Wealth in South Africa: HNW Investors 2017
"Wealth in South Africa: HNW Investors 2017", analyzes the South African investment market, with a focus on the HNW segment. The report is based on our proprietary datasets.
More than 40% of South African HNW investors generated their wealth through earned income, mainly through manufacturing and the real estate and 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.
Specifically the report -
- Sizes the affluent market (both by number of individuals and their demographics) using our proprietary datasets.
- Analyzes which asset classes are favored by South African investors and how their preferences impact the growth of the total savings and investments market.
- Examines HNW clients attitudes towards non-liquid investments such as property and commodities.
- 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.
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 Africas 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 Africas 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. GlobalDatas 2016 Global Wealth Managers Survey 45
6.3.2. GlobalDatas 2015 Global Wealth Managers Survey 45
6.3.3. GlobalDatas WealthInsight 45
6.3.4. Exchange rates 46
6.4. Bibliography 46
6.5. Further reading 48
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 Africas HNW investors 10
Figure 3: Manufacturing is the leading generator of South African wealth 12
Figure 4: A significant proportion of HNW investors in South Africa are directors 13
Figure 5: 8.4% of South Africas HNW client base is made up of expats 14
Figure 6: Almost two thirds of South African HNW expats are from the UK 15
Figure 7: Nedbank Private Wealth targets British expats 16
Figure 8: More than half of HNW assets are managed using discretionary mandates 18
Figure 9: A lack of expertise is the major driver of wealth management demand 19
Figure 10: Over three quarters of South Africas HNW investors use two or more advisors 20
Figure 11: Discretionary and advisory mandates experience the highest demand 21
Figure 12: Advisory asset management will experience the highest increase in demand 22
Figure 13: HNW investors lack of expertise drives the need for advisory mandates 23
Figure 14: Advisors should offer innovative services to offset self-directing trends 24
Figure 15: Charles Schwab offers automated advice with a human touch 25
Figure 16: South African HNW investors are heavily exposed to equities 27
Figure 17: Equity investments are split almost equally between direct holdings and funds 28
Figure 18: Demand for equity holdings is forecast to decrease over the next year 29
Figure 19: Bond allocations in South Africa are half those seen globally 30
Figure 20: Bond investments are set to decline significantly 31
Figure 21: The majority of cash and near-cash is invested in money market funds 32
Figure 22: Cash and near-cash investments are set to record strong growth 33
Figure 23: South Africas HNW investors favor direct property investments 34
Figure 24: Property investments are forecast to increase further 35
Figure 25: Hedge funds are the most popular alternatives investment 36
Figure 26: The majority of industry experts expect alternative investments to increase 37
Figure 27: Commodity funds are most attractive to South African HNW investors 38
Figure 28: Asset diversification drives South African commodities investments 39
Figure 29: Pension planning is the priority for South Africas HNW investors 41
Figure 30: Pension planning will remain the preferred planning service 43
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