A recent study by Bain & Co. of high-net-worth individuals (HNWIs) in China projects that by the end of 2011, the number of HNWIs will double compared to 2008 figures. The study estimates that there will be 585,000 Chinese HNWIs by the end of the year.
A high net worth individual is one whose individual investable assets amount to more than $1.5 million. According to the study, however, the fastest growth is not in this ‘low’ segment of HNWIs; instead, the category of HNWIs with more than $15 million in investable assets is the group showing the highest rate of increase.
The greatest concentration of Chinese HNWIs reside in Guangdong, Shanghai, Beijing, Zhejiang and Jiangsu, with more than 30,000 HNWIs living in each city/province, according to the study.
As the number of HNWIs grows, individual investors at this level of wealth are developing “sophisticated investment strategies,” according to Johnson Chng, author of the Bain & Co. study.
“They are no longer satisfied with safe, stable investments such as cash, but seek increasingly diversified portfolios that include a broad range of wealth management products,” continued Chng.
In China, HNWIs are predominantly business owners, and more than ninety-nine percent HNWIs are first-generation. And compared to study results in 2009, Chinese HNWIs are becoming savvier about their wealth management practices.
The top priority of HNWIs in 2011 is wealth creation, with wealth safety their second most-important objective. Providing for children’s education or inheritance is a third goal of Chinese HNWIs. According to the study, Chinese are shying away from high-risk investments and leaning toward more moderate investment risks than they did in 2009.
With these concerns of wealth creation and safety at the forefront, HNWIs are increasingly turning to private banks as investment channels, with 45 percent taking advantage of these banks as investment channels in 2011, compared to the 15 percent who did in 2009. Unsurprisingly, these private banks are chosen with care: HWNIs exhibit a high level of brand awareness, and demand the establishments they patronize to provide expertise and relationship management. Chinese HNWIs increasingly expect wealth management institutions to provide value-added services like tax planning, healthcare, and introduction to new investment opportunities.
“The Chinese HNWI is quickly becoming a savvy shopper of wealth management products and services. Private banks that recognize this shift and adapt their strategies and business models accordingly will be the best positioned to gain share in this increasingly valuable market,” said Chng.
image credit: jonathan