Thanks to the rise of UHNWs, there are more extremely wealthy people in the world than ever before. But where are they, what do they do with their money, how are their attitudes changing – and what does it all mean for the businesses that serve them?
The number of wealthy people in the world and their share of the world’s wealth is on the rise.
In 2019 the AuM of the global asset management industry – a reasonable indication of the wealth of high-net-worth individuals (HNWs) around the world – swelled to a total of $89 trillion. This represents a 15 per cent year-on-year increase, according to Boston Consulting Group.
But the trend has been developing for several years. The number of individuals with investable assets of over $1 million has more than doubled over the past decade, from 8.5 million in 2008 to 19.6 million in 2019, according to Capgemini. (Capgemini puts the combined wealth of the world’s HNWs at $74 trillion – also more than double the level a decade ago.)
The number of people in the $1-5 million, $5-30 million, and $30 million-plus brackets has increased every year over the past decade, with the exception of a dip in 2018 which was more than made up for by a large rise in 2019. The fastest rate of growth has been among ultra-high-net-worth individuals (UHNWs), those with investable assets of over $30 million.
Between 2018 and 2019 the number of UHNWs worldwide grew by 9.1 per cent, according to Capgemini.
Despite the fact that less than one per cent of HNWs are UHNWs, they own a third of millionaire wealth.
One consequence of the growth in the number of UHNWs has been an increase in the number of family offices – and the influence that they wield. In turn, many companies have created products and services that are designed to cater directly to them, or that are influenced by the way they operate.
‘The banks have been trying to create services which are kind of akin to family office-style services within their banks,’ says Liam Bailey, Global Head of Research at Knight Frank. ‘So if you can’t justify employing your own family office, there are other tiers of service that you can access from the private banks.’
The Asian Century
Asia has seen the biggest growth in millionaires whose wealth is in the $5-30 million bracket (known as ‘very-high-net-worth individuals’ or VHNWs) and the $30 million-plus bracket.
Meanwhile, Europe’s share of the world’s VHNWs and UHNWs has decreased in proportional terms, according to Wealth-X.
In 2005 36 per cent of VHNWs were in Europe, with the continent barely behind the USA at 38 per cent. By 2019 Europe had fallen to third place behind Asia, which now accounts for 29 per cent of the world’s VHNWs and UHNWs. The USA’s proportion dipped after the financial crash but has since recovered.
Anurag Mahesh, head of the UBS Global Family Office Group in Asia-Pacific says this rise in wealth in Asia has seen increasing demand for family offices, and for support in setting them up.
‘The family offices in the region are very much principal/family driven,’ says Mahesh. ‘Increasingly, many Asian families are setting up their family offices as they wish to preserve their wealth and build a legacy for themselves and their future generations.’
How HNWs put their wealth to work
Capgemini research shows that equities were the leading asset in the average HNW’s financial portfolio at the start of 2020, with cash and cash equivalents averaging a quarter.
However, the interests of HNWs, UHNWs and their family offices go beyond simply maximising financial gain.
In the past year, billions of dollars in cash and resources were poured into support for emergency workers, PPE, hospital equipment, vaccine production and research. Research published by UBS shows just under 100 US billionaires together contributed to the pandemic response with a total of more than $4.5 billion in publicly made donations. The real total, including privately made donations, is likely to be much more.
The UBS report notes that billionaires are giving more than at any time in history: ‘The upsurge is reminiscent of the first few decades of the 20th century, at the time of the Second Industrial Revolution, when the relationship between American capitalism and philanthropy flourished, and fortunes were invested in supporting opportunity creation through schools, universities, libraries and research centers.’
Indeed, in a survey of the interests, hobbies and passions of HNWs by WealthX, philanthropy ranked top for billionaires and UHNWs, and second for VHNWs, with sports and real estate appearing in the top 10 for all groups.
Many observers expect this to continue as HNWs, as a cohort, become younger, more female and increasingly passionate about social and environmental issues.
The evolution of wealth
The changing behaviour of HNWs has already begun to influence wealth management, notes Knight Frank’s Liam Bailey. He says the industry is undergoing an ‘evolution’ as more typical philanthropy activities are combined with investments that are directly informed by clients’ passions and values.
‘They want a return on their money but they want that return to lead to good social outcomes,’ Bailey says. ‘You’re kind of seeing quite a blurring of distinctions between outright philanthropy, impact investing and then actually looking at the quality of governance in companies that you might be investing in as well.’
Implications for the private client world
Each of these three trends associated with the rise of UHNWs – the growth in millionaire wealth, the increase in the number of Asian HNWs and a more thoughtful approach to investing – has already started to shape the private client industry.
In September, UBS announced it would be making sustainable investments its recommended option for private clients, saying it was a ‘critical component for clients and a strategic growth opportunity for UBS’. The world’s largest wealth manager added that a wholly sustainable portfolio can deliver the same or higher returns than a traditional investment portfolio.
In the last 12 months, Pictet, HSBC, Citi, JP Morgan and UBS are among the firms to have expanded their wealth management presence in key Asian offices.
And, if the growth of this year’s Spear’s 500 is anything to go by, the increase in the number of wealthy individuals in the world and the share of wealth that they hold has significantly increased the demand for advice and services that is specifically tailored to HNWs and UHNWs.
Our directory of private client advisers and service providers to HNWs has significantly increased in size since it made its debut in 2015 and profied 500 of the UK’s leading wealth managers and private client advisers.
The name has stayed the same, but the latest edition of the Spear’s 500 includes 1,562 advisers. Our full database, accessible here, is home to 1,818 profiles in all. Wealth managers are still the single largest group, as the below chart shows, but we now profile leading service-providers from a multitude of fields.
Spear’s, like the world’s billionaires, is also increasingly international. Our indices and rankings now cover the UK, Channel Islands, Isle of Man, Switzerland, Luxembourg, Liechtenstein, the US, Singapore and Hong Kong.
To explore the Spear’s rankings and indices of private client advisers, and to find out more about our research and how to be included, go to spears500.com.