Becoming a millionaire does not have the same glamour and air of unattainability as it once did. So much so, that the term ‘millionaire next door’ does not sound unreasonable anymore. While it might be hard to wrap your head around just how quickly this segment is growing, especially in emerging markets, the data illustrates it quite clearly. Business consulting firm Capgemini’s recent Asia-Pacific Wealth Report for 2018 revealed that wealth of Indian high net-worth individuals (HNWIs) rose to nearly 22% in 2017 compared to the previous year. This is the fastest growth in the region for the particular period.
While there is no clearly defined level of wealth to determine who fits into the category, those with a net worth of $1 million or more are generally considered HNWIs.
“Money attracts money. HNWIs are usually smarter about money, both in terms of earning and investing. So while the rich-poor divide keeps increasing, the number of HNWIs is also on the rise," said Deepali Sen, certified financial planner and founder of Srujan Financial Advisers.
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The Capgemini report focused on 11 markets—Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, Singapore, South Korea, Thailand and Taiwan. It also features the findings of the 2018 Global High Net Worth Insights Survey which surveyed 2,600 HNWIs across 19 major wealth markets globally. More than 1,200 HNWIs were surveyed in Asia-Pacific across the eight major markets of Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia and Singapore.
It revealed that emerging markets made up almost two-fifths of the region’s HNWI population growth and more than half of HNWI wealth growth in 2017. This was a significantly higher than mature Asian market. But mature markets like South Korea, Hong Kong, Taiwan and Singapore also saw double-digit HNWI population growth.
India grew by more than 20% in both wealth and population, far outstripping its 2010-2016 annualised average population and wealth growth rates of HNWIs. A mix of economic and financial dynamics propelled the market’s growth. Government stability encouraged favourable business development policies, especially in the area of manufacturing, which resulted in a 30-step jump in ranking for ease of doing business in the country in 2017. This was also reflected in India’s equity market capitalisation which increased by 51%, and its GDP growth of 6.7%.
When it comes to investing, many HNWIs still seem to play it safe. While equities remained the dominant asset class accounting for 26% of investible wealth, cash accounted for more than a quarter of the holdings at 26%, while another 20% was invested in real estate. The report stated that HNWIs actively reallocated their investments to cash and cash equivalents to hedge against market volatility, as well as for lifestyle spending.
According to Sen, Indian HNWIs have always been more conservative in their investments, “While you would expect HNWIs would be more open to risks because all their goals are met and they have a surplus, from what I have seen, most of them are still quite risk averse," she said.
This caution with their wealth also translated into a desire to keep track of their various investments through consolidation. According to the Capgemini report, HNWIs in the Asia Pacific (excluding Japan) seem to value account aggregation services. Of those surveyed, 88% said that it is important for them to see their entire wealth picture, across multiple banks, financial institutions, and non-bank assets in a single place. In India, a remarkable majority (96%) of HNWIs are willing to pay for account aggregation services.
Younger HNWIs sought a consolidated wealth picture, with 92% considering it important, compared to 70% of HNWIs in the 60-plus age bracket. Most trust their primary wealth management firm to carry out the account aggregation.
In all this, data security remained the primary concern of HNWIs, with the majority of the younger set (74%) citing it as the primary reason they were wary of consolidation, while their older counterparts were less concerned (only 22% cited it as the major issue).