Differentiating the winners in the pursuit for global wealth, a European perspective on UHNWI
A perspective on UHNWI in Europe by Deloitte Luxembourg Strategy Practice
In the last ten years, ultra-high net worth individuals (UHNWIs, in this paper defined as individuals holding more than US$10 million in assets), have contributed significantly to total world wealth. The segment is often seen as a key source of growth for wealth management operators globally. In light of increasing competition from off-shore banking models, and growing tax related pressure leading to cost inflation, acquiring new assets with a particular focus on UHNWI is expected to be a key priority for wealth management operators in the coming years.
In this paper, we look at the development of the UHNWI segment in Europe (supported by data from our partner Wealth-X). We also analyze key wealth management coverage models and their respective success factors, and propose a hypothesis for future development. Finally, we bring perspective to the evolution of the UHNWI segment in Luxembourg and how the ecosystem is specifically geared to serving them.
Part I: The evolution of European UHNWI
Since 2006, European UHNWIs have added over €1 trillion to the total wealth in Europe. With the total UHNWI European wealth standing at nearly €10 trillion in 2016, growth is expected to accelerate in the coming years. According to Wealth-X, the European UHNWI segment is set to add another €1 trillion in wealth by 2021. The sheer size of this number should draw attention from European wealth management operators in validating the strategic importance of this segment for new asset acquisition.
Part II: UHNWI banking coverage models and success factors
Based on our research and experience across the European Wealth Management sector, we observe three types of wealth management players pursuing UHNWI:
- Large global private banks are global institutions with significant private banking operations alongside other activities, including investment banking, asset management, and universal banking activities, among others
- International wealth management specialists are medium and large private banking and wealth management operators with international operations whose key focus is on wealth management services
- Local and regional players, which include local private banks and private banking units of local or regional banks
Part III: Development of UHNWI wealth management in Luxembourg
As observed globally, the UHNWI segment is also becoming more strategic in Luxembourg. In 2011 it contributed 49 percent to Luxembourg’s total banking AuM, while only five years later it soared up to 63 percent. This corresponds to an annual growth rate of 10 percent for clients in this segment, confirming the strategic importance of this segment over the next years for wealth management operators in Luxembourg.