The total wealth of high-net-worth individuals rose 7.6 per cent in 2020 to about $80 trillion, driven by government stimulus measures and rising equity markets, according to Capgemini.
The global number of HNWIs grew by 6.3 per cent in 2020 to surpass the 20 million mark, the global consultancy said in its World Wealth Report 2021 on Wednesday.
Capgemini defines HNWIs as people with investable assets of $1 million or more, excluding their primary residence, collectibles, consumables and consumer durables.
Its World Wealth Report covers 71 markets that account for more than 98 per cent of global gross national income and 99 per cent of the world's stock market capitalisation.
The Covid-19 pandemic pushed the global economy into its deepest recession since the 1930s, prompting governments to inject $16tn in fiscal stimulus last year to bolster their economies as businesses closed and millions of people lost their jobs.
However, stimulus packages, backed by $9tn in monetary support from central banks, led to a resurgence in stock markets in the second half of the year, propelling global equities to record highs.
Last year was “filled with the unexpected: a devastating global pandemic, the severe impact of lockdowns forcing economies to spiral downwards, fear of emerging markets collapsing, unprecedented government stimulus packages to individuals and business – and, despite all these, roaring global equity markets that defied the headwinds”, Capgemini said.
“Unprecedented stock market gains in key markets drove robust HNWI wealth growth by the end of this volatile year.”
The global number of millionaires grew nearly 9.3 per cent to 56.1 million last year – the first time in history that more than 1 per cent of the world's adults are, in nominal terms, dollar millionaires, investment bank Credit Suisse said in its Global Wealth 2021 report last week.
For the first time in five years, North America overtook the Asia-Pacific as the region with the world’s highest number of HNWIs and wealth growth, which expanded by 10.7 per cent and 11.9 per cent, respectively, in 2020.
Wealth in the Asia-Pacific region grew 8.4 per cent and 4.5 per cent in Europe. It fell 3 per cent in the UK due to the worst economic contraction since 1709 as gross domestic product contracted 9.9 per cent, Capgemini said.
“Covid-19 affected Latin America more than most regions in 2020, resulting in a 4 per cent HNWI population dip,” it said.
The Middle East’s HNWI population grew 6.8 per cent, while wealth was up 10.7 per cent, driven by Iran’s “dramatic economic resurgence”.
“Between March and July, the Tehran Stock Exchange’s trade values increased 625 per cent, compared with the same period a year earlier, and the TSE hit a record high in early August,” Capgemini said.
In other Middle Eastern markets, HNWI population and wealth growth were more moderate in 2020, growing 3.3 per cent and 5.4 per cent, respectively, in Saudi Arabia. The UAE’s HNWI population rose 3.4 per cent while wealth grew by 5.3 per cent.
Wealth accumulation was strongest among the ultra-HNWI segment – defined as people with investable assets of $30m or more. The UHNWI population grew by 9.6 per cent and their wealth increased 9.1 per cent, the report said.
The Middle East recorded the highest population growth in the ultra-HNWI segment of 13.2 per cent, while their wealth grew by 17.2 per cent.
Iran was again a “significant contributor to the ultra-HNWI population and wealth advances”, with 24.5 per cent population and 27.3 per cent wealth growth, Capgemini said.
“In addition [to] their greater exposure to equity markets, active exploration of other market opportunities also likely drove the relatively higher growth in ultra-HNWI population and wealth,” it said.
The Millionaires Next Door segment, who have assets between $1m and $5m, and mid-tier millionaires (assets between $5m and $30m) had lower population and wealth growth of about 6 per cent and 8 per cent, respectively.
Meanwhile, the Capgemini 2021 Global HNW Insights Survey, which polled 2,900 HNWIs across 26 wealth markets, found that the wealthy had become more involved in managing their investments over the past 25 years and are now seeking broader advisory support.
Technological breakthroughs, changing social dynamics, new providers, the democratisation of investment management and the rise of digital channels are all affecting wealth management companies, the survey said.
“The wealth management industry must push its frontiers to capture customer mindshare and best serve HNW clients accustomed to Big Tech convenience and personalisation,” said Anirban Bose, chief executive of Capgemini’s financial services strategic business unit.
“Investing in technology and talent is a critical need for wealth management firms to maintain their market share as WealthTechs continue to grow and Big Tech entry into the space looms.”
About 43 per cent of ultra-HNWIs and 39 per cent of HNWIs aged 40 and below are likely to request an ESG score for products offered by their firm, the survey said.
Meanwhile, 72 per cent of respondents invested in cryptocurrencies and 74 per cent in other digital assets, including website domain names or apps.
The survey also found that special purpose acquisition companies are becoming more popular while non-fungible tokens are also gaining “asset-class credibility”.
“The rise of zero-commission retail investing has piqued the interest of HNWIs as well, with 39 per cent saying they desire zero-fee trading but their wealth management firm is yet to oblige,” the survey said.