Over the past 20 years, the Wealth Management industry has undergone an incredible transformation and Capgemini has been right there tracking the growth of the market and keeping abreast of the key trends. Yet, many of the challenges firms have faced in the late 90's still exist today.
Spanning these two decades, our report accurately predicted key trends such as the impact of technology disruption, cost pressures, and the rise of social impact investing. However, for as many predictions we got right, we had not foreseen the Financial Crisis and its related impact on regulatory oversight, the delay in Asia-Pacific overtaking North America in HNWI population and wealth, and the persistently high levels of cash held by HNWIs.
None-the-less, today, I am very honored to have the opportunity to release Capgemini's 20th Anniversary of our annual World Wealth Report. We have interviewed thousands of senior executives in the wealth industry and tens of thousands of HNWIs and wealth managers across the Americas, EMEA, and Asia-Pacific since the inaugural report was launched in 1997. Each year we make great strides in continuing on the excellence of our previous work, but finding new ways to enhance the valuable insights we can share with the industry and our clients.
After years of speculation, Asia-Pacific has now passed North America to become the region with not only the most High Net Worth Individuals (HNWI), but also the most wealth held by HNWIs.
Asia-Pacific achieved this in commanding fashion with a HNWI wealth growth over 4x (9.9%) that of North America (2.3%). In fact, nearly 60% of the newly minted HNWIs world-wide came from China and Japan.
The Asia-Pacific HNWI population is now 5.1m individuals holding US$17.4 trillion, compared with North America at 4.8m and US$16.6 trillion. Given the current pace of growth, the total HNWI wealth worldwide could rise from US$58.7 trillion in 2015 to over $100 trillion by 2025.
Despite slower growth, big opportunity still exists with only 1/3 of HNWI wealth managed by a wealth manager
Huge gains were made in rebuilding HNWI trust and confidence in their wealth management firm (17 percentage point increase to 74%) and Financial Markets (30 percentage point increase to 61%). However, trust and confidence levels in HNWI's wealth managers' plateaued with only a 2 percentage point increase to 59%.
The industry can take credit and solace that their efforts and investments to regain the trust of the clients is starting to pay off. However, the trend is also disturbing for wealth managers. In a time where a wealth manager's value proposition is being challenged and roboadvisors are gaining steam, the pressure is on for wealth managers to truly deliver a differentiated, holistic wealth management service.
Demand for digital is not only coming from HNWI clients, but also from wealth managers
Over the past two World Wealth Reports, we have showcased how important digital capabilities are to HNWIs, especially for Informing and Transacting activities. And while this is largely driven by the younger millennial generation, we found demand for digital was strong for Gen X and Baby Boomers as well. With rare exception, most industry executives have historically noted their biggest challenge was getting their older wealth managers to buy into leveraging new technology. This now seems to be shifting as we found over 80% of wealth managers are demanding access to digital tools.
However, what is really concerning is only 45% of wealth managers are satisfied with the digital tools and 39% are likely to leave if they are not satisfied with the digital capabilities of the firms.
And more importantly, 73% of HNWI clients across the globe note that the digital maturity of their wealth management provider has a significant impact on their likelihood to increase the amount of their assets they invest with a firm.
This is becoming even more important as HNWIs comfort level with automated advisory services (aka roboadvisors) is on the rise. Last year, 47% of HNWIs across the globe noted an interest in investing in a roboadvisor capability. That number rose to 67% in 2016. Yet, only 31% of Wealth Managers believe their HNWI clients would consider using an automated advisory service.
Capgemini's DigiWealth Maturity Assessment Model is a diagnostic tool which examines digital capabilities from three perspectives: Firm, Client, and Advisory.
Our analysis based on self-assessments by senior industry executives highlights the industry has only achieved moderate levels of digital maturity to-date. And given these are self-assessments, it is very likely that actual maturity levels may be substantially lower if analyzed independently.
However, the good news is wealth managers have noted higher levels of satisfaction with digital tools than they did just a few years ago.