Recent reports suggest that the wealth of high-net-worth individuals (HNWIs) grew by 4.7% in 2023, with the HNWI population increasing by 5.1% to 22.8 million globally*. This growing population has distinct financial needs that are evolving alongside economic conditions, market trends, and technological advances. As these individuals’ wealth grows, so do their priorities when it comes to managing that wealth.

What’s behind the increase?

Global economic uncertainty, higher interest rates, and rising political tensions led to significant declines in HNWI wealth (3.6%) and population (3.3%) in 2022. However, the economic picture improved in 2023, as global equity markets recovered and investors focused on the prospect of interest rate cuts.

CapGemini’s report confirmed that despite ongoing interest rate uncertainty and rising bond yields, equities surged alongside the tech market, largely driven by enthusiasm for generative artificial intelligence (AI) and its potential impact on the economy. North America led the recovery, with the region seeing significant increases in HNWI wealth and population. Asia-Pacific also saw growth, while Europe’s gains were more modest.

The rebound of HNWIs reflects their ability to adapt and capitalize on emerging opportunities, particularly in sectors like technology, which have shown tremendous growth. However, while their wealth has recovered, their approach to managing that wealth has shifted in response to new market dynamics.

What are their priorities?

The shifting priorities of HNWIs are evident, particularly as younger generations begin to inherit wealth. Investment strategies have gradually moved from defensive postures during uncertain times to long-term growth-oriented approaches. Younger HNWIs are increasingly focused on generating wealth for future generations and creating a lasting legacy through tax-efficient planning.

One of the key areas of focus for HNWIs today is intergenerational wealth transfer. Many wealthy families are seeking advice on how best to pass wealth down to the next generation while minimizing tax liabilities. This has led to a growing interest in estate planning, trusts, and other wealth preservation tools.

Additionally, HNWIs are increasingly looking for more personalized and bespoke financial advice. With emotional biases influencing many investment decisions—such as holding onto underperforming assets for too long or seizing opportunities without due diligence—HNWI investors need trusted advisers who can provide objective guidance and help them stay focused on their long-term goals.

Emotional biases in decision-making

Over 64% of HNWIs polled said emotional or cognitive biases influence their decision-making. This includes seeking information that aligns with their views, jumping at opportunities without thorough consideration, or holding onto underperforming investments. These biases are particularly impactful during personal life events, such as marriage, divorce, or retirement, as well as times of broader economic turbulence, like volatile market conditions or geopolitical uncertainty.

By working with financial advisers who understand their personal biases, HNWIs can avoid the common pitfalls that emotional investing can bring. Instead, they can focus on structured, strategic decision-making that ensures both long-term wealth growth and financial security.

The role of technology and AI in decision-making

Technology, particularly the rise of AI, is increasingly influencing the way HNWIs make decisions. AI-powered tools can offer data-driven insights, portfolio optimization, and more sophisticated investment strategies, helping to reduce the impact of emotional biases and provide more reliable projections.

In particular, AI has been instrumental in analysing vast amounts of market data to identify trends and opportunities that would otherwise be difficult for human investors to detect. This allows HNWIs to make more informed investment decisions, ensuring that they stay ahead of market trends and maximize returns. AI tools can also offer personalization, tailoring advice and strategies to the unique needs and goals of each HNWI.

The need for personalised advice

While technology and AI are valuable tools for decision-making, they do not replace the need for personalized financial advice. The complexity of HNWI portfolios, coupled with their changing needs, means that a one-size-fits-all approach does not work. Instead, HNWIs require bespoke solutions that take into account their individual financial goals, risk tolerance, and family dynamics.

Personal advisers play a crucial role in helping HNWIs navigate the ever-changing financial landscape, particularly as their priorities shift towards wealth preservation, intergenerational transfer, and legacy building. A trusted adviser can provide the strategic oversight needed to manage complex financial portfolios, address emotional biases, and ensure that wealth is aligned with the client’s broader life goals.

We’re here to help

If you’re looking for personalized advice to help navigate the complexities of wealth management and intergenerational planning, our advisers are ready to support you. Get in touch today to explore how we can tailor strategies to your needs.

Source:

Capgemini, World Wealth Report 2024: https://www.capgemini.com/insights/research-library/world-wealth-report/