The recession and markets crisis has had a significant impact on the world’s wealthy, reducing the number of high-net-worth individuals (those with investable assets of at least $1 million) by 14.9% to 8.6 million from year-end 2007 to year-end 2008, while the aggregate value of their assets fell 19.5% to $32.8 trillion. For the ultra-HNW (those with at least $30 million in financial assets) the declines were even steeper: the overall number of UHNW individuals fell 24.6% to 78,000, while their aggregate wealth fell 23.9%. At year-end 2007, by contrast, there were 10.1 million HNW individuals with total wealth of $40.7 trillion.
Among some of the other key findings from the 2009 World Wealth Report from Merrill Lynch and Capgemini was that while the U.S., Japan, and Germany accounted for 54% of the HNW in 2008, Hong Kong passed the U.K. as the fourth largest home of the high-net-worth last year. Moreover, the authors of the report expect HNW wealth will grow at an annual rate of 8.1% through 2013, and that the Asia-Pacific region will become the largest geographic center of wealth in the world.
That growth will come as the wealthy “return to higher-risk/higher-return assets and away from capital-preservation instruments.”
What does the report offer in terms of takeaways for advisors? For one thing, more than 25% of HNW clients reported withdrawing assets or leaving their advisory firm altogether in 2008. It also appears that there is a perception gap in some critical areas between advisors and their clients. The World Wealth report’s survey of advisors, HNW clients, and executives at wealth management firms found that while advisors (87%) and clients (88%) both called service quality “very important” and critical for client retention, 66% of clients said online access was very important in client retention, compared to only 32% of advisors. When it came to risk management and due diligence, 73% of the clients surveyed said those capabilities were an important factor in their decision to stay with their advisors; only 54% of advisors agreed.
Other large gaps between what clients and advisors thought was very important was in statement and reporting quality and fee structures.