Insight Report: Product Innovation in Wealth Management

Transcription

1 Publication date: September 2014 Report code: WI0013FR Insight Report: Product Innovation in Wealth Management WealthInsight This report is a licensed product and is not to be photocopied. 0 Beijing Buenos Aires Frankfurt Hong Kong Hyderabad London Madrid Mexico City New York San Francisco Seoul Shanghai Singapore Sydney

2 About WealthInsight The WealthInsight Intelligence Center Database is an unparalleled resource, and the leading database of its kind. Compiled and curated by a team of expert research specialists, the database comprises dossiers on over 100,000 HNWIs from around the world. The Intelligence Center also includes tracking of wealth and liquidity events as they happen, and detailed profiles of major private banks, wealth managers and family offices in each market. With the Database as the foundation for its research and analysis, WealthInsightisable to obtain an unsurpassed level of granularity, insight and authority on the HNWI and wealth management universe in each of the countries and regions it covers. WealthInsight This report is a licensed product and is not to be photocopied. 1

3 TABLE OF CONTENTS TABLE OF CONTENTS... 2 LIST OF TABLES... 3 LIST OF FIGURES Introduction What is this report about? Definitions and Scope Executive Summary Global Snapshot of the HNWI Market Market Trends of the Online Wealth Management Market Drivers and Barriers of Innovation in Wealth Management Key Drivers Changing demographic landscape Shift in consumer behavior Technological advancements Rising operating costs Key Barriers Attitudes of Wealth Managers and Private bankers to Online Investment Platforms Overview of Current Online Investment Platforms The Future Outlook for Online Investment Platforms Web-Based Wealth Management Innovations and Case Studies Innovative Consumer-Centric Online Platforms DIY platforms Customer engagement through social media platforms Online lifestyle web portals Targeted innovative platforms About WealthInsight WealthInsight This report is a licensed product and is not to be photocopied. 2

4 LIST OF TABLES Table 1: HNWI Wealth Band and Group Definitions... 2 Table 2: Global HNWI Volumes and Wealth Accumulation by Wealth Band, Table 3: Selected Types of Online Wealth Management Tools Table 4: Proportions of Immigrant HNWIs in Major Markets, Table 5: Key Challenges for Online Wealth Management by Wealth Band Table 6: Key Challenges for Online Wealth Management by Age Group Table 7: Nutmeg Performance 12 Months, September WealthInsight This report is a licensed product and is not to be photocopied. 3

5 LIST OF FIGURES Figure 1: Global HNWI Population, Figure 2: Global HNWI Population by Region, Figure 3: Global HNWI Wealth, Figure 4: Global HNWI Wealth Accumulation by Region, Figure 5: Regional HNWI Populations by Age Group, Figure 6: Regional HNWI Populations by Gender, Figure 7: Global HNWI Asset Allocation, Figure 8: Adoption of Online Platforms and Tools by Wealth Band Figure 9: Global HNWI Wealth by Age Group (US$ Trillion), Figure 10: Growth in Female HNWI Population Shares, Figure 11: Wealth Platform Trends, WealthInsight This report is a licensed product and is not to be photocopied. 4

6 INTRODUCTION 1 Introduction 1.1 What is this report about? Product innovation is increasingly becoming the key to gain market share, as web-based wealth management platforms disrupt the traditional wealth management business structure. This report analyzes the wealth management sector through the perspective of online innovation, with a focus on innovative online platforms and analytical tools launched during the review period. The report also analyzes regional HNWI demographics in the Americas, Europe, Asia-Pacific, and the Middle East and Africa from WealthInsight s proprietary HNWI database comprising 100,000 individuals from the four regions. The report is divided into four main chapters that cover the following: A Global Snapshot of the HNWI Market The chapter focuses on the evolution of the HNWI landscape since the 2008 economic slowdown. It analyzes the HNWI population and its wealth by gender, age group and region. This is followed by a snapshot of HNWIs major asset investments. Market Trends of Online Wealth Management Market This chapter offers insights on the key trends in product innovation in the wealth management sector. It primarily focuses on the key online wealth management trends, new products and the growing significance of social media in the domain. Drivers and Barriers of Innovation in Wealth Management This chapter analyzes key factors affecting innovation in the sector, which includes the demographic landscape, changes in consumer behavior, advances in technology and the emergence of third-party platforms. Attitudes of Wealth Managers and Private Bankers to Online Investment Platforms This chapter examines the attitudes of wealth managers and private bankers to online investment platforms. It analyzes how wealth managers position online investment platforms in the wealth management industry, and whether they will complement or threaten traditional face-to-face service. The report also provides the future outlook and implications of the service to the wealth management industry. Web-Based Wealth Management Innovations and Case Studies This chapter focuses on new offerings in the wealth management sector, including online investment, DIY, social media platforms, lifestyle innovation platforms, and targeted innovative platforms. It includes case studies related to innovation in online wealth management. The review period is , while the forecast period is The global HNWI population and wealth in this report covers 24 countries: Argentina, Australia, Brazil, Canada, Chile, China, France, Germany, Hong Kong, India, Israel, Italy, Japan, Mexico, Nigeria, Russia, Singapore, South Africa, Spain, Sweden, Switzerland, the UAE, the UK and the US. The report uses extensive primary and secondary research as a source of information. Primary research was conducted through in-depth interviews with key industry stakeholders, including senior wealth managers and private bankers. These views were then verified and strengthened by secondary research through studies on product innovation in wealth management by major consulting firms such as EY and Deloitte. The WealthInsight HNWI database was also used for statistical data. The latest developments on the issue were researched through the websites of private banks and WealthInsight This report is a licensed product and is not to be photocopied. 1

7 INTRODUCTION wealth management firms. In this way, the report aims to provide comprehensive insight and future outlook of production innovation in wealth management. 1.2 Definitions and Scope Table 1: HNWI Wealth Band and Group Definitions Wealth Band Billionaires Centimillionaires Affluent Millionaires Mid-Tier Millionaires Lower-Tier Millionaires Wealth Group HNWIs UHNWIs Core HNWIs CAGR Source: WealthInsight Definition Billionaires are those HNWIs with wealth of US$1 billion or more, including equities, bonds, cash and deposits, fixed-income products, real estate (excluding primary residence), alternative assets and business interests. Centimillionaires are those HNWIs with wealth of between US$100 million and less than US$1 billion, including equities, bonds, cash and deposits, fixed-income products real estate (excluding primary residence), alternative assets and business interests. Affluent millionaires are those HNWIs with wealth of between US$30 million and less than US$100 million, including equities, bonds, cash and deposits, fixed-income products, real estate (excluding primary residence), alternative assets and business interests. Mid-tier millionaires are those HNWIs with wealth of between US$5 million and less than US$30 million, including equities, bonds, cash and deposits, fixed-income products, real estate (excluding primary residence), alternative assets and business interests. Lower-tier millionaires are those HNWIs with wealth of between US$1 million and less than US$5 million, including equities, bonds, cash and deposits, fixed-income products, real estate (excluding primary residence), alternative assets and business interests. Definition The high net worth individuals (HNWIs) wealth group comprises all wealth bands. It represents those individuals with wealth of US$1 million or more, including equities, bonds, cash and deposits, fixed-income products, real estate (excluding primary residence), alternative assets and business interests. The ultra high net worth individuals (UHNWIs) wealth group comprises the billionaire, centimillionaire and affluent millionaire wealth bands. It represents those individuals with wealth of US$30 million or more, including equities, bonds, cash and deposits, fixed-income products, real estate (excluding primary residence), alternative assets and business interests. The core HNWIs group comprises the mid-tier millionaire and lower-tier millionaire wealth bands. It represents those individuals with wealth of between US$1 million and less than US$30 million, including equities, bonds, cash and deposits, fixed-income products, real estate (excluding primary residence), alternative assets and business interests. Compound annual growth rate. The year-over-year growth rate of an investment over a specified period. WealthInsight WealthInsight This report is a licensed product and is not to be photocopied. 2

8 DRIVERS AND BARRIERS OF INNOVATION IN WEALTH MANAGEMENT Figure 1: Regional HNWI Populations by Age Group, % 90.0% 1.0% 1.0% 14.0% 12.0% 12.0% 17.6% 80.0% 70.0% 60.0% 37.0% 30.0% 38.0% 33.1% 50.0% 40.0% 30.0% 20.0% 48.0% 58.0% 49.0% 49.3% 10.0% 0.0% Americas Asia-Pacific Europe Middle East and Africa Source: WealthInsight, HNWI Database WealthInsight Growing number of female HNWIs will result in more female-centric products and services Female HNWIs have a limited presence across all regions. Females account for just over 10% of the HNWI population in Asia-Pacific and 13.3% in Europe. In the Middle East and Africa, females account for just 11.1% of the population. The female HNWI presence is, however, greater in the Americas with 14.5% of the HNWI population, primarily due to their higher footprint in the US, which accounts for more than 85% of the HNWI population in the Americas. The global female HNWI population s share rose from 9.3% in 2008 to 12.2% in Government policies are a key driver of this growth. Several countries, especially in Europe, are beginning to require the boards of publicly listed companies to have significant female representation. For example, a law passed in 2003 in Norway requires publicly listed companies to have 40% female representation on their boards of directors, with failure leading to possible delisting from the Oslo stock exchange. Similarly, a law proposed in Germany in 2013 makes it mandatory for publicly listed firms to have 30% female representation on their boards. Sweden and Finland have also adopted similar policies. In addition, new policy frameworks are being designed to improve entrepreneurship among females. Governments in the US and several countries in Europe are providing loans to females to improve their presence in the start-up domain. For example, Finnvera Plc, a state-owned financial services company in Iceland, provides loans ranging from EUR3,000 (US$4,011) to EUR35,000 (US$46,797) for women starting their own enterprise. These policies are directly impacting the financial independence of females, particularly in Europe where the number of female HNWIs has risen over WealthInsight This report is a licensed product and is not to be photocopied. 3

9 DRIVERS AND BARRIERS OF INNOVATION IN WEALTH MANAGEMENT Figure 2: Global HNWI Wealth by Age Group (US$ Trillion), Total Source: WealthInsight HNWI Database WealthInsight HNWIs aged below 45 account for around 14.4% of the HNWI population, and this population is highly informed with regards to technological advancements. Most prefer DIY channels, and are the primary consumers of these platforms. Over the next five decades, wealth managers will need to develop strategies to accommodate the demands of the rising proportion of younger and technologically adept HNWIs, as well as the rising number of seniors. While these managers are expected to retain their baby boomer client base, they are also expected to develop new services for the younger HNWIs that meet with their requirements and preferences. Rising number of female HNWIs encourages gender specific wealth management products Women account for approximately half the world s population, but in 2013 they accounted for just 12.2% of the global HNWI population. Developed countries such as the US, Canada, Norway, the UK, offer better environments for female economic independence, and as a result tend to account for higher proportions of female HNWIs. In developing countries, however, the proportions of female HNWIs are far lower. However, the global proportion has increased since 2008, when females accounted for just around 9.3% of the HNWI population. Despite the ascendency of females in the global HNWI population, most private bankers do not target them specifically. The slow pace of growth of the female HNWI population has limited banks from offering gender-specific products and services. However, females are gradually becoming a significant target market for wealth managers, which are introducing products and services related to marriage, divorce and remarriage, and the financial intricacies of widowhood. WealthInsight This report is a licensed product and is not to be photocopied. 4

10 DRIVERS AND BARRIERS OF INNOVATION IN WEALTH MANAGEMENT The attractiveness of online platforms among HNWIs of different age groups is demonstrated in the table below: Table 2: Key Challenges for Online Wealth Management by Age Group Age Group (Years) Key Challenges 0 24 HNWIs are technologically aware and understand online platforms. While they form a highly attractive group for online wealth management firms, they are limited by their size HNWIs in this age group are also technologically aware, and are an attractive group for online wealth management platforms. However, they only account for around 14% of the HNWI population This age group accounts for around half the HNWI population. However, most are baby boomers with more limited knowledge of, and preference for, online wealth management. 65+ This age group accounts for more than 30% of the HNWI population. However, its interest in and preference for online wealth management is generally very low. Source: WealthInsight WealthInsight Lack of advisory services for online investment platforms Online wealth management platforms offer investors an opportunity to invest on their own. However, the large size of the investments can require expert advice on markets and industries, investment options and ongoing market trends. Online wealth management platforms, especially third-party platforms, generally do not offer advisory services, as they are primarily operated by nontechnological banking firms venturing into the banking sector to target core HNWIs who prefer DIY methods. While these firms can offer a wide range of tools to analyze the market, they are limited by their inability to offer intelligent human advisory services. Advisory services have been integral to the wealth management sector, which has primarily been based on the relationship-based business model. While third-party platforms have reduced the need for relationship building, these platforms cannot ignore the significance of advisory services in larger investment amounts. As a result, while offering DIY services to HNWIs is a good proposition, a lack of advisory services limits the market to core HNWIs. WealthInsight This report is a licensed product and is not to be photocopied. 5

11 ABOUT WEALTHINSIGHT 5 About WealthInsight WealthInsight provides detailed data and insightful analysis on the world s HNWI and wealth sector. With decades of experience providing business information, WealthInsight helps organizations to make informed decisions and win new business. At WealthInsight s core is its proprietary HNWI Database of the world s wealthiest individuals. Around this database WealthInsight has built a number of valuable research-based products and services that make WealthInsight much more than just a rich contact list. WealthInsight works with and provides solutions for: Wealth managers Private banks Family offices Technology providers Professional services consultants, accountants, lawyers and real estate professionals Fund managers, hedge fund managers, asset managers, venture capitalists Non-profit and educational institutions WealthInsight s corporate headquarters are located in London, with offices in New York, San Francisco, Sydney, Seoul and Hong Kong. For more information on WealthInsight please visit Reports WealthInsight publishes high-quality research reports focused on the wealth sector. The reports provide comprehensive analysis of countries, regions and special topics. With the HNWI Database as the foundation for its primary research and analysis, WealthInsight is able to obtain an unsurpassed level of granularity, insight and authority on the HNWI universe in each of the countries and regions covered. All reports are available as a part of the WealthInsight Intelligence Centre. Reports can also be purchased on a subscription or one-off basis. Every WealthInsight report is uniquely formulated for the region, country or topic covered. Key features of the reports include: Market sizing Forecasting Benchmarking HNWI asset allocation Behavioral mapping Family offices WealthInsight This report is a licensed product and is not to be photocopied. 6

12 ABOUT WEALTHINSIGHT Methodology WealthInsight s teams of in-house analysts devise and collect data over a historical period of five years, and develop forecasts for a five-year forecast period. All WealthInsight wealth reports are rigorously sourced and created according to a comprehensive methodological process: Internal audit - Review of in-house databases to gather existing data: Historic market databases and reports HNWI Database Wealth management, private bank and family office database Financial deals and news archive Secondary research - Collection of the latest market-specific data from a wide variety of industry sources: Government statistics Industry associations Company filings Broker reports International organizations Primary research - Review of the latest wealth management and private banking industry trends - Surveys using panels compiled from across the wealth sector: Wealth management and private banking professionals Financial services experts HNWIs Expert opinion - Collation of opinion taken from WealthInsight interviews of leading industry experts - Analysis of third-party opinion and forecasts: Broker reports Industry associations Wealth management and private banking media Official government sources Leading academic research and commentary Data consolidation and verification - Consolidation of data and opinion to create historical datasets - Creation of models to benchmark data across sectors, asset classes and geographies WealthInsight This report is a licensed product and is not to be photocopied. 7

13 ABOUT WEALTHINSIGHT Market forecasts - Feed of forecast data into market models: Macroeconomic indicators Industry-specific drivers - Analysis of the WealthInsight HNWI Database and Wealth sector company databases to identify key trends: Latest wealth trends Key drivers of the wealth management industry Report writing - Analysis of market data - Discussion of company and industry trends and issues - Integration of survey results - Annual review of financial deals and wealth management trends - Standardization of market definitions using recognized industry classifications Quality control - Peer review - Senior-level QC - Random spot checks on data integrity - Benchmark checks across databases - Market data cross-checked for consistency with accumulated data from: Internal databases Company filings WealthInsight This report is a licensed product and is not to be photocopied. 8

14 Disclaimer All rights reserved. The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions and recommendations that WealthInsight delivers will be based on information gathered in good faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such WealthInsight can accept no liability whatever for actions taken based on any information provided herein. WealthInsight This report is a licensed product and is not to be photocopied. 9

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