Research on the growing number of high-net-worths can herald ‘extraordinary’ opportunities for wealth managers, according to a new report
More than 6,000 people were minted as ultra-high-net-worth (UHNW) individuals last year to bring the total number globally to more than 60,000, research from Boston Consulting Group (BCG) has revealed.
The rise means that UHNWs – those with investable assets of at least $100 million – now hold a total wealth of $22 trillion, a 9 per cent year-on-year growth rate since 2015.
Most UHNWs are based in the US, where 20,600 UNHWs collectively own $5.8 trillion, a growth of 15 per cent between 2019 and 2020. This is set to grow by 36 per cent over the next five years, with the number of UHNWs forecast to grow to 28,000.
This was followed by China, where 7,800 UHNWs hold a combined wealth of $3.6 trillion were based as of 2020 – a 24 per cent growth since 2019. The report forecasts that this will grow by 74 per cent by 2025 to $6.5 trillion in investable wealth.
By the end of the decade, however, the report says China is ‘on track’ to overtake the US thanks to an annual growth rate of 13 per cent. This brings its total to $110.4 trillion to the US’s $9.9 trillion by 2029.
Who are the ‘new ultras’?
The next generation of UHNWs, termed ‘new ultras’ by the report’s authors, are set to be an influential driver of future growth’ over the next 10-15 years.
Aged between 20 and 50, the next-generation of UHNWs fall into three categories: those who are already UHNWs, young HNWs whose wealth will grow, and those who are likely to acquire life-changing wealth, through inheritance or liquidity events.
This composition varies globally. In China, most ultras are first-generation, and in the US two-thirds of ultras are self-made. On the other hand, almost half of UHNW wealth in Europe is inherited.
The ‘new ultras’ are also increasingly likely to be women. Women’s wealth is projected to hit $93 trillion in 2023, presenting its own set of challenges to wealth managers.
Taken collectively, this emerging generation is one with longer investment horizons, a greater risk appetite than previous generations, and often with a ‘desire’ to create positive societal impact and solid returns with their wealth.
What does this mean for wealth managers?
Growth in UHNW wealth is set to herald ‘extraordinary opportunities’ for wealth managers, the report says. But what ultras want from their wealth managers is shifting. Formerly ‘leading edge’ offerings such as impact investments and exposure to alternative asset classes, can now look ‘stale’, the report notes.
Wealth managers need to have a ‘differentiated approach’ to UHNWs, says Dean Frankle, BCG’s lead for asset and wealth management in Western Europe, South America, and Africa and one of the report’s authors.
‘The failure to segment is cardinal sin number one. Just assuming “we have an ultra-strategy” or “we have a next-gen strategy” is not enough,’ he adds, noting that new ultras are not their parents: ‘They don't want to be the child of your existing client, they want to be treated as their own person.’
The report claims that this next generation of UHNWs enjoy a ‘mix and match’ approach to banking, in which they independently navigate many elements of their wealth management.
‘They’re not inclined to pay high fees for activities they believe they can do well enough on their own, such as stock picking. What they want are exclusive opportunities, specialized lending, and investment expertise—services and capabilities they can access only through a wealth manager,’ it says.
Frankle stresses the importance of wealth management firms adapting their business models to incentivise relationship managers to form strong relationships with their clients, and then also be comfortable bringing in other expertise when needed.
‘They expect what they're getting to be worth paying for. They want a very deep knowledge of asset classes, and access to certain investment opportunities that you just can't do alone,’ he tells Spear’s.