Emerging markets continued to propel the global wealth
industry last year. India, spurred by GDP growth of 7.9 percent and
market capitalisation growth of 118 percent, saw the greatest
increase in high net worth population growth, with the number of
dollar millionaires rising by 22.7 percent over the course of the
year to 123,000.
The growing number of wealthy individuals in India, China and
South America have helped fuel a 9.4 percent rise in high net worth
wealth, which stood at a collective $40.7 trillion in 2007,
according to the 12th annual World Wealth Report from Merrill Lynch
and consultants Capgemini.
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This represents a slowdown in growth when compared to the 11.4
percent increase seen in 2006, despite the number of high net worth
individuals (HNWIs) rising by 6 percent. Yet strong rises in
overall HNWI assets and numbers in emerging economies helped push
the overall figure past the $40 trillion mark for the first
time.
China, where growth of 20.3 percent has resulted in a total of
415,000 HNWIs, has seen GDP growth of 11.4 percent and market
capitalisation growth of 291 percent. If current rates are
maintained, Merrill Lynch and Capgemini estimate that China’s HNWI
population will almost match the UK’s by the end of 2008. The UK
currently has 494,500 high net worth individuals.
Strong market performance across emerging market economies
emerged as a key driver of global wealth in 2007, helping offset
the slowdown seen in the US and Europe. While the now familiar
growth markets of India, China and Latin America are at the
forefront of this economic and HNWI growth, less-heralded countries
such as Slovakia and the Czech Republic also feature in the top ten
countries for HNWI population growth, recording increases of 16 and
15.1 percent respectively.
Wealth managers looking to gain an ever-increasing share of the
global total are facing increased competition from other financial
services firms too, the report noted – not least from retail banks.
“We are seeing convergence; retail banks are adding things like
advisory skills to their capabilities – that poses a threat to
private banks,” said Chris Gant, head of wealth management at
Capgemini UK.
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By GlobalDataThose sentiments are echoed by Ileana van der Linde, principal
at Capgemini in New York, who told RBI that mass affluent
and high net worth individuals are increasingly being targeted by
retail banks.
“Many retail firms are investing in new capabilities – in both
mature and domestic economies”, van der Linde commented, pointing
to the significant retiring populations in the US and Europe in
particular.
“Private banks and trusts, some of whom have traditionally not
invested heavily in technology, are now seeing retail banks ‘eat
their lunch’, so much so that private banks are looking at
institutional tools to work out what they can do better than retail
banks.”
Despite the worsening credit crunch, Merrill Lynch and Capgemini
conclude that global HNWI wealth will rise to $59.1 trillion by
2012 – an upwards revision on predictions made in the 2006 edition
of the report, based on the increasingly well-insulated nature of
HNWIs and faith in a relatively short global economic
downturn.
