The Tribune

The 10 per cent rise in the collective wealth of the world’s high net worth individuals (HNWIs), which hit $46.2 trillion at end-2012, shows the Bahamian financial services industry still has much to play for.

The World Wealth Report 2013 (WWR), released yesterday by Capgemini and RBC Wealth Management, disclosed that total HNWI wealth rebounded from a 1.7 per cent decline the year before to hit a record high.

And the report added that one million individuals joined the global HNWI population, which reached 12 million, an increase of 9.2 per cent.

The findings are encouraging for the Bahamian financial services industry, which is focused primarily on private wealth management and estate planning.

They indicate that these markets are continuing to grow, providing a potentially expanding client base for the Bahamas and its service providers. All of which could stimulate further growth for the so-called ‘second pillar’ of the Bahamian economy.

The World Wealth Report 2013 said the the HNWI recovery was fuelled by global recovery in the equity and real estate markets.

“HNWI population increases were strong in 2012,” said Jean Lassignardie, chief sales and marketing officer at Capgemini Global Financial Services.

“However, North America’s lead in both population and wealth is likely to be eclipsed again in the future by Asia-Pacific.

“Interestingly, while North America led in HNWI population, Asia-Pacific actually had a higher overall wealth growth rate at 12.2 per cent, compared to North America’s 11.7 per cent.”

North America reclaimed its position as the largest HNWI market after being overtaken byAsia-Pacific the in 2011. North America’s population of 3.73 million HNWIs surpassed Asia-Pacific’s 3.68 million, while its HNWI wealth reached $12.7 trillion, above the $12 trillion in the Asia-Pacific region.

Global investable wealth growth was led by HNWIs in the higher wealth bands, with ultra-HNWIs expanding in wealth and number by about 11 per cent, following declines in 2011.

All regions experienced strong growth in HNWI population and wealth except Latin America, which led growth in 2011, but faltered in 2012 due to slow GDP growth and challenged equity markets. That region is one the Bahamas has been targeting heavily.

The HNWI population country ranking saw the UK as the fifth largest country. In the UK, the total number of HNWIs increased by 5.4 per cent to reach 465,000. And UK HNWI wealth expanded to $1.6 trillion in 2012, representing a 5.4 per cent increase from 2011.

HNWIs remained cautious in 2012, highlighting a pronounced focus on wealth preservation in the Global HNW Insights Survey. Introduced this year in the World Wealth Report, and based on feedback from over 4,400 global HNWIs, the survey said that despite recent market improvements, one-third (33 per cent) of HNWIs are more focused on preserving, versus just 26 per cent on growing, their wealth.

Asset allocation trends followed the preservation trend, with almost 30 per cent of HNWI wealth held in cash and deposits. Regional differences were clear, with equities taking up the largest portion of North American HNWI portfolios (37 per cent), while HNWIs in Latin America and Asia-Pacific (excluding Japan) preferred real estate (30 per cent and 25 per cent of portfolios respectively).

In the UK, HNWI asset allocations favoured cash/deposits at 28 per cent, and real estate at 26 per cent.

“Despite a marked focus on capital preservation and high cash allocations, high net worth individuals achieved a record level of wealth in 2012, suggesting further growth lies ahead if trust and confidence in the markets increase further,” said M. George Lewis, group head for RBC Wealth Management & RBC Insurance.

Global HNWI confidence in the wealth management industry has improved, with 61 per cent 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 per cent of HNWIs feeling confident about generating future wealth. At the same time, HNWIs expressed a low level of confidence in markets and regulators, with fewer than half having a high level of trust in each (45 per cent and 40 per cent, respectively).

In terms of meeting wealth management needs, HNWIs indicated a preference for a seamless approach, working with a single firm (41 per cent versus 14 per cent preferring multiple firms), and a single point of contact (34 per cent versus 24 per cent preferring multiple contacts).

While 31 per cent prefer direct in-person contact, almost one in four HNWIs feel digital communication to be more important, a trend driven by younger HNWIs and those in Asia-Pacific (excluding Japan).

Looking forward, with the ongoing economic recovery providing an environment of reduced risk and improving investor confidence, global HNWI wealth is forecast to grow by 6.5 per cent annually over the next three years.

This is in contrast to the sluggish 2.6 per cent growth since the financial crisis in 2008. The Asia-Pacific region, which is projected to grow at one-and-a-half times the global average at 9.8 percent, is expected to lead global growth.