Globally, the number of millionaires and their wealth suffered a decline in 2019. Worldwide, the millionaires list shrunk 0.3 per cent to 18 million. Furthermore, the cumulative wealth declined three per cent or $2.1 trillion year-on-year to $68.1 trillion in 2018.
This was contained in the World Wealth Report 2019 (WWR), published on Tuesday by Capgemini.
The report found that after seven years of continuous growth, overall global high net worth individual (HNWI) wealth declined by 3% in 2018. This was due largely due to a drop in wealth in the Asia-Pacific region (specifically China). This decline resulted in a loss of 2 trillion USD worldwide.
More so, Europe accounted for about one-quarter of the overall decline or $500 billion.
The report notes that despite this, wealth management firms maintained stable levels of customer trust and satisfaction throughout the year.
“While the volatile economic environment of 2018 led to HNWI wealth decline globally, wealth managers have been extremely successful in maintaining strong levels of client trust.”
It, however, added that better personal relationships are still key for enhanced performance of firms which can be achieved through effective utilization of next-gen technologies.
“While the volatile economic environment of 2018 led to HNWI wealth decline globally, wealth managers have been extremely successful in maintaining strong levels of client trust,” said Anirban Bose, CEO of Capgemini’s Financial Services.
“However, future success will depend on agility of wealth management firms to evolve the client experience and find new ways to add value through more personalized services. Next-gen technology and closing expectation gaps will aid this.
“But the landscape is shifting so quickly that companies must not be afraid to overhaul their strategy and business models if needed.”
Millionaires list shrunk in Africa too
In Africa, the size of the HNWI population decreased by 0.7% in 2018, while wealth decreased by 7.1% to US$ 1.6 trillion.
Meanwhile, Asia-Pacific was the hardest hit region. The region represented US$1 trillion of the global decline in wealth. The HNWI population decreased by 2% and HNWI wealth by 5%. China alone was responsible for more than half (53%) of Asia-Pacific and more than 25% of global HNWI wealth loss.
Furthermore, HNWI wealth declined across nearly all other regions.
Latin America declined by 4%, Europe by 3% and North America by 1%. However, the Middle East bucked the trend, generating 4% growth in HNWI wealth and increasing its HNWI population by 6%. This was due to strong GDP growth and financial market performance. Similar to the previous year, the markets with the largest HNWI populations represented 61% of the total global HNWI population.
These include the United States, Japan, Germany, and China.
Further, the report reveals that the ultra-HNWI population declined by 4% while their wealth declined by around 6%. This accounted for 75% of the total global wealth decrease. Mid-tier millionaires (HNWIs between US$5-30 million of wealth) made up 20% of the total decline.
The millionaire-next-door segment (which represents HNWIs between US$1-5 million of wealth and makes up almost 90% of the HNWI population) was affected the least in 2018. Their wealth dipped by less than 0.5%. This signifies that nearly all declines in HNWI wealth and population were driven by the higher wealth (ultra-HNWI and mid-tier millionaire) segments.
In addition, the report identifies that asset allocations shifted significantly. Cash replaced equities to become the most held asset class in Q1 2019, representing 28% of HNWI financial wealth. On the other hand, equities slipped to the second position at nearly 26% (a decline of 5 percentage points). Volatile equity market conditions spurred a slight increase in allocation towards alternative investments to 13%. This represents a four percentage point increase from the previous year.