This content is from: Wealth Management

The Wealthiest Clients of the Future, According to a Decade of Proprietary Data

A special Wealth-X report explains the evolution of a lucrative client segment.

The wealthy stay rich but they are a group continuously evolving. Their profile in the coming decade will not look the same as the past one, according to a new report.

Wealth-X, a New York City-based research firm focused on the world’s most affluent individuals, recently aggregated observations since its 2010 founding and shared its insights and expectations for the coming decade.

Not surprisingly, the Covid-19 pandemic, which led to a historic market downturn and has devastated economies, is expected to have a tremendous impact on the future of three segments of the rich defined by Wealth-X: high-net-worth individuals with $1 million to $5 million in assets; the very-high-net-worth with $5 million to $30 million; and the ultra-high-net-worth with over $30 million.

“We are living in extraordinary times, making it all the more essential to take a longer and more structural view of the wealthy. Our 10-year view considers how the wealthy will rebuild after the current downturn, details the major demographic changes that are occurring within this group and, finally, examines the behavioral trends and values that will continue to influence their spending,” the report titled A Decade of Wealth, says.

Some of the report’s findings are not novel, but they do affirm changes that anyone interested in or catering to the wealthy, including financial advisors, should consider or at least find interesting.

For example, the number of wealthy people grew over the past decade and their net worth expanded dramatically, according to Wealth-X. In 2019, the three segments controlled nearly one third of global private wealth, or $104 trillion, up from $50 trillion in 2005. The growth was “largely driven by the performance of the global economy, the value of stock markets around the world and the distribution of wealth among each country’s population.”

The report also noted that while North America, Latin America and the Middle East still account for roughly the same percent of the world’s wealthy (together, about 44%), others have grown or shrunk. Asia represented 18.6% in 2005 and grew to 27.3% in 2019. Europe’s representation fell from 36% in 2005 to 25.6% in 2019. North America “continues to dominate as the world’s leading wealth region” with almost 39% of all wealthy individuals.

None of those things are surprising and have been well-reported. But what about the coming years?

“There will be a moment when the world has finally beaten Covid-19. Yet given the extraordinary changes taking place — from unprecedented government intervention in a wide range of industries to the acceleration of ecommerce and digital retailing in response to social distancing — the world will be different,” the report said.

The wealthy — many who are business owners — will first focus on rebuilding their businesses and their wealth derived from them. During that phase of repair, if they aren’t already, some will advantageously consider mergers and acquisitions and wealth managers that can help facilitate that will strengthen relationships with clients and attract new ones. 

Next, they will “examine their wealth holdings through a new lens and may make some alterations in where they allocate their assets,” according to Wealth-X. The distribution of wealth in the U.S. has not changed over the past 10 years and following the pandemic, the researcher expects governments will levy higher taxes on the rich to bolster social programs and the country’s emergency preparedness.

Advisors need to continue to improve their ability to work with clients who don’t look like them (only 14% of financial advisors in the U.S. are women) because the wealthy are gradually getting younger and Wealth-X anticipates more of them will be women in the future. Currently, 14.3% of wealthy individuals are women.

The rich are also increasingly choosing RIAs and multi-family offices to manage their money, but they are gravitating toward certain firms.

Euromoney Institutional Investor, which owns RIA Intel, acquired Wealth-X in 2019.

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