A recent study on the wealthy by Capgemini titled ‘World Wealth Report 2020’ has revealed that HNI population in India has increased to 2.63 in March 2019 from 2.56 lakh in March 2018, a marginal growth of 3% in a year. In 2007, India had 1.52 lakh HNIs. This reflects a growth of 73% in 13 years.
Though India does not make it to the top 10 countries, it overtakes countries like South Korea, Russia, Saudi Arabia and Spain in terms of number of HNIs.
Globally, HNI wealth and population grew by almost 9% globally in 2019 despite a global economic slowdown, international trade wars and geopolitical tensions. North America and Europe took the lead with around 11% and 9% growth respectively, surpassing Asia-Pacific (with 8%) for the first time since 2012.
The impact of covid-19 pandemic on HNIs
As per World Federation of Exchanges reports, COVID-19 erased more than $18 trillion from global markets over the course of February and March 2020, before a slight recovery in April. Analysis from Capgemini, detailed in its new report, projects a decline of between 6% and 8% in global wealth until the end of April 2020 (compared with December 2019).
“In the face of today’s extraordinary uncertainty, wealth managers and firms are finding themselves in uncharted waters,” said Anirban Bose, Capgemini’s Financial Services CEO and Group Executive Board Member in the press release. “This unpredictable period may also present opportunities for firms to reassess and reinvent their business and operating models to be more agile and resilient. Analytics and automation as well as emerging technologies like artificial intelligence, can enable firms to enhance revenues through better client experiences while reducing costs by streamlining processes.”
Investments
Investment priorities have also shifted – sustainable investments (SI) that uphold environmental and social priorities, are gaining significant prominence post-pandemic. The top reasons driving HNI interest in sustainable investing are higher returns and lower risks – 39% expect to receive higher returns from SI products while 33% view SI as sound and less speculative. Interestingly, already 26% of HNWIs cite a desire to give back directly to society.
HNWIs plan to allocate 41% of their portfolio to SI products by the end of 2020, and 46% by the end of 2021. Wealth management firms have recognized the trend and are prepared to meet the demand as 80% of them now offer SI options.
Further, equities became the most significant asset class in early 2020 and accounted for 30% of global HNIs’ financial portfolios, largely due to robust equity markets and financial stimulus restoring trust.
Fee concerns
HNIs are also becoming increasingly critical over wealth managers’ fees with 33% uncomfortable with rates in 2019. Discomfort is expected to rise as a result of volatile markets. According to the report, more than one in five HNIs might switch firms in the next year with high fees being the top reason for 42% of HNIs. HNIs are also citing a preference for performance and service-based fees over asset-based ones, indicating higher expectations on value delivered for fees charged.