Here is something I didn’t expect to read today: Among the world’s high net worth individuals (HNWIs), “confidence in the wealth management industry has improved, with 61% having a high degree of trust in both wealth managers and their firms in early 2013, up four and three percentage points, respectively, from last year. Increased trust and a cautiously upbeat economic outlook contributed to 75% of HNWIs feeling confident about generating future wealth.”
That was just one of the findings in the “World Wealth Report 2013” from Capgemini and RBC Wealth Management — but it’s the one that stood out for me because, as regular readers of this blog will know, restoring trust in the financial services industry is a major priority for CFA Institute.
But lest you get your hopes up too high, the report also noted that “HNWIs expressed a low level of confidence in markets and regulators, with fewer than half having a high level of trust in each (45 percent and 40 percent, respectively).”
Here are some of the other highlights of the report, which offers insights into the world’s HNWIs — those with US$1 million or more in investable assets:
- The ranks of the world’s HNW population swelled in 2012, as one million individuals joined the club. The HNW population stood at 12 million, up 9.2% from the prior year.
- Global HNWI wealth increased by 10% in 2012 — led by the global recovery in the equity and real estate markets — to a record high of $46.2 trillion, after falling 1.7% in 2011.
- North America reclaimed its crown as home to the most HNWIs, after being overtaken briefly by Asia-Pacific the year prior. North America’s population of 3.73 million HNWIs inched out Asia-Pacific’s 3.68 million, while its HNWI wealth reached $12.7 trillion, compared with $12.0 trillion in the Asia-Pacific region.
- Latin America, which had the highest growth rate in 2011, decelerated in 2012, with growth of only 4.4%. This was largely due to a slowdown in GDP growth and contraction in the Brazilian and Argentine equity markets. Mexico was a bright spot, with 6.6% growth in its HNWI population.
- HNWIs were cautious in 2012, opting to focus on wealth preservation. Asset allocation trends followed “the preservation trend”, with nearly 30% of HNWI wealth held in cash and deposits. But there were clear regional differences: equities constituted the largest portion of North American HNWI portfolios (37%), while HNWIs in Latin America and Asia-Pacific (excluding Japan) preferred real estate (30% and 25% of portfolios, respectively).
- On the regulatory front, the report noted that “the volume and pace of regulatory change is the single largest challenge facing wealth management firms, creating signficant and increasing costs related to both compliance and non-compliance, and constraints in delivering an integrated client experience.”
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