The number of individuals considered high net worth declined by 3.3 percent in 2022 while their wealth shrunk by 3.6 percent or a loss of $3 trillion as equity markets globally contracted, according to a report by Capgemini, a Parisian-based consulting and information technology company. The decline in wealth is the largest drop in a decade, brought on by geopolitical tensions and macroeconomic uncertainty as countries cope with the aftermath of the pandemic.
The number of high-net-worth people or those with investable assets of at least USD 1 million fell to 21.7 million in 2022 as the value dropped to USD 83 trillion. The largest decline occurred in North America where both the amount of wealth and the number of high-net-worth individuals fell: wealth declined by 7.4 percent while the population dipped by 6.9 percent. Europe reported a smaller decline of 3.2 percent while the Asia-Pacific reported the lowest amount of a drop of 2.7 percent. Wealth increased throughout Africa, Latin America and the Middle East in 2022 as the oil and gas sectors rebounded after hitting lows in prices in 2020.
Wealth managers face challenges from the choppy economic conditions brought on by political strife and lockdowns from the global pandemic.
ESG Investments Still Important
While only one in five or 23 percent of wealthy people reported their returns from ESG-related assets were higher, investing in these assets remains a top priority. Even though the global stock and bond markets remain volatile, 41 percent of respondents to the survey said they viewed ESG investments as the first concern.
Other investors sought to find out how their investments ranked in terms of meeting ESG goals: 63 percent of wealthy individuals said they wanted scores of what they have been investing in.
But few wealth management firms, or only 52 percent, reported that ESG data analysis and its traceability. Only 31 percent found it to be the number one priority.
Four out of 10 relationship managers said they wanted more data to determine the impact of ESG criteria, but almost one in two managers said they wanted more ESG information to discuss with their clients.
“Wealth management firms are at a critical inflection point as the macroenvironment is forcing a shift in mindset and business models to drive sustainable revenue growth,” said Nilesh Vaidya, global head of banking and capital markets at Capgemini. “Agility and adaptability are going to be key for high-net-worth individuals as their attention gears towards wealth preservation. The industry will need to fortify value, empower relationship managers, and unlock new growth opportunities to remain relevant.”
Wealth asset managers said they need more tools online to give timely financial advice to their clients since it is impacting their profit margins, the survey found. Only one in three executives ranked their asset management firm’s technology as high while 45 percent said the cost per relationship manager has increased due to inefficiencies.
High net-worth individuals expressed their dissatisfaction with their current wealth managers: 56 percent of wealthy individuals reported that firms that can offer more value are beneficial and impact their decision when choosing a money manager. But only one in two people said they were satisfied with their current manager’s ability to deliver value-added services.
Capgemini found that the lack of technology and weaker online platforms means that money managers spend less time with their clients, devoting only one-third of their time to answering their questions and concerns.
Wealthy individuals are fed up: nearly 31 percent want to change wealth management providers within the next 12 months.
The largest number of affluent people are in North America with 46 percent, and 32 percent in the Asia-Pacific region—with a combination of about USD 27 trillion in assets or nearly 32 percent of total HNWI wealth. But 34 percent of firms are not exploring wealthy people in these two regions, Capgemini said.
The survey found that 67 percent of wealthy people said preserving their wealth was an important goal and sought changes in allocations of the assets in their portfolios.
The Capgemini survey included 3,171 high-net-worth individuals in 23 major wealth markets in North America, Latin America, Europe and the Asia-Pacific region.