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  • 28 November 2018 16:32

Capgemini’s Asia-Pacific Wealth Report 2018: HNWI wealth in region is forecast to surpass US$42 trillion by 2025

Satisfaction with wealth managers remains considerably lower than levels in the rest of the world; hybrid-model prioritisation and closer customer connections are critical to wealth management firms’ success as BigTech disruption looms

Asia-Pacific confirmed its status as the current high net worth individual powerhouse, generating 41.4 percent of all new high net worth individual (HNWI) wealth globally in 2017, according to the 2018 Asia-Pacific Wealth Report (APWR) released today by Capgemini. With a 12.1 percent growth in HNWI population, and a 14.8 percent rise in wealth, the region is now forecast to surpass US$42 trillion by 2025 and has shrunk its required compounded growth rate from 9.2 percent in 2016 to 8.7 percent. The report also finds that: Emerging markets power Asia-Pacific growth Emerging markets drove more than half (52.9 percent) of regional new wealth growth, with India’s growth of more than 20 percent in both wealth and population, making it the fastest growing region (earning it eleventh place in the HNWI population ranking). Mature markets like South Korea, Hong Kong, Taiwan and Singapore also saw double digital HNWI population growth, adding 88.2 thousand HNWIs collectively in 2017.

Greater personal connection needed between HNWIs and wealth managers Though showing improvement, Asia-Pacific (excluding Japan) HNWIs’ satisfaction with their wealth managers remains below 70 percent and is considerably lower than levels in the rest of the world. Ultra-HNWIs were the least satisfied investor class despite the high returns being delivered. Concerns over the lack of holistic services from wealth management firms; perceived low value-add management fees; and a low personal connection with wealth managers were top reasons for this discontent. With 95.7 percent of Asia-Pacific (excluding Japan) HNWIs – who have a strong connection to their wealth managers – saying they are likely to consolidate wealth with them, the opportunity to build greater customer intimacy is clear.

Talking to the Australian financial services landscape, Phil Gomm, Head of Financial Services ANZ at Capgemini says, "Vertically integrated financial services (FS) business models are also demonstrating complex conflict of interest challenges for advisors, with senior FS leaders acknowledging recently in the Australian Royal Commission, that robo-advice services, with hardened process orchestration may be necessary to ensure increasingly strict regulatory compliance can be maintained and alignment can be assured with ethically sound business processes that avoid potential conflicts of interest and remain in line with community expectations."

Potential BigTech entry forces accelerated hybrid-advice model transformation Faced with strong demand, wealth management firms showed significant progress in ramping up their hybrid-advice transformation activities. According to the report however, with half of the firms surveyed saying they were still “defining” or “conceptualising” their transformation, the pace needs to accelerate urgently. Indeed, as HNWIs’ expectations continued to be shaped by positive experiences with non-financial services firms, their year-over-year satisfaction with hybrid-advice services actually fell.

Accelerated hybrid transformation is especially critical amid growing HNWI interest in BigTech players as they enter the market. Attracted by BigTechs’ highly-intuitive customer experience and low-cost business models, significant numbers of Asia-Pacific (excluding Japan) HNWIs showed high interest in developing wealth management relationships with firms like Google (60.8 percent) and Alibaba (52.6 percent). “Low levels of satisfaction in wealth management in a thriving market equate to a wake-up call for incumbent wealth management firms to digitally transform,” said Anirban Bose, CEO of Financial Services at Capgemini and member of the Group Executive Board. “The direction for the industry is all about collaboration, especially with BigTechs crossing into the Asia-Pacific wealth management threshold. Wealth management firms must choose between standing still or preparing for industry transformation.”

Gomm adds, “In Australia, the superannuation industry looks well positioned for further substantial growth, however investment in technology will be required to meet the transformational requirements of the rapidly advancing digital economy, whilst invigorating personal connections that extend customer satisfaction outcomes”.

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