By Ed Emerson
Investing secrets? Well, maybes yes and maybes no.
Capgemini’s fourth annual Global Insights Survey, which surveyed more than 5,200 high net worth individuals (HNWIs) in 23 major markets across the five regions of North America, Latin America, Europe, Asia-Pacific, the Middle East and Africa, doesn’t exactly tear the lid off the hidden motivations of the HNWI market.
But it does offer up some encouraging news about the rich and powerful.
HNWI‘ The most commonly quoted figure for membership in the high net worth “club” is $1 million in liquid financial assets. An investor with less than $1 million but more than $100,000 is considered to be “affluent”, or perhaps even “sub-HNWI” (Source: Investopedia).
While trust and confidence in wealth management firms (and other stakeholders) has increased significantly over the past 12 months – 2015 to 2016 – so too has record-setting levels of wealth.
The report also found that only one-third (32%) of global HNWI wealth is currently being managed by individual wealth managers. Good news if you’re a wealth manager in terms of opportunity.
In short, global HNWI wealth grew 4% in 2015 to $58.7 trillion – quadrupling its value over the last 20 years despite three major US recessions – and up to 15.4 million members, according to Capgemini.
And, over the last 20 years, the Asia-Pacific region has grown at the fastest rate (10%); the first time any region has managed to pip North America for both HNWI wealth and HNWI population growth.
It has been suggested that investment firms combining FinTech capabilities and digital tech, and the communications channels for same alongside relationship building activities, will be the beneficiaries of that increasing level of trust and confidence in the form of more clients.
But there’s still a long way to go in the confidence stakes.
Any glance at the American Association of Individual Investors (AAII) barometer will tell you market confidence is still at or near 2009 levels.
And while not necessarily party to the HNWI classification, European households have accumulated more than €10 trillion in savings accounts, the US is over $8 trillion in low return deposit accounts and the UK is at just over £1 trillion (depending on who you ask).
That’said a lot of cash held back from the markets due to fear.
Equally, in 2015 more HNWI wealth (35%) was essentially liquid, held in bank accounts or as physical cash, compared to the 32% that was overseen by individual wealth managers.
And under-40 HNWIs were even less likely to turn to wealth managers (28 percent), while those in North America were more likely (39 percent).
Here’s the chart:
The annoying bit is the lack of depth.
Sure, we know that the top three services sought by HNWIs are investment advice (47%), financial planning expertise (40%) and investment access (40%), and almost half are focused on investing for growth – they’re obviously not doing it to lose money.
But we have to assume that HNWIs are suffering at the same yolk of fear and uncertainty as those outside that stratospheric wealth category.
How Investors Benefit
What we do know is that investors generally only benefit from about 30% or less of what the market delivers.
And that has been attributed to a variety of emotional knee-jerk reactions to bad news and attempts to “time” the market.
Surely then the point is that regardless of whether you’re an HNWI or the man on the street, taking advice is the way forward.
And don’the be fooled by the assumption that the two-thirds of HNWIs outside of wealth management advice is driving the growth of global wealth themselves.
Only a fool takes credit for a seven year bull market by saying, “my strategy is working.”
They’re the ones who lose it when the markets fall.
Want to know more?
Check out HNW Magazine’s Investing Secrets of Self-Made Millionaires section here.
And look out for our forthcoming report The 7 Investing Secrets of Self-Made Millionaires out soon.