their attempts to research information about a firm and get personalized updates about new wealth offerings when receiving educational market information.

“Given the current uncertainty, we expect the experience and satisfaction levels to have dropped further since our survey,” the report said.

More than 40% of the wealthy said good experiences at these touchpoints profoundly affect their overall impression of a firm. The proportion was higher (around 50%) for those younger than 40 who indicated that these touchpoints generate the highest “wow factor.”

While wealth managers do not rank Big Tech competition among the top potential disruptors, the rich believe that the big tech firms can outperform incumbent firms when it comes to information access and value-added services. Seventy-four percent of wealthy people indicated a willingness to consider wealth management offerings from big tech firms, jumping to 94% among the 22% of high-net-worth individuals who said they may switch their primary wealth management firm in the next 12 months.

As technology firms gains ground in the financial services space, wealth management firms have little choice but to quickly enhance digital customer engagement, the report said.