Bloomberg Audio Studios, Podcasts, radio News. Welcome to Meren Talks Your Money, the personal finance edition of Merin Talks Money. In these bonus podcasts, we talk about the best strategies for making the most of your money. Now, this episode is slightly longer than usual. I'm speaking with Gareth Wilton, who's chief vice president at cap Gemini. They publish annually a World Wealth Report, which looked at where wealth is concentrated and where wealth is growing, why it's growing, and
who's getting that money. Gareth, thank you so much for joining us today. We really appreciate it.
Great to be a Maren. Thanks for invitation.
Let's start by talking about this World Wealth Report. It's super interesting. It's jams all of fascinating findings. But tell me first, how is it put together?
The cap Gemini World Wealth Report. This is actually the twenty ninth edition of this particular industry report that covers seventy one countries. When we look at the wealth management industry globally, we interview something like six and a half thousand high net worth individuals. We also talk to a number of wealth management executives across captureminised clients and other industry players as well as some of the kind of ecosystem by that I mean some of the technology companies
that specifically support wealth management. And then we talk to some of the relationship managers. And again, relationship managers is one of the key rules that we talk about in our World Wealth Report twenty twenty five in terms of the role they have to play and the opportunity that is represented to them going forward.
Okay, so let's start with these six and a half thousand people, and that's a lot of people to talk to. How are we defining high net worth ultra high networth? Who are these people?
High net worth individual We look at them effectively in three classifications. So individuals who have investable assets over a million dollars and the millionaire next door marin that we all have, we have investible assets between one and five million dollars. The next category up, which we call mid tier millionaires, is between five and thirty million, and then you get into the ultra high net worth individuals with
investible assets of greater than thirty million US dollars. Fundamentally, if you're above a million dollars, you're included in our high networth individual discussion.
And investible assets is liquid cash, so that doesn't include property.
It doesn't include property, It covers investments that individuals have. It obviously includes cash. It obviously includes some crypto currency, which is an increasing consideration.
Okay, you interviewed six and a half thousand. How many of these people are there across the board? What percentage of the population falls into this bit.
When we look at high network individuals three categorizations, something like two point six percent of the world's population falls into this categorization. It does vary by geography. We've seen how that variation has evolved because, as I say, we've done this report for multiple years, and when we look at that two point six percent, six point two fall
into that ultra high net worth. So six point two percent of the two point six percent have had investible assets of greater than thirty million dollars.
Okay, And the richest populations are going to be, presumably in the US, where it's not going to be two point six percent, it's going to be very significantly higher.
It is, and when we look at it, when we look at the population within North America, seven point three, so seven point three percent fall into this high net worth individual we look in Asia, it's something like two point seven, and we look at Europe it's two point one.
Can you break that out for the UK at all?
Not specifically the point I want to make here marinaction, let me just clarify that those figures in terms of population are in terms of growth.
Okay.
So when we look at North America, there's seven point three percent growth in terms of the high net worth individual population. Within Asia Pacific, it's two point seven percent growth when we compare twenty four to twenty three, and actually in the UK it's two point one percent decline. So we've seen a decline in terms of this high net worth individual population here in the UK for many
of the reasons that you would expect. When we look at twenty twenty four, it's a year, but North America is growing apex growing Europe and the UK we've seen a decline.
Okay, so I decline in Europe as well.
Yeah, indeed, I know you said.
You all know the reasons for this, but would you run us through them so we can just feel miserable about them all over again.
We've seen a fall in terms of the kind of return on equity investments and fundamentally the stock market that was obviously contributed. We've seen declines in some of the investments with regard to private equity, and all of.
This has contributed to this reduction.
Okay, interesting, I thought you were going to say that that number was falling because people were leaving the UK and the EU and taking their investable assets with them to go else well, and we've seen a lot of talk, for example, about the well of leaving the UK for tax reasons. So I'm surprised that you put it down to falling returns from their investments, not to actual departures.
Your point is valid, Marin in terms of the kind of globalization of this particular segment of the society. They're definitely looking at opportunities to invest globally. They're certainly looking at some of the benefits of tax jurisdictions outside.
Their domestic market.
In our report this year, we've seen growth in locations like Singapore. We've seen growth in locations like Hong Kong, the BI seems to be a well known location for the relocation of wealth, but also Saudi Arabia.
We should say, just to be clear, although I think probably is clear that this is last year's information, and obviously there's been a big change in the way the markets have moved so far this.
Year twenty four versus twenty three. The shift here is based on the twenty four data.
Okay, let's talk about the main theme and one of the big themes of this year's report, which is all about the great wealth transfer. The number that you put in there is there'll be a wealth transfer of eighty three point five trillion dollars to a new generation of investors or rich people, whatever related called by twenty forty eight. And that's that's real money.
Is a huge shift in wealth from one generation to the next, eighty three point five trillion dollars by twenty forty eight. Now that twenty forty eight signs a long way away, Maren. But actually, when you look at the short term, thirty percent of that wealth will actually transfer before twenty thirty over the next five years, and a further sort of thirty percent transition before twenty thirty five.
So it's a big number, but it also is an imminent consideration for the individuals, obviously, particularly if you're about to receive or inherit that wealth. But also it's an important consideration for the wealth management organizations in terms of effectively, how do they mean relevant to their client's kids generation in a way that they've being relevant to their to the parents' generation.
Yeah, And one of the interesting things about this is the extent to which that wealth, as it's passed down, stays in the market and the extent of which it is removed for living costs, particularly down at the lower end. Right, do you inherit a million dollars or two million dollars and you're in your thirties or forties, what are you going to do? You're probably going to buy a house and maybe paid for school fees, that kind of thing.
So there is this dynamic where you can't necessarily expect that eighty three point five trillion to hang around in stock markets and private equity and crypto exactly. You can expect it to be taken out for living on dadlie, that.
Will be the case.
I think everybody's situation is fundamentally different. However, when we look at the gen X to those of us who are between there are forty four and fifty nine years of age, we have one perception in terms of what that inheritance will mean. The millennials the famous millennials who are all sort of between their late twenties and early forties in twenty twenty five have a different outlook and to your point, is very relevant, and Maren, that's where property.
School fees, lifestyle will be.
And then you have Gen Z's, which are really only teenagers in their early twenties.
But there also will be a recipient for this wealth.
So I think we'll see different behaviors depending on the generations and obviously by individual, but fundamentally the point we're making here is how can the wealth management industry take advantage of this transfer but also mitigate the risk that it represents because there's a chance that the wealth management firms will lose some of those assets.
Let's put the decumulation point aside for the moment. The secondivetic thing, as you say, is this idea that it's something of a threat to the wealth management business, partly in terms of that flow out, but also in terms of the different expectations and needs that the younger generation will have. One of the terrifying statistics for wealth management companies the put in this report is it eighty one percent of those who inherit a likely to shift wealth
management company within one or two years. Can it really be that much? Can people really be that non apathetic?
I think they can, and that statistics definitely support that potential risk. Now, of course, there's things that we can all do to mitigate that. You know, do we really understand what the inheriting generations want to achieve in terms of their objectives? And as I say, the baby boomers have somewhat been in a little bit of a wealth
preservation mindset. I think when we look forward into the millennials, it's all about long term growth and that's where some of these maybe higher risk assets come into the frame. We've talked about cryptocurrencies, We've talked about private equity, you know, a movement towards some of these types of investments in a portfolio potential consideration. I think this global diversification. I think future generations will look at the world in its
entirety and think, well, quite franky. If they want to invest in markets in Asia, they want to invest in censors like Singapore, then.
Again much more open to do so.
And then thirdly, I think that nature of the services. I think our senses and the report very clearly draws out that concanerge services, trust planning, property management are willingness to have a more encompassing relationship that's not just purely based on the scale of your wealth and the growth of that particular portfolio, but with a set of cervices
are wrong that really contribute to a lifestyle. Our report draws out that this idea of luxury, certainly for those high networth individuals, is becoming an increase in consideration in terms of where they spend their wealth. How can the wealth management firms bring some of those lifestyle concierge support services to bear to make sure that they're bringing that all encompassing relationship for the future generations.
Okay, let's go back a bit to this idea of that young wanting a different class of assets and risk a class of assets. So crypto okay, private equity. I mean again, there's a rising evidence that in fact, private equity is not a higher return asset class at all. As we say these days, it's not magic, it's debt, right, And as interest rates rise, and we've seen over the last couple of years, it's huge difficulty that private equity
companies are having and exiting any of their positions. So it's possible that private equity may not be one of the asset classes that the young end up looking at. But I'm really interested in the idea that they might want to invest in a more global way, because we have had over the last couple of decades, even global has meant the US right in the six seventy percent
of world industries are still America. So even if people say I want to be globally diversified, they still end up basically invested in the US and more or less invested in those top tech companies. But you think that over the next couple of decades we'll see a shift driven by people genuinely wanting to be more international.
Yeah, yeah, we do.
It's partly driven by some of those favorable tax regimes, but also the access to those particular sort of financial ecosystems, the stability political stability within those particular regions are all considerations. But I think when I look at the long term benefits, I'm going to bring you back to your point by private equity, I think when you look at private equity in the long term, it's a very valid options, as with crypto, as with the kind of globalization piece.
Yeah, I have to have to stop you there. I've got to stop you there because first, on private equity, there is no real long term because the scale of it has only relatively recent, right, so we don't know yet. I'll give you that if you look at the numbers of the private equity industry, gives you it looks like maybe this outperforms over the long term. But this is a tiny industry until relatively recently. It's only become a
giant industry during the low interest rate period. We have no idea how at this scale it will perform in a higher interest rate environment. So I'm not giving you that one Cryptocurrency again, I can't give you that because there is no long term. We have no idea. There is no long term. We only have the short term here. We can only guess about the future, right Which doesn't mean that if you have a high risk appetite, shouldn't
be in it. But no one can tell you that cryptocurrency has a great long term performance record because there is no long term, right Nless, your definition of long term is different to mine.
I'm not going to argue with you on that point. We're seeing organizations invest Goldman Sachs to give an example. You know, they have their GMFRA product proposition, which is.
Enabling that b N Y melan. They have what they call.
All bridge, which is looking at what we talk talk about alternative investments.
So as I say, we.
Can argue the pros and cons, but ultimately I think as an industry, I think my key point is important to be cognizant of those those alternative investments and our sense of capt geminis those will be more relevant going forward, and I think the regulation of those particular products, you know, crypto as an example, I suppose they're also increasing let's just say the acceptance of the opportunity they represent.
Let's go back to crypto because I get in a lot of trouble from the bitcoin bros all the time about confusing bitcoin and crypto because they're different things. Right, So when you say crypto and you say that the young or the younger generations would like to include crypto as an asset class inside their portfolios, what do you mean.
Anything that qualifies as a digital asset, Maren, including bitcoin?
Can I just interrupt to give my usal message was if any of you would like to send hate mail about the differentiation between crypto or bitcoin, NFTs, etcetera. Please can you send them direct to Gareth. I'll give you his contact details at the end.
Thank you, thank you, My.
Pleasure, My pleasure.
Get enough everyone, Everyone should share the.
Joy exactly exactly.
I think fifty six percent fifty percent of gen zd's and millennials view alternative investments as a valid part of their portfolio.
Alternative investments, we're putting crypto, we're putting private equity. What else are we putting.
ETFs for example? Yeah?
Yeah, yeah, is that alternative?
Depends on the product type? Yeah, yeah, all right.
The other thing about the future generations is the digital experience very much moving away probably from the classic face to face. When you look at the millennials, they really want the mobile interface. They want personalization. So they want us to use their data. When I say us, the banking industry, the wealth management industry, they want us to use their data to bring proactive propositions that are relevant
to their investment strategy. And fundamentally, they probably also want to see only for these high network of individuals their extensive wealth in one place.
Yeah, and I'm really interested in this idea that a wealth manager should also provide a sort of luxury concierge service that does travel and does bespoken experiences, education, medical, cybersecurity, all these things in a wanna that would love. That sounds great. Do you think that the next generation has different expectations of how they will spend to the current generation.
And one of the things that we've talked but again quite a lot on the podcast, is the way, particularly in travel and people with a much lower level of wealth than the luxury travel industry previously have expected are spending very large amounts of money on luxury travel.
I think it's the experienced generation.
I think, I think fundamentally and with this this segment, next generation high networth individuals, it probably just amplifies that Meren. You know, travel experience, passion. You know, we talk about passion investments. I can see you look steering.
It's not physical, it's a snare.
But you know, art art wine cars. And again in our cap Gemini report last year, we talked about the roll of the family offers.
This is an extension merin in.
Terms of bringing some of those non financial services to bear in a way that I see is very much in line with the client expectations and their desire for experiences.
Yeah, I guess that what I object to slightly is idea that something is a passion investment. I kind of feel either it's a passion or it's an investment confusing too, and it's a root to low returns or disaster. So listen, here's the real question for you. Right, we have a lot of listeners out there. Maybe they're going to inherit,
maybe they're not. Maybe they already have money or whatever, and they're sitting listening to this and they're thinking themselves, do you know what, Why haven't I got a wealth manager? I should have a wealth manager. This is what I need. And maybe they're inheriting. They're thinking, I don't want my mum and dad's wealth manager. I never liked them anyway. Fusty old people, pursuits, ties, blasts, lunch at Christmas. Don't want any of that nonsense. How do you look for
a wealth manager? What are the main things that you should be looking for when you go out trying to find somebody to do exactly this, not just run your money, but effectively manage your long term, long term income and lifestyle. What are we looking for?
Really, really good question. I'll probably think about it in three ways.
I think, first and foremost, a wealth manager or wealth management organization that fundamentally understands your aspirations, so I think they have to be one hundred percent aligned with what you want to achieve. I think the second thing I would say, Marin is I think a wealth manager that gives you access to the breadth of products, services, and experiences you're looking for for you and your family. And then finally, I think with anything in life, there has
to be a degree of chemistry. I think fundamentally having a very real time relationship that's supported by digital and we've talked about this demand for a digital platform, but also that's enabled through a relationship because fundamentally we're talking about the very important conversations for you as an individual and your and your future and your family's future.
Okay, and crucially, what should I pay and how should I pay? Is there been any shift in the charging structure for wealth management or are we still just going to pay one percent advalareum forever one and a half whatever it is depending on my eiger.
Obviously it varies very much by organization. Don't comment on the kind of pricing models for specifics. But again, I would say, in a world where we're looking to achieve outcomes and experiences, why not link the investment to those outcomes, and that will be as a client, that will be the angle that I would always be looking to take in terms of how can we get some surety in terms of the long term investment and how can we link fees, costs, et cetera on that.
Basis, So you would suggest that people find a way to link what they pay to the performance of the assets that they left for the wealth manager rather than pay a flat advalorem.
I think if you're able to make sure that all aspects of the kind of investment are aligned to the to the ultimately ams, that would be that for me would be a preferable model. The relationship manager model as well.
Maren.
Let's just think about that, because the other dynamic we're seeing here is relationship managers are also considering their long term future. You know, many of them are approaching retirement age. You know, we've seen a significant proportion of relationship managers that will leave the industry. So there's quite a lot of volatility in terms of the relationship manage your community as well. So again This is another consideration for the
wealth management organizations. How do they retain and grow that talent that also evolves with their client base.
How has it happened that the relationship managers in this business have not recruited at a younger age? Why have we got an aging industry?
I think undoubtedly they are, But the key challenge is can you retain and excite that talent, give them the capabilities that we've talked about, you know, digital capabilities.
Generational AI.
Can you give them access to the products and services that their clients need?
You know, we all say it's sorry, Is this really about a lot of people working in this industry who used to be active wealth managers and gradually is the asset management itself is centralized? Men or women or whatever who used to find themselves actively running assets now find themselves really only being a relationship manager because the asset management has been shifted centrally. Is is that what we're talking about here?
Undoubtedly there's been a change in the role, but again, as we've said, there's also a change in the client base, and there's a wealth management firm. You've got to make sure that you're giving your relationship managers the tools and techniques to enable them to serve as future generations.
Do you know what, Gareth, I think we can now answer one of the questions that we get asked most regularly by listeners, which is what career should my child go into when they leave university? I think you've answered this for us. Become a specialist wealth management relationship manager with an AI and luxury travel specialty. I can I cover it.
You here to hear first, Merrit, and you hear to hear first.
Oh lucky kids, wonderful. Thank you so much, every one. Last question for you? What are you reading at the moment?
Oh? I'm reading a book called Vine Street.
Vine Street.
Yeah, yeah, there's a drama based in Soho in the nineteen nineteen thirties, classic police drama. Nothing that's all to do with banking, nothing that's all to do with financial.
Services, police drama. I love a police drama. Vine Street. Okay, Vine Street.
I recommend it, Marion. I'm very much enjoy it. Part way three brilliant.
Thank you so much. Thank you so much for joining us today.
That was really really interesting, my pleasure.
Great to see you.
Thank you, thanks for listening to this week's Marin Talks Money. If you like ours, show, rate, review, and subscribe wherever you listen to podcasts and keep sending questions or comments The Merror Money at Bloomberg dot net. You can also follow me and John on Twitter or x. I'm at marinas w and John is John Underscore Stepe. This episode was hosted by Meet MAREN'SUMT web. It was produced by some Asati and Moses and sound designed by Blake Maple's Special thanks of course to Gareth Wilson.