Global Millionaires and the Rise of Asia-Pacific Wealth
According to The Boston Consulting Group’s 16th annual wealth report, there was an increase in global private financial growth by 5.2% to $168 trillion (£115 tr) in 2015 with China and India being the growth motor in the Asia-Pacific region. The 2015 growth was not largely generated by existing assets but by the new wealth of rising household income. It was estimated that there were 18.5 million millionaire households for the year 2015. Private financial wealth in 2015 consisted of cash, deposits and equities, all making up more than 80% of global wealth assets.
The Asia-Pacific region (13% in 2015, 14% in 2014) presented the highest growth in private wealth, while the MEA (Middle East and Africa) the lowest growth (3% in 2015, 4% in 2014) due to lower equity and bond markets caused by political instability and low commodity prices.
In the next five years, and with the hope of financial markets’ recovery, the highest growth rates will be seen in the Asia-Pacific which is believed to exceed western Europe as the second wealthiest region in 2017 after North America. Global private wealth will also rise to $224 tr (£196 tr) in 2020. After 2020 it is anticipated that the Asia-Pacific region and Japan will surpass North America in private wealth. At the moment, the US remains the wealthiest country in the world.
The Asia-Pacific region was the only region where large growth in private wealth was sustained to $37 tr. This rapid growth will continue until 2020 with a projected 27% in 2020. Most of Asia-Pacific’s wealth is invested in cash and deposits. The report showed that China was the dominant force of growth in the region. In 2015 there were over 200 billionaires in China. Chinese billionaires such as Wang Jianlin ($24.2 billion net worth), Jack Ma ($22.7 billion net worth), and Li Hejun ($21.1 billion net worth) have grown their assets through real estate, e-commerce and solar power equipment. In both China and India, the number of millionaire households increased considerably. In 2015 the global growth of millionaire households reached 6%.
The BCG report showed that North America’s private wealth grew less than 2% to $60 tr (£41 tr), as the Dow and the S&P 500 suffered negative returns. There is also the feeling of uncertainty in regards to the kind of effect the November 2016 US election might have on financial markets. However, North American private wealth is expected to increase by 5% each year and to reach $76 tr (£52) in 2020.
In western Europe growth will continue but might be hindered by the low-interest rate environment and a possible Brexit. In 2014 growth reached 6%, while in 2015 it fell to 4%.
While growth in 2014 rose to 11%, in 2015 it reached only 6% at $4 tr (£2,7 tr), driven mainly by rising household income. Millionaire households’ share of wealth is expected to grow to 62% in 2020.
Japan was the only nation whose wealth growth was higher in 2015 (4%) than in 2014 (3%) with existing assets performing well. However, throughout 2020 growth will decrease due to moderate capital investments and consumer spending, a low-interest-rate environment and the decline of exported goods and services.
Millennials and Female Investors
The word ‘millennials’ seeks to describe those generations born between the 1980s and 2000s. Like female investors—entrepreneurs and corporate executives—these two groups stand out since their wealth is increasingly growing. The report has identified millennials and female investors as ‘a significant opportunity’ for wealth managers, given the fact that they both remain underserved groups. As potential clients, the report stressed the need for new approaches and strategies in order to satisfy these groups’ particular investment and service requirements.
Millennials’ choice of financial institutions and investments is formed by Google, Facebook, and Alibaba. These are individuals who grew up in an age of accelerating technology, speed, and access to information, and who are familiar with mobile apps and online banking. In this respect, they are interested in ‘competitive and transparent pricing’, ‘socially responsible products’, and ‘flawless digital delivery.’ No wonder that most of these millionaire millennials’ wealth originates from innovative, self-driven and online endeavours: Michelle Phan is the co-founder of a make-up subscription company, Ipsy; Nick D’ Aloisio founded the mobile news summarisation app, Summly; David Karp is the founder of Tumblr; Evan Spiegel and David Murphy are the founders of Snapchat. And the list goes on…