Emerging trends in HNWI Wealth Management

Wealth management is a general term in the financial sector to describe financial advice and portfolio management services offered to wealthy clients. The HNWI Wealth Management is also called Private Wealth Management or Private Banking, when financial companies or banks provide comprehensive services to the millionaires, including portfolio performance, estate planning, and tax management. This article will explain the HNWI meaning, describe who are the ultra HNWI, and analyze the 2019 (U)HNWI wealth management and asset management trends to help you optimize your services.

Who are the HNWI

In the financial industry, the term HNWI, an acronym for High-Net-Worth Individual, describes any person or a household with more than $1 million liquid assets excluding their primary residence. The wealth estimate of the HNWI varies depending on the region, financial regulators, and the financial organizations that serve to the ultra-wealthy. For example, the SEC defines HNWI as anyone with over $1 million AUM or over $2 million net worth, including the non-financial assets like their homes and art collections. Financial advisors need to submit a list of such HNWI to SEC in the ADV form.

The private wealth managers can set the bar on the minimum required investment. Some offer services to the sub-HNWI (also called mass affluent), who have more than $100 thousand in assets but less than a million. However, with the rising number of Millennial millionaires, more and more private banks require minimal investment in ranges of 6+ figures.

Individuals and families with more than $5 million but less than $30 million liquid assets are called very-HNWI. While, anyone above $30 million (and according to some sources, above $50 million) is called UHNWI, or Ultra High-Net-Worth Individual.

HNWI and UHNWI Demographics 2018/2019

According to a 2019 global wealth report by Credit Suisse, the top 1% of the adult population with a net worth above $1 million owns 44% of the world’s wealth. The majority of millionaires and billionaires come from the USA (40%). This year China overtook Japan for second place, with 10% of global millionaires vs. 6% accordingly, while Germany and the United Kingdom tied for 4th place with 5% of global HNWI each.

The USA also had the highest number of ultra HNWI. In mid-2019, Credit Suisse registered a total of 168 thousand UHNWI, with above $50 million rather than $30 million in liquid assets. 80 thousand members or 48% resided in the USA, 20% in Europe (33k), and 14% in Asian-Pacific countries (23k) not counting India and China. Again, China placed second after the US with over 18 thousand Ultra HNWI; Germany was third with 6,8 thousand; UK fourth with 4,6 thousand, then India (4,5k), and France (3,7k). This year the number of UHNWI increased by 6870, led by North America (4,570), and interestingly Latin America and Europe. Brazil gained 860, and Russia added 400 members to the world’s wealthiest club. The US is also a target destination for many foreign HNWI and UHNWI as they seek stability in the political and economic system. 108 thousand HNWI migrated in 2018, 14% more than in 2017. Australia placed as a top migration destination for HNWI in 2018, thanks to no inheritance tax, sustainable growth, and minimal recession, but it lost 280 UHNWI in mid-2019.

Global Wealth Distribution

The global wealth rose in 2019 to $360.6 trillion, representing a growth rate of 2.6%. The world’s wealthiest adults (HNWI and UHNW) now own approximately $158.3 trillion, which is around 44% of the world’s total wealth. However, according to the Credit Suisse report, the overall wealth inequality seems to be declining since 2000.

While North America is the wealthiest nation, the emerging markets have become increasingly important to the asset managers. Growing economies, including China, accounted for 2/3 of the real wealth gain since 2008, or double the contribution of North America. It’s not surprising that wealth duplicated in China and India. But, interestingly, the VisualCapitalist mentioned Mauritius, Ethiopia, and Sri Lanka among the top-performing markets with the highest growth between 2008 and 2018.

Emerging economies also contributed to the rise of the middle class (from 514 million in 2000 to 1.7 billion in 2019) and the sub-HNWI population (212 million to 499 million, respectively). The mass affluent currently holds approximately $140.2 trillion in assets, which amounts to 39% of global wealth, and they are becoming an interesting target for private wealth managers and asset mangers.

Ultra-HNWI Wealth Management Trends 2019

According to the Bank of America survey for 2018, HNWI gained more freedom but continue to struggle with competing priorities that affect their financial goals. The Report suggests that HNWI and UHNWI are trying to find the purpose of their wealth and create a legacy.

One of the rising trends in HNWI asset management is sustainable investing. Among the HNWI, 87% of Millennials (23-38yo) and 65% Gen X (38-44yo) believe that impact and socially conscious investments are important, and 37% actively review their portfolio in this context. Although 47% claim to have already found their purpose and working towards their goals,

65% think that wealth managers help speed up their progress.

HNWI wealth/asset managers should consider deep dive into impactful and environmental investments, as well as donations, to help HNWI find fulfillment and create a legacy.

“Life is a balancing act of personal, professional and family needs and goals that requires comprehensive financial planning.”- says Katy Knox, the President of the U.S. Trust, at the Bank of America. “Effective wealth management, built on listening to our clients and working with them as their priorities change, is how we help clients make the most of their wealth and build a legacy for future generations.” In another development, Millennials recently shifted from storing the majority of their assets in cash to stock markets. Cash assets dropped from 47% in 2017 to 21% in 2018, and stocks increased from 25% to 46%, respectively. Despite this dramatic change, 23-38-year-