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Welcome to Marin Talks to 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. I'm Merinsum, Supweb Editor at Last for Bloomberg UK Money. So this week we are talking about who is getting wealthier and where and how those people are reshaping the wealth management industry. What do they want from their management teams that they didn't want a decade ago?
To talk about it, we've provided on Gareth Wilson, global banking industry leader and executive vice president of IT services and consulting group cap Gemini. Cap Gemini recently released its thirty years edition of the Institute's World Wealth Report. We talk about the growing appealab alternative as it's the folks on diversify portfolios. Stick around to hear more about this and about whether what you want from your wealth manager
is excellent returns or empathy. Garrett, thanks for joining us today.
Thank you, Maren. Great to be on Marin Talks Money.
Right now, we are talking about rich people and very rich people. So before we start, because what we're going to do in this podcast, are going to talk a lot about high network people and ultra high network people. So can we just start by defining what we're talking about. Who is a high network person? What do you need to have to be referenced in this report?
So, high net worth individual is an individual who has investible assets that's greater than a million dollars maren.
Okay, and investable assets is everything's of your house.
Everything except your house, everything except your house. And if you've got if you've got investible assets between one and five million, uh huh, we refer to you as a millionaire. Next door, if you've got assets between five and thirty, we talk about you as a mid tier millionaire. And then for the bracket of individuals who have assets and vestable assets of greater than thirty million dollars, high networth individuals.
Okay, hang on, I've got to have a lot to be a high networth individual, you do?
And ultra high networth individual.
Soul, everybody here is a high net worth individual and HNW, but only those above what was it, thirty thirty, ultra thirty, ultra high networth, well thirty is not going to get you much. These days is it by the time you've got a holiday home and a boat and all that.
And that's the interesting thing that we're seeing, Meren, the growth in terms of that population. So when you look at that full high networth individual population, yeah, I think we're talking about twenty five million people globally. Yeah, and we've added when we look at the year twenty four versus twenty five, we've added two million additional high networth individuals. So the population is growing, but their absolute wealth is
growing as well, Meren. And it's growing at the fastest level when we compare twenty twenty four to twenty twenty five for the last five years.
Interesting, have you got any analysis of the bit above that, like anyone over two hundred or how many billionaires, etc. Or a week stopping at thirty for the pepastes of this real world.
Well, we've captured that ultra high net worth individual segment, if I could describe it that way, Maren, as above thirty million, So we haven't looked at bands within that. However, when we look at that group as well, it's something like one percent of those total high net worth population, and they own something like thirty five percent of that tall wealth. So there's a real concentration at the top
of the pyramids. So one percent represents thirty five percent, So there's really individuals there that meet your definition at two three, four hundred million plus.
Yeah, the bit where you really can have anything you want.
Exactly. Yeah, indeed.
Okay, So where is wealth growing the most? I think we probably all would get that. It's the US, which is where we're seeing the highest number of people entering the high net worth equation and growing the fastest.
Yeah, exactly. Again, based on our cap Gemini analysis in our World Wealth Report, when we compare twenty twenty four to twenty twenty five, something like ten percent growth in terms of that high net worth individuals in the US, and that was growing the fastest globally. Asia Pacific was also pretty positive on that basis. And then when you looked at Europe and the UK still growing merin but and less less positively.
Yeah.
And then probably the Middle East was one example when we compared twenty four to twenty five where actually we saw a decrease in terms of some of that both population and wealth, but the US leading the way, followed by Asia Pacific.
Okay, And if you look at Asia Pacific. We'll come back to the miseries of Europe shortly, but a lot of that presumably was based around the extraordinary rise in these create a stock market it.
Was, yeah, indeed, Yeah, we're seeing positive, positive trajectory on that basis. And interestingly, to your point there, and for these high networth individuals, we also saw equities become more important in their portfolio. The stock market increases that we saw were certainly driving a proportion of that that wealth population and wealth growth.
So when you look at who's growing wealthier ware across the world, you can pretty much see the correlation with domestic stock markets. It's interesting because it suggests that most places have a fairly hefty.
Home buy it.
Yes, yeah, very much so. And we saw a little bit of a movement away from some of the more conservative asset classes. So where we saw equities increase by something like three percent, we saw cash reduce by two percent, So some of that.
Kind of Yeah, I'm always interested by when I look at your chats every year, I'm always interested by the extent of which the high network people keep so much money and can your cash equivalents. It always knocks around pretty substantially over twenty percent twenty three, twenty four to twenty five percent, and that seems an awful lot of
your assets to hold in cash, your cash equivalents. I'm pretty sure that if you looked at mid ranking wealthy people before they quite get you your millionaire next door, they'd be holding much less of that in cash your cash equivalents.
Yeah, I think, I think, I think you're right, and I think it's we always use it as a little bit of a barometer in terms of risk appetite, conservatism, and in markets that are growing, were individuals the greater value in terms of stop and equity markets, they're obviously taking on a greater risk position. Fixed income we also saw increase when we looked at twenty four versus twenty five Merrin so again by something like two percent these points.
And interestingly, alternative investments we saw a little bit of a decline, So there was a move away from some of the alts into fixed income and equities. But I think you point. I think those higher worth individuals were really following where they saw the performance and the value in twenty twenty five.
And when you say alternatives, what do you mean you're talking about private equity and the main private equity, private credit, etc.
Private equity, private credit, some of the hedge hedge funds. Yeah, and again not all of those investment asset classes are available to everyone. You know, and I know you've discussed this in the past in terms of both the liquidity associated with private assets but also in terms of accessibility. But again, I think that breadth of asset class and those breadth of investments is something we're seeing greater appetite for.
I was interested to see that two thirds of your respondents said that they were interested in increasing their exposure to private equity, which seems to me so slightly extraordinary at the moment when it hasn't been a great performer, and there's an awful lot of debate about the extent to which it's historical record about performance is real or not. But still everyone says they want more.
I think they want more access to it, Marin. That's not necessarily going to say they're going to commit, but having the option, and I think this for high net worth individuals, access to products and services is a real driver and the ability to the ability to diversify your portfolio, whether it be in terms of asset classes, are also geographically Again, I think you and I have touched on this in the past. We've seen high net worth individuals
want to diversify into different markets. We've seen significant growth and attraction in Asia and the Middle East in the past. So I think to your point about two thirds of our respondents wanting to have access to the alternative investments, I think that's true. Whether or not they'll commit is dependent on that point in terms of where they see value and where they see growth and.
What about crypto, And one of the things that you talk about in the report is how important it is for wealth managers to be able to offer their high networth investors' access to all investment classes and crypto. Again, is that a class that I'm loath to call it an asset class to be honest, But is that a group of possible places where you might put some money about that investors are more interested in?
Now more interested is a subjective statement, but again I would put it in the same class as alternative investments. If you're wealth manager can give you access to digital assets, to crypto, and they can do it through a platform that's easily accessible, then I think that is kind of meeting these high net worth individuals their expectations and giving them the option to choose that within their portfolio, whether or not they take that decision, I think, as I say, it's a different point.
It's a different matter.
Yeah.
One of the things you're saying this new report is that we are, at your words, clear inflection point for the wealth management industry. What does that mean and why now?
I think the inflection point I think that's probably founded on three perspectives here, Maren. I think the first point, I would say is just growing this growing wealth. And I think we've seen this trajectory over thirty years. Actually we've been writing this report for thirty years, which yeah, makes us all feel a little bit dated, but.
The way dated, but expert dated, but.
Expert and d experienced. But I think the wealth management industry obviously continues to grow to service this growing population and say it grew by seven point eight percent globally in twenty twenty five. But also the expectations of those individuals. And we started this conversation by defining high net worth individuals.
The expectation is that we can bring very personal, a very personal relationship, a very personal experience, and we can also bring the breadth of products and services that those individuals require. So I think there's a real kind of call to action for the wealth managers to move away from some of this kind of standard wealth band segmentation to bring very kind of personalized products and services.
Why because most people, as far as I see it, most people, until you get up into your thirty, forty, whatever million dollar band, most people require the same things from their wealth manager. They don't mind some talking in your report about the importance of empathy led advice. And I can't think of anything worse than my wealth manager giving me empathy led advice. What I'd like him to do is to make me absolute returns in excessive inflation
every single year without making a fuss about it. And that seems to me that is what everybody wants from their wealth manager. Not endless communication and empathy and complicated portfolios. What am I missing?
We might have to agree to disagree here, Marion, because I do think that model where success is purely bag some performance and it's purely denominated by your annual portfolio review, is not the expectation in terms of the pace with which the markets in the world is moving. And I think high net worth individuals want to have the ability to be able to optimize products and services on a very kind of timely and a very real time basis.
What does that What does that mean? Gareth? What does that mean? Optimize products and services on a real time basis? Surely you employ a wealth manager to manage your money without constant reference to you, because it's a delegated activity. But the way you seem to be looking at is though it is a non delegated activity, but more of a regular conversation in that when previously when we've talked
to we've talked about wealth management on the podcast. What we do is we say to people, look, if you don't want to manage your own money, get some guy to go do it for you. Then you can sleep at night and you don't have to think about it. So is the suggest here that high networth individuals are changing from that idea of I give my money to this guy or woman and they're going to take care of it and I don't have to do anything. I can sleep at night because I know this guy's a
pro and he's got it under control. What you're talking about seems to be a regular communication that involves empathy.
There's definitely the need for more of a kind of proactive and regular management of your portfolio. Now, I suppose the point I'm making here is if you want to delegate that and leave that on a twelve month schedule, then that's obviously one requirement. However, I think there are individuals who want to have opportunities to present it to
them in a very kind of immediate fashion. So as things are changing, whether that be changes in the market, changes in the geopolitical situation, changes in terms of their kind of personal situation, meren, they're looking for their wealth managers to be pro and to predict what's required based on their requirements and objectives and intervene on that basis. So I think we are seeing a demand for a
much more active relationship rather than a periodic relationship. And also, I think this idea that we're operating in a very kind of real time environment. You and I have become very comfortable with the immediate experience, the real time experience of being able to order an Amazon being delivered within
X number of ours if required. Again, I think in a wealth management context, marin clients want to have that level of insight they want their wealth managers to understand their expectations and their objectives and to respond on that basis. And the other thing I would say from our analysis, Maren, we've seen if you're able to provide the level of personalization that we're talking about here, those individuals will recommend and you to their peers and to their friends, even.
If you're charging more than the robo advisor down the road.
And the other time now that we're saying is individuals are having multiple relationships with their wealth managers. Five years ago, six years ago, in twenty nineteen, something like thirty nine percent of all individuals had a relationship with one wealth management organization. When we look at that figure nine in
twenty twenty five, that's reduced to nineteen percent. So my point is, Maren, individuals are looking towards multiple organizations to provide access to the products and services they need.
That is one of the numbers that jumped out as me as well. And I think you may look at that and say, maybe they're not satisfied with one and so they're moving to another. But that doesn't Necesslily argue against the idea that you want a personalized, empathetic wealth manager, because if you have four different wealth managers, they definitely do not have oversight of your full portfolio or of your full lifestyle because you've got three other guys as
well who are doing something else. If you want that personalized, empathetic one on one understand my family, understand my generational shifts, understand my wealth, understand how I feel, etc.
Etc.
You'd want one wealth manager. This is like having four therapists.
The kind of argument to that, I would say is that if you can provide the full breadth of products and services that's required under a single umbrella, under a single umbrella, then I think you can maximize the strength and quite frankly, the stickiness of that relationship.
Okay, shift, this shift represents the failure of the industry.
I think this shift represents that demand from clients for a greater personalized relationship with empathy and also a greater access to products and services because no one firm has been providing that. And we've also seen merin to your point. We've seen the advent of the robo advisors. We've seen growth in that kind of digital only model. We at the other end of the scale, we've seen growth in
terms of the family offices. So again, if you look at the traditional wealth management organizations, there's competition from family offices. There's competitions from the kind of robo advisors and in the model where they're not able to deliver the experience or the products and services that's required. That's meaning assets are flowing away from the traditional wealth management firms to
the competition. And again in our report we quantify that as something like one point five trillion of new assets that have moved into that competitive sphere. So there's an opportunity, but obviously there's clearly a threat as well.
Yeah, and you're focusing the highest growth rates for the robo advisors over their traditional the family offices, which makes sense because the lower base, etc. But that is where you're expecting to see the growth.
It is. But again you've got to look at this at an individual basis, because again when we look at those ultrahi networth individuals with investable assets of greater than thirty million, the rule of the family offers not just the financial services that they're bringing marin, but some of those non financial services around estate planning, inheritance likewise becomes
increasingly important. When we look at products and services. Of course, we can talk about asset types, we can talk about crypto, we can talk about alternatives. But I also think there's a rule for the wealth management firms here to bring those broader services to bear again in a way that's directly relevant to their clients.
Yeah, okay, so most marintalks money listeners I think are probably at the top end of your millionaire next door, maybe the bottom end of your million next door, or maybe soon they'll be your millionaire next door. What should they be looking for in a wealth manager?
First and foremost, I think they should be looking for performance manager that gives them the return that they aspire towards in terms of their objectives. I also think they should be looking for a wealth management firm that gives them access to the products and services which they believe will be relevant for them and their family going forward. Yeah, and then the final thing I would say is a
wealth manager where they don't have to repeat themselves. Part of our analysis suggested that individuals forty two percent of the individuals in the high network that we interviewed have to restate their objectives and requirements. Can you have a relationship with an organization? He Here's your requirements once understands them and actively manages those going forward, this idea of personalization but also access to products and services.
Yeah, I guess that robo advisory you do only have to tell.
Once indeed, and also a robo advisor can take advantage of some of the artificial intelligence data and information and that's increasingly available to optimize that relationship.
Maron, Well, I suppose that is one of the questions ever thinking about how do you find a wealth manager? What are you looking for in a wealth manager? The questions you're going to ask are taught me through your performance and show me how that works relative to the performance from other wealth managers, which I know is information that is not always easy to get hold of. And then what products and services are you providing? Can you
show me the whole suite and outside actual products? Do you have a tax advice et cetera, et cetera legal environment department? And then maybe this last question is can you explain to me how you are using AI to enhance your productivity?
Yeah, well, you know, I think a lot of that is focused on that role of the relationship manager, which is still very key role across the industry. And again when we looked at when we looked at the relationship managers that we met and we talked to, I think we talked to something like thirteen hundred of them as part of our report. Maren still about forty percent of
the activity they do they consider as operational administration. Can't you use AI to somewhat automate that and then ensure that the relationship managers are spending their time bruly invested in their clients and their clients wealth and their clients' portfolios using artificial intelligence around things like know your customer, some of the tools and techniques around managing meetings, and some of the kind of communication on that basis, and
portfolio optimization. We still believe the relationship manager is key, and even in the world of AI Maren, we still believe there's a role for the human element, the human judgment within the wealth management industry and that that relationship. Using AI to support the relationship manager, but also using AI to understand more about you as a client. Okay, what do we know about Maren and the things that she's doing Beyond.
Maren wants to make two or three percentage points above inflation every year and not be bothered. That's what Maren wants, and I still think that's what most people.
Well, you know, I think what we're talking about here will hopefully not only meet your expectations, Maren, but exceed them.
Okay, excellent. Can I ask you one last question before we've finished, which is about family offices. We're seeing the rise and rise of the family office. How much money do you need for that. I'm not talking about a single family offices. I'm sure some of my listeners are rich enough for a single family office, but a multiple family office or to get the kind of service you
might get from a family office type organization. Which bit of high network do you need to slot into for that and where do you start?
I think, unfortunately, Maren, it's not the millionaire's next door. Unfortunately is not the millionaire's next door. So I think in that bracket, when you're getting north of five into the kind of thirty million region, that's where that's when you and your family will be will be relevant on that basis, But again I would come back to understanding
truly what you want to achieve. I think we've seen with the advent of entrepreneurs there's a lot of wealth that's being generated through entrepreneurs and the transactions that they're successfully executing within their respective ventures and businesses. And again, as significant amount of wealth generated quite quickly, also lends itself to that kind of family office scenario.
Yeah, there'll be a lot of excitement around in the wealth management community about the mega IPOs, right.
Of course. Of course, we've got anthropic on the it was on the books on SpaceX when we looked at what was generating wealth previously, we talked about those equity markets, we talked about stocks and shares, and I think it continues to be a significant part of the growth that we've seen over the last five years.
Yeah, and it will be I'll tell you what, when we next have this conversation, we tend to have it in a reat. When we next have this conversation, we'll know a lot more about how the young, newly rich young like to have their money managed and what kind of health managers there after, because assuming something doesn't get horribly wrong, which of course it could, there will be an awful lot of newly rich, relatively young people presumably delegating a lot of that money management to the wealth
management industry. So we'll know a lot more in a year, won't.
We We will, and I suppose my prediction is they will definitely want that level of empathy and personalization that we've talked about, Maren. But also I think they'll be demanding in terms of the kind of products and services from the wealth management industry and their relationship managers.
Yeah, it's fascinating and we will find out. Gareth. Thank you so much joining us today.
Pleasure Maren.
Thanks for listening to this week's Maren Talk to Your Money. If you like our show, rate review and subscribe wherever you listen to your podcast. Also be shorts, follow me and John on x or Twitter. I am Meren s W and John is John Underscore Steppek. This episode was produced by Samasadi and Moses and sound designed by Blake Maples Bestial. Thanks of course to Gareth Wilson and the team at cap Gemini and questions and comments on this
show are always welcome. Our show email is Meren Money at Bloomberg dotnut