The Capgemini Research Institute’s World Wealth Report 2024 highlights a significant resurgence in high-net-worth individuals (HNWIs) and their wealth in 2023, driven by a global economic rebound. HNWI wealth grew by 4.7%, reaching $86.8 trillion, and the HNWI population increased by 5.1% to 22.8 million, showing a robust recovery and growth trajectory despite market volatility.
North America led the global recovery with a notable 7.2% increase in HNWI wealth and 7.1% in population, boosted by economic resilience, reduced inflation, and a strong US equity market. Other regions saw growth but at a slower pace: Asia-Pacific (4.2% wealth, 4.8% population) and Europe (3.9% wealth, 4.0% population). Latin America and the Middle East experienced moderate growth, while Africa was the only region with a decline in HNWI wealth (-1.0%) and population (-0.1%) due to falling commodity prices and decreased foreign investment.
As HNWI numbers rise, asset allocation is shifting from preservation to growth. Early 2024 data shows a normalization of cash holdings to 25% of portfolios, down from 34% in January 2023. Two-thirds of HNWIs plan to increase investments in private equity in 2024, seeking growth opportunities.
Ultra-high-net-worth individuals (UHNWIs), who make up just over 1% of the HNWI population but hold more than 34% of total HNWI wealth, are driving demand for financial and non-financial value-added services. An estimated $80 trillion will be transferred over the next two decades as aging generations pass on their wealth, creating opportunities for wealth management firms to offer services like investment management, tax planning, philanthropy, and concierge services. The report indicates that 78% of UHNWIs see these services as essential, and 77% rely on their wealth management firms for inter-generational wealth transfer support. However, 65% express concern over the lack of personalized advice for their evolving financial situations.
Nilesh Vaidya of Capgemini emphasizes the need for wealth managers to engage clients with personalized, omnichannel experiences. AI-powered behavioral finance tools can offer a competitive edge by understanding client decision-making processes and providing deeper client intimacy. Real-time communication channels are essential for managing biases from volatile market movements.
The report reveals that 65% of HNWIs acknowledge biases in their investment decisions, particularly during major life events. Consequently, 79% of HNWIs seek guidance from relationship managers to manage these biases. Integrating behavioral finance with AI can help wealth management firms understand client reactions to market changes and make informed decisions.
UHNWIs have increased their relationships with wealth management firms from three in 2020 to seven in 2023, indicating the industry’s struggle to meet service expectations. In contrast, single-family offices, which cater exclusively to individual families, have grown by 200% over the past decade. To effectively serve HNWIs and UHNWIs, wealth management firms need to balance competition and collaboration with family offices. Notably, 52% of UHNWIs want to establish a family office and seek guidance from their primary wealth management firm.