Wednesday, 17 April 2024

How Chinese HNWIs are changing the wealth management landscape in Asia Pacific

5 min read

By Foo Boon Ping

The strong wealth creation growth in China is changing the distribution of wealth across Asia Pacific. By 2024, the number of UHNW individuals in the Asia Pacific region is expected to grow at an average of 8% per annum. As a result the wealth management market in the region is undergoing major shifts.

According to the latest Global Wealth Report released by Credit Suisse, China has profoundly changed the distribution of wealth across Asia Pacific. The distribution of household wealth in the region has transposed upwards remarkably because of the increasing prosperity of the Middle Kingdom.

In the high and ultra-high net worth (UNHW) segments, China added a further 967,000 millionaires between mid-2018 and mid-2019 to reach a total of 4.47 million. Asia-Pacific countries are home to 22,660 (14%) of the world’s UHNW individuals (UHNWIs) while China has 18,130 UHNWIs, an increase of 370 from mid-2018.

By 2024, the number of UHNW individuals in the Asia Pacific region is expected to grow by approximately 21,300, faster than any other region at an average of 8% per annum, to reach a total of nearly 66,000, of whom 42% will be from China.

Inheritances are projected to have greater wealth distribution consequences in the future, particularly in China where the effects of the one-child policy combined with vast new wealth creation, preservation and transfer, both by and to, tech-savvy HNWIs will present many new opportunities for the wider region as a whole.

The strong wealth creation growth in China is driven by a combination of factors: a high rate of savings, the high level of private enterprise and entrepreneurship, easy access to credit and financing, often well guided government policies, healthy private-public sector partnerships and well-educated workforce, which together produce robust investment opportunities.

Much of the growth has been generated in the past decade. The current economic and financial restructuring underway in the country, with a greater focus on services and consumption, small and medium enterprises, innovation and digitalisation, will go some way to ensure that the environment for wealth creation continues to be conducive.

This will continue to support the unprecedented wealth accumulation that has spawned an increasingly competitive, professional, albeit nascent private banking and wealth management industry over the past decade.

In particular, private banking and family office services are beginning to be more understood and accepted by Chinese HNWIs, especially in the last 2 to 3 years. There is now greater focus on diversification of risks and asset portfolio allocation, tax efficiency, segregation and protection of wealth assets, and succession and estate planning as opposed to the fixation on fixed income wealth management products before.

The wealth management market is undergoing major shifts from fixed-income investment to multi-asset investment, from the domestic market to the global markets, from short-term speculation to long-term horizon, from single products and opportunities to diversified portfolios, from wealth generation by first-generation entrepreneurs to succession by the second generation of wealth managers. HNWIs today are more sophisticated and discerning but also willing to seek professional advice and against the backdrop of intense competition, institutions need to do more to win their and their families’ trust and confidence

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