There was once upon a series of reports– not long ago – where America (North) and Europe (to varying degrees) were seen as the holders of major individual wealth in the modern world. These two regions were well known for setting a benchmark for the highest echelon of the who’s who in the world of bloated bank balances.
Asia’s rich were more confined to peppered anomalies among the Forbes elite with the likes of the Sultan of Brunei and Li Ka Shing, but the list was still dominated by the west. Simply put, Asia wasn’t synonymous with individual wealth accrual as much as its western counterparts.
Fast-forward several years and all that has changed rapidly.
A High Net-worth Individual (HNWI) is defined as one who has more than $1 Million USD in investible assets – excluding primary residence, collectables, consumables and consumer durables.
According to consulting, technology and outsourcing firm Capgemini’s annual Asia-pacific Wealth Report 2016, the region generated the most HNWI wealth in 2015, cementing its status as the world’s leader of HNWI wealth growth. These figures were bolstered considerably by Japan and China proving to be the engines of both Asia-Pacific and global growth.
Even more interesting was the fact that the region grew its wealth rapidly- expanding by 10.8% for ultra-HNWIs in Asia-Pacific, compared to just 0.1% for those outside of Asia-Pacific.
Singapore: A leading example in the region
Among the series of cities that fit the wealthy criteria within the Asia Pacific, one has to look no further than our little red dot, coming in high on the world’s millionaire list. Spear’s magazine and leading wealth consultancy company WealthInsight reported in 2015 that Singapore had the 9th highest concentration of HNWIs per head of population, an amazing feat by any means, considering we have a population of only about 5.6 million.
Rationale behind our status
One of the undeniable (and major) reasons why many of our citizens have earned the status of being rich is due to the property industry. The real estate arena has seen phenomenal times over the past several decades with many punters experiencing major windfalls due to skyrocketing values in their secondary and even tertiary properties. This is not only limited to the private property sector, HDB’s have also seen record sales over the last decade. On the rental side of things, yields have also tended to be high in Singapore, providing a handsome source of supplementary income for many.
Capgemini also interestingly points out that the phenomenal wealth in the region has not been tapped as adequately as should be, or rather volunteered to wealth management firms, with HNWIs preferring the traditional methods of placing their money in retail banks.
Although trust levels in wealth management firms have increased rapidly over the past few years, from the relationships to infrastructure that supports the industry, this has not translated clearly in terms of gains compared to the west. This could largely be due to the fact that apart from Japan, the Asia Pacific tends to allocate only 20.7% of their wealth to their primary wealth managers, less than the 23.2% global average. They are also more likely to keep their assets available in the form of physical cash or in retail bank accounts.
The region as a whole moving forward
Capgemini’s report also projects Asia Pacific’s HNWI wealth to surpass 42 trillion by 2025, an astounding figure by any standards. According to wealth managers, the key drivers of this onward progress of the region will stem primarily from the key markets of China, India, and Hong Kong, with the financial services, high-tech, and healthcare sectors are expected to be the main catalysts for this.
Whatever the future might hold in terms of the distribution of global HNWI wealth, one thing seems to be for certain. Asia has come of age in this area and will be a major if not leading player for some time to come.