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Market Research Report

Wealth in South Africa: HNW Investors 2017

Published by GlobalData Product code 500074
Published Content info 49 Pages
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Wealth in South Africa: HNW Investors 2017
Published: May 2, 2017 Content info: 49 Pages
Description

More than 40% of South African HNW investors generated their wealth through earned income, mainly through manufacturing and the real estate (property sector). Most HNW individuals opt to have their assets managed by a professional, driven by a lack of expertise.

However, clients who self-direct their investments do so mainly to avoid management fees and to retain exclusive control over some of their portfolio. Equities are the preferred asset class, but property, alternatives, and cash are forecast to experience notable increases over the next 12 months. Demand is quite pronounced for pension and inheritance planning, and a strong increase in demand is forecast across all planning services.

Key points to note -

  • Expats account for a below-average proportion of the HNW population, with UK HNW migrants accounting for the majority.
  • While equities dominate, demand for alternatives is forecast to rise rapidly as investors are looking for new means of diversification.
  • Despite a strong preference for discretionary mandates, 21.5% do not place their assets with a professional manager, which is double the global average.
  • Demand is strongest for pension and inheritance planning services, and will increase further increase over the next two years, along with demand for financial planning services.

Critical success factors of South Africa HNW business -

  • Tailor services to the professional client base: Almost half of South African HNW investors accumulated their wealth through earned income - a considerably larger proportion than the global average. Wealth managers will do well to provide services tailored to the lifestyles and investment goals of their professional client base.
  • Target the expat population: Despite being lower than the global average, expats constitute a notable proportion of South African HNW residents. Solutions such as offshore bookings services in the UK will prove to be successful, since British expats constitute nearly two thirds of South African HNW expats.
  • Diversify your planning services offering: Demand is very strong for all planning services and is forecast to grow even further. Advisors will do well to develop a broad service offering able to meet diversified planning demands.

The report "Wealth in South Africa: HNW Investors 2017" analyzes the South African investment market, with a focus on the HNW segment and analyzes which asset classes are favored by South African investors and how their preferences impact the growth of the total savings and investments market. Additionally, it examines HNW clients' attitudes towards non-liquid investments such as property and commodities.

Companies mentioned in this report: Mercantile Private Bank, Credit Suisse, Friends Provident International, Aviva, SIPP, Charles Schwab, Anglo American, BMW, Ford, Toyota, Savills, Nedbank.

Scope

  • Expats account for a below-average proportion of the HNW population, with UK HNW migrants accounting for the majority.
  • While equities dominate, demand for alternatives is forecast to rise rapidly as investors are looking for new means of diversification.
  • Despite a strong preference for discretionary mandates, 21.5% do not place their assets with a professional manager, which is double the global average.
  • Demand is strongest for pension and inheritance planning services, and will increase further increase over the next two years, along with demand for financial planning services.

Reasons to buy

  • Benchmark your share of the South African wealth market against the current market size.
  • Forecast your future growth prospects using our projections for the market to 2020.
  • Identify your most promising client segment by analyzing penetration of affluent individuals in South Africa.
  • Evaluate your HNW proposition by understanding how the South African tax system will impact HNW clients.
Table of Contents

Table of Contents

Table of Contents

  • 1. EXECUTIVE SUMMARY
  • 1.1. South African clients accumulate wealth through earned income 3
  • 1.2. Key findings 3
  • 1.3. Critical success factors 3
  • 2. PROFILING THE SOUTH AFRICAN HNW INVESTOR 8
  • 2.1. Earned income accounts for the largest source of wealth 8
  • 2.1.1. The bulk of South African HNW individuals are males above 51 years of age 8
  • 2.1.2. The largest proportion of HNW clients amass their wealth through earned income 9
  • 2.1.3. Many HNW investors have built their fortunes through the manufacturing industry 11
  • 2.1.4. Nearly half of HNW individuals in South Africa are directors 12
  • 2.2. Expats account for 8.4% of the local HNW population 13
  • 2.2.1. The majority of HNW expats are from the UK 14
  • 3. SOUTH AFRICAN HNW INVESTMENT STYLE PREFERENCES 17
  • 3.1. Wealth managers should highlight their professional expertise 17
  • 3.1.1. Over half of South Africa's HNW wealth is held in discretionary mandates 17
  • 3.1.2. A lack of expertise drives demand for professional advice 18
  • 3.1.3. South Africa's HNW investors place a higher-than-average proportion of their wealth with their main wealth manager 19
  • 3.2. A desire to avoid management fees is increasing demand for execution-only mandates 20
  • 3.2.1. However, demand is strongest for discretionary mandates 20
  • 3.2.2. Advisory mandates will experience the strongest growth in demand 21
  • 3.2.3. A lack of expertise is driving demand for advisory mandates 22
  • 3.2.4. South African HNW investors who self-direct want to avoid management fees 23
  • 3.2.5. Charles Schwab offers automated investment services with a human element 24
  • 4. UNDERSTANDING ASSET ALLOCATION TRENDS AMONG SOUTH AFRICAN HNW INDIVIDUALS 26
  • 4.1. Property will register the fastest increase in demand over the next year 26
  • 4.1.1. Equities continue to account for the largest segment of HNW portfolios 26
  • 4.1.2. Equity investments constitute the largest proportion of the average South African HNW portfolio 27
  • 4.1.3. Capital appreciation opportunities are the main driver for equity investments 28
  • 4.1.4. Bond investments are lower in South Africa than the rest of the world 29
  • 4.1.5. Wealth managers expect bond holdings to decrease significantly 30
  • 4.1.6. Cash and near-cash allocations are in line with the global average 31
  • 4.1.7. A desire to maintain liquidity is driving demand for cash and near-cash products 32
  • 4.1.8. Property constitutes a relatively small part of the typical HNW portfolio 33
  • 4.1.9. Rental income is the main driver for property investments 34
  • 4.1.10. Investments in alternatives are more popular in South Africa than globally 35
  • 4.1.11. Asset diversification is the leading driver for investments in alternatives 36
  • 4.1.12. Commodities allocations are as low as the global average 37
  • 4.1.13. Asset diversification is the leading driver for commodity investments 38
  • 5. HNW PRODUCT AND SERVICE DEMAND 40
  • 5.1. Wealth managers should lead with pension planning services 40
  • 5.1.1. Pension planning demand is much higher in South Africa than the rest of the world 40
  • 5.1.2. Demand for all planning services is forecast to increase 41
  • 6. APPENDIX 44
  • 6.1. Abbreviations and acronyms 44
  • 6.2. Definitions 44
  • 6.2.1. Affluent 44
  • 6.2.2. HNW 44
  • 6.2.3. Liquid assets 44
  • 6.2.4. Mass affluent 44
  • 6.3. Methodology 45
  • 6.3.1. GlobalData's 2016 Global Wealth Managers Survey 45
  • 6.3.2. GlobalData's 2015 Global Wealth Managers Survey 45
  • 6.3.3. GlobalData's WealthInsight 45
  • 6.3.4. Exchange rates 46
  • 6.4. Bibliography 46
  • 6.5. Further reading 48

List of Figures

List of Figures

  • Figure 1: Women represent just 9% of the South African HNW population 9
  • Figure 2: Earned income is the main source of wealth for South Africa's HNW investors 10
  • Figure 3: Manufacturing is the leading generator of South African wealth 12
  • Fi
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