The global high-net-worth individual population rose by 5.1% in 2023, and their wealth grew by 4.7%, according to Capgemini’s 2024 World Wealth Report.
Population growth across different HNWI wealth bands was highest for the so-called ‘millionaires next door’, described having $1 million to $5 million in assets. Ultra-high-net-worth individuals (UHNWIs) were the most concentrated among the HNWI wealth bands, however.
Capgemini reported that this group held over 34% of the total HNWI wealth but represented just 1% of the total population. They were also found to be more engaged in their investment strategy than any other wealth bands.
It is perhaps unsurprising then that Capgemini found that UHNWIs prioritize value-added services, with 78% of them considering them essential to wealth management firm relationships.
UHNWIs were also found to be more changeable in their relationships with wealth management firms, however. According to Capgemini’s survey, 78% of UHWIs indicated they are likely to switch their primary wealth management firm in 2024.
In addition, the number of UHNWI wealth management relationships is on the up. The number of UHNWI wealth management relationships increased from three in 2020 to seven in 2023, and that means the competition is growing for UHNWI’s wallets.
So how should wealth management firms seek to retain this highly lucrative wealth band?
Capgemini suggests that personalization is a key marketplace differentiator for wealth management firms that want to attract new clients and retain existing investors. This is because, through personalization, firms can ensure “engagement, trust, and loyalty”.
“Firms that can cultivate stronger client relationships will further solidify their loyalty. Heightened loyalty increases customer lifetime value because loyal clients are likelier to entrust additional assets to the firm and recommend its services to others,” the research firm stated.
And wealth management firms’ relationship managers appear to agree. 65% of relationship managers surveyed by Capgemini said they find having individual profiles that include client preferences, pain points and behavioural tendences “critical” to enable personalized, sound advice.
And yet only 13% of wealth firms said they sent customized communication, according to Capgemini’s survey, with 73% of firm choosing instead to distribute generic communication monthly.
In addition, only 8% of wealth management firms updated client profiles weekly. Instead, 52% conducted monthly or quarterly updates, and 40% update profiles annually or less frequently. As a result, firms find it challenging to keep pace with clients’ evolving demands and fail to meet clients’ desire for personalization.
The evolution of artificial intelligence over the last decade has meant that personalization in wealth management no longer must be a time-consuming or laborious process.
AI can analyse vast amounts of client data quickly, identify trends and make predictions in a timeframe that would be impossible for humans. This can then provide deeper insights into clients’ behaviours and preferences, allowing for wealth managers to provide bespoke investment strategies quicker and easier.