Rich are getting richer: Global HNWI wealth hits $63.5T

Dubai - Millionaires rise by nearly 8% in 2016 to an all-time high of around 16.5M people

The number of millionaires in the world rose by nearly eight per cent in 2016 to an all-time high of around 16.5 million people, with record total wealth of $63.5 trillion, a report by global consultancy firm Capgemini revealed on Thursday.
The wealth of high net worth individuals (HNWI) - defined as those with investable assets of $1 million or more, excluding the primary residence, collectibles and consumables - rose 8.2 per cent on the year in 2016 and is on track to surpass $100 trillion by 2025.
In the Middle East, the size of the HNWI population increased by 4.8 per cent in 2016 to 0.6 million, while their wealth witnessed an increase of five per cent to $2.42 trillion.
The report finds that the average HNWI investments overseen by wealth managers in 2016 increased in value by 24.3 per cent. The gain substantially outweighs earnings from lower-cost passive index funds and gives wealth managers an opportunity to solidify HNWI relationships.
Investors had high levels of trust and confidence in their wealth managers, yet the report characterised their satisfaction rates as "tepid," perhaps because of fees. Average fees paid in 2016, based on investor estimates, were $65,795, or an average of 8.4 per cent of assets under management.
The report found that hybrid advice models that combine digital tools with some level of human interaction are as valued by HNWIs as wealth manager-led offerings. With hybrid advice on the rise, the report also highlighted the impending industry threat of BigTech firms such as Google and Alibaba entering the industry, as more than half of HNWIs (56.2 per cent) say they are open to using BigTechs for wealth management services. Respondents perceived BigTechs as offering increased efficiency, transparency, online excellence and innovation.
Some 1.15 million people became millionaires in 2016, the report said.
The United States, Japan, Germany and China boast the highest numbers and together make up for almost two-thirds of the total.
In the United States, their ranks rose to 4.8 million from 4.46 million, while the number of millionaires in China rose to 1.13 million from just over one million.
The Asia-Pacific, Europe and North America contributed equally to the rise in wealth, with Russia, Brazil and Canada reversing course from declines a year ago, the report showed.
Russia, helped by a rebound in its stock market, saw both the number of its millionaires and their wealth grow by about 20 per cent. France overtook Britain in the top five in terms of the number of millionaires, helped by a recovery in real estate, while Sweden knocked Singapore - which saw a decline in its equity markets - out of the top 25. Surveys on the millionaires' financial asset holdings show they held 31.1 per cent in equities in the second quarter of 2017, compared with 24.8 per cent in 2016. Fixed income held steady at 18 per cent, while cash grew to 27.3 per cent from 23.5 per cent.
Alternative investments, such as hedge funds, derivatives, foreign currency, commodities and private equity, fell to 9.7 per cent from 15.7 per cent. The report did not dive into the reasons for the reallocation, but stronger global growth, coupled with hefty liquidity after years of unprecedented stimulus by global central banks, have pushed stock markets around the world to record highs. Millionaires saw a 24.3 per cent return on average on investment portfolios overseen by wealth managers.
Recent data on HNWI migration suggests that greater numbers of the world's wealthy are now going one step further and moving permanently to the UAE.
A report by New World Wealth showed that the Emirates welcomed the fourth most HNWI migrants globally in 2016 - 5,000 in total. The UAE was behind only Australia, US and Canada in the report, which revealed that, globally, 82,000 millionaires moved country last year, a 28 per cent increase on 2015.
Knight Frank's 2017 Wealth Report has ranked Dubai fourth in the world on its list of cities with the biggest inflow of HNWIs.
Dubai attracted about 2,000 of these very affluent people in 2015 - growing the local wealthy population by about five per cent, the report said.
The Australian cities of Sydney and Melbourne led the global inflow list.
- issacjohn@khaleejtimes.com