– The market boom in 2023 saw the wealth of high net worth individuals (HNWIs) increase by $3.8 trillion.
– More than 65% of HNWIs said emotional or cognitive biases affect their investment decisions during major life events, and most want help managing such situations.
The World Wealth Report 2024, released today by Capgemini Research Institute, shows that the number of high-net-worth individuals1 (HNWIs), as well as their wealth, will reach unprecedented levels in 2023 thanks to the recovery of the global economy. According to the study, global HNWI wealth will increase by 4.7% to $86.8 trillion in 2023. The number of HNWIs globally increased by 5.1% to 22.8 million and continues to grow despite market unpredictability. This upward trend offsets last year’s decline and puts HNWIs back on a growth trajectory.
The number of HNWIs worldwide is growing rapidly.
In 2023, North America was the strongest in the global HNWI recovery, with a 7.2% year-on-year growth in assets and a 7.1% growth in the number of HNWIs. According to the study, the main factors were good economic resilience, declining inflationary pressures and impressive growth in the US stock market. This trend is evident in most markets, albeit to a lesser extent:
– Asia Pacific (4.2% growth in wealth and 4.8% growth in HNWIs) and Europe (3.9% growth in wealth and 4.0% growth in HNWIs) saw more moderate growth.
– Latin America and the Middle East saw limited growth in HNWIs, with wealth and number of HNWIs increasing by 2.3% and 2.9%, respectively.
– Conversely, Africa was the only region where HNWI wealth (-1.0%) and the number of HNWIs (-0.1%) declined due to a fall in commodity prices and reduced foreign investment.
As HNWIs grow, asset allocation is shifting from asset preservation to growth. Data from early 2024 shows a normalization of cash holdings to 25% of the total portfolio, a significant decline from the peak of 34% in January 2023. The study notes that two out of three HNWIs plan to invest more in private equity in 2024 to take advantage of potential future growth opportunities.
Above-average growth in the number of HNWIs and the value of their assets in the Czech Republic
In the Czech Republic, the number of HNWIs increased by 5.2% year-on-year – from 32.3 thousand to 33.9 thousand. The value of Czech HNWI assets increased by 5.3% from $78.2 billion to $82.4 billion. The main drivers of the growth in the number and wealth of Czech HNWIs are an increase in market capitalisation of 21% in 2023 (after a decrease of 9% in 2022), a reduction in the average inflation rate in 2023 to 10.7% (i.e. 4.4 percentage points compared to 2022), as well as a reduction in interest rates announced by the Czech National Bank. These positive effects far outweighed the negative effects, such as a 0.18% reduction in real GDP growth and an 11.4% fall in house prices. The main drivers of the growth in market capitalisation included a sharp rise in the share prices of large financial institutions such as Erste Group and Komerční banka, as well as the Colt arms factory. House prices fell as a result of rising interest rates on housing loans, high inflation and the weaker performance of the economy. These factors discouraged home purchases and led to a near-record low number of mortgage closures.
The large transfer of wealth is creating an urgent need for value-added services.
Ultra-high-net-worth individuals (UHNWIs), the most concentrated of the wealth groups, own more than 34% of total HNWI assets and account for just over 1% of the total. It is estimated that over the next two decades, aging generations will transfer more than $80 trillion2, sparking interest in financial (investment management and tax planning) and non-financial (philanthropy, concierge services, passion investing3 and networking opportunities) value-added services. These services represent a lucrative opportunity for wealth management firms. The study shows that 78% of UHNWIs consider value-added services essential and more than 77% expect their wealth management firm to help them with intergenerational wealth transfer. As HNWIs seek thoughtful advice, 65% say they are concerned about the lack of personalized advice tailored to their changing financial situation.
“Clients are demanding more from their wealth managers and the opportunities have never been greater. Firms can take proactive steps to engage and retain clients and provide them with a personalised, multi-channel experience at a time when there is a large wealth transfer taking place and the growth of HNWIs continues,” said Nilesh Vaidya, global head of retail banking and wealth management at Capgemini. “Instead of the traditional way of profiling clients, it is worth considering using the tools of behavioural finance theory using psychographics, supported by artificial intelligence. These tools can offer a competitive advantage by understanding individual decision making and providing a greater level of intimacy with the client. Creating channels for real-time communication will be essential to manage the biases that sudden, volatile market movements can create.”
Most HNWIs want advice to help them manage their own biases and assumptions.
More than 65% of HNWIs said that biases and assumptions affect their investment decisions, especially during major life events such as marriage, divorce and retirement. As a result, 79% of HNWIs expect their advisors to help them manage such situations. By integrating behavioral finance with artificial intelligence, wealth management firms can evaluate how clients react to market fluctuations and make data-driven decisions that are less prone to emotional or cognitive biases. The study highlights that AI-powered systems can analyse data and detect patterns that may be difficult for humans to spot, allowing advisers to take proactive measures when advising clients.
According to the study, the number of relationships that UHNWIs have with wealth management firms has increased from three in 2020 to seven in 2023. This shows that firms in this sector are striving to provide the wide range of quality services that these clients require. In contrast, family offices that manage the assets of just one family have grown by 200% over the last ten years4. In order for wealth management firms to continue to meet the needs of HNWIs and UHNWIs, they must strike a balance between competing and working with family offices. One in two (52%) UHNWIs want to start a family office and expect their primary wealth management firm to help them do so.
Study methodology.
The World Wealth Study 2024 covers 71 countries representing more than 98% of the world’s gross national income and 99% of the world’s stock market capitalisation. The Capgemini 2024 Global HNW Insights survey polled 3,119 HNWs, including more than 1,300 ultra HNWs, in 26 major wealth markets in North America, Latin America, Europe, the Middle East and Asia Pacific. The 2024 Wealth Management Executive Survey includes 75 responses across 12 markets with representation from pure wealth management firms, universal banks, independent broker/dealer firms and family offices in North America, Europe and Asia Pacific. The 2024 Relationship Manager Survey includes more than 750 responses in ten markets.
The full report can be found on the link below:
