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The financial well-being of Romanians increased last year by 9% compared to 2019, calculated at a constant currency. It is 4% faster growth than that of Western Europe, but 12% slower than Eastern Europe, which also includes the Baltic States and Russia, according to Boston Consulting Group’s Global Wealth Report (BCG).
“In Romania, the concentration of wealth shows a less polarized society than in other parts of Eastern Europe. A strong segment of people, who own less than $ 250,000, represents 58% of the total financial wealth, ”said Nimrod Pais, CEO and partner of BCG. “At the same time, the share of those with a net worth of over $ 100 million is higher than globally: 16% compared to 13%, but this rate is only half the average of 32% in Eastern Europe,” added Pais.
The data in the report shows that the allocation of Romanian assets is characterized by a strong increase in life insurance and pensions, and the percentage of shares is much lower than globally or in other parts of Eastern Europe. The share of cash and deposits is well below the Eastern European average, but remains at the global average, which reflects a slightly more advanced savings market than Romania’s neighbors in Eastern Europe, Pais said.
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Global financial well-being set a new record in 2020, up 8.3%. Against the background of the Covid-19 pandemic, the strong performance of the stock market and the growth of savings by individuals have fueled progress in well-being, according to the Boston Consulting Group report.
This development contrasts with the impact of recent global crises: during the 2008 crisis, global financial well-being fell by 7.8% and stagnated with the dot-com bubble burst in 2002.
The report, entitled Global Wealth 2021: When Clients Take the Lead, shows that in 2020, many clients using wealth management services have chosen alternative investments in the pursuit of better returns, to the detriment of low-yield bonds. As part of this trend, real assets, mainly represented by real estate, reached an all-time high of $ 235 trillion. However, Asia, which has the highest concentration of wealth in real assets ($ 84 trillion, 64% of the regional total), will experience an increase in financial assets that will exceed the increase in real assets (7.9% compared to 6.7%) in the coming years. Asian investment funds, with the exception of Japan, will see the fastest growing financial asset class, with a compound annual growth rate (CAGR) of 11.6% by 2025.
According to the report, North America, Asia (excluding Japan) and Western Europe will be the main generators of global financial well-being, accounting for 87% of the new increase in global financial well-being, from now until 2025. BCG expects that, due to the financial growth of Asia, by 2023 Hong Kong will replace Switzerland as the market leader for cross-border welfare management.
As for Romania, BCG predicts that the financial wealth segments will remain stable over the next five years, with slow growth of the richest segment and a very slow decline of the one with wealth below $ 250,000.
The new “ultra”: China will overtake the US
The “ultra” wealth category – people whose individual wealth exceeds $ 100 million – expanded in 2020, with 6,000 people joining the 60,000-strong group, growing by 9% year on year beginning with 2015. Currently, the category has a combined wealth of 22 trillion dollars in investment, representing 15% of the total world.
According to BCG, China will overtake the US by the end of the decade, being the country with the highest concentration of the “ultra” category. If investable wealth continues to grow at the current annual rate of 13%, China will host $ 10.4 trillion in ultra assets by 2029, more than any other market in the world. The US will be just below China, with an estimated total of $ 9.9 trillion by 2029.
And the “ultra” category is changing, with the growth of the next generation segment. These people, aged between 20 and 50, have wider investment horizons, a greater appetite for risk, and often show a desire to use their wealth to create a positive impact on society, but also to achieve solid profits. Many wealth managers are not yet ready to assist the new “ultra” category.
High-growth markets are an opportunity, but wealth managers need to build and understand local differences and key demographic changes. For example, women now account for 12% of the “ultra” category, with the majority coming from the US, Germany, and China.
The next generation segment will also be an influential factor in future growth over the next decade. Whether it’s a customer with simple needs or extremely high net worth, managers need to offer a personalized service to effectively capture the next wave of growth.
Financial well-being: Financial well-being is defined as total wealth, excluding real estate assets such as real estate, consumer durables, liabilities, non-monetary gold, and other metals, held by adult individuals.
Translated from Romanian by Service For Life S.R.L.