Merrill Lynch and Capgemini recently reported that there are now 9.5 million people who are "high net worth." This only seems like a big number until you consider the world's population, or even the developed world's population.
High net worth defined
The Merrill/Cap study defines high-net-worth as individuals having net assets of at least $1 million USD, excluding their home and consumables. [I guess this means the contents of the wine cellar don't count?]
Ultra-high-net worth individuals have to have at least $30 million by this definition. There are about 95,000 of these people worldwide. A few, of course, have much more. There's no category for them, but they can afford to buy wide-body private jets at $150 million a piece. Boeing apparently had 11 such planes on order at the time of the report.
True customer-centric approach demanded
The point of the Merrill/Cap research is that the needs of this group are becoming ever more demanding, and they need the services that only an organization with global reach can muster. More important, they want a true needs-based approach to managing their money and investment needs.
Some want to buy luxury goods, such as the jets mentioned above. Others want to invest in philanthropy. None of these folks wants a cookie-cutter solution. Nor do they want to integrate all these services themselves, which is time-consuming and kind of boring really, if you can get someone else to manage it for you.
Two implications to ponder
We have a lot of people out there in the wealth-management industry chasing a very small number of wealthy people. Europe and North America each have about three million of these HNWIs. In Canada, we have a measly 248,000, less than one per cent of the population. If you can't move to a high-value-added delivery approach for this exclusive group, perhaps you need to rethink your target market.
There is another implication that is important for anyone covering the mass affluent -- those people who don't quite make the cut as HNWI. And it's this: soon you will be expected to provide something closer to what HNWIs can get in terms of customized and customer-focused investment and money management services.
There is a consistent pattern where services only available to the most wealthy -- either businesses or individuals -- gradually become available lower down the market. At one time, you could only buy currency futures in seven-figure amounts. Then it was only in six-figure amounts. I believe it's now five-figure amounts, but I may have missed something. There may well be locker-lunch and lemonade-stand futures being sold somewhere.
The same thing happened with Treasury Bills. Heck, it happened with maid services, didn't it? Look at luxury spa services. It's even happened in eco-tourism. It's getting harder and harder to find a category of goods or services that is truly exclusive, available only to a select few.
Exclusive goods and services tend to become less exclusive over time. One reason for this is that a successful business strategy can be built on bringing that exclusive stuff within the purchasing power of the next layer down. The corollary to this is clear: if you want to serve that exclusive market, you need to keep pushing the bar higher, to avoid having your exclusivity eroded.
Resources:
Merrill Lynch and Capgemini announcement is here
PDF file of the report is here
There are some interesting charts in this report, including the one that compares the current approach to serving the needs of wealthy individuals with the new, more customer-centric direction.
