2020 foresight: banking the mass affluent - …2020 foresight: banking the mass affluent beijing •...

2020 Foresight: Banking the Mass Affluent ©WealtInsight | This report is a licensed product and is not to be photocopied.

Publication date: January 2014

Report code: WI0009FR

www.wealthinsight.com

2020 Foresight: Banking the

Mass Affluent

Beijing • Buenos Aires • Frankfurt • Hong Kong • Hyderabad • London • Madrid • Mexico City • New York • San Francisco • Seoul • Shanghai • Singapore • Sydney


About WealtInsight

The WealthInsight Intelligence Center Database is an unparalleled resource, and the leading

database of its kind. Compiled and curate by a team of expert research specialists, the database

comprises dossiers on over 60,000 HNWIs from around the world.

The Intelligence Center also includes tracking of wealth and liquidity events as they happen, and

detailed profiles of major private banks, wealth managers and family offices in each market.

With the Database as the foundation for its research and analysis, WealthInsights able to obtain an

unsurpassed level of granularity, insight and authority on the HNWI and wealth management universe

in each of the countries and regions it covers.

Contact:

Ouliana Vlasova

Head of Content, WealthInsight

[email protected]

+44 (0)20 7406 6711


TABLE OF CONTENTS

LIST OF TABLES ...................................................................................................... 2

LIST OF FIGURES..................................................................................................... 0

1 Introduction ........................................................................................................ 1

1.1 What is this report about? ....................................................................................................... 1

1.2 Mass Affluent – Definition and Scope ..................................................................................... 2

Executive Summary ................................................................................................. 1

2 Global Snapshot ................................................................................................ 3

2.1 Overview ................................................................................................................................. 3

2.2 Market Size and Forecast by Region ...................................................................................... 5

2.2.1 Americas ......................................................................................................................... 5

2.2.2 Europe ............................................................................................................................. 6

2.2.3 Asia-Pacific ...................................................................................................................... 8

2.2.4 Middle East and Africa .................................................................................................. 10

3 The Mass Affluent – Customer Attitude and Behavioral Analysis .............. 12

3.1 Wealth Management Analysis............................................................................................... 12

3.2 Spending Behavior ................................................................................................................ 14

3.3 Spending Behavior Towards Banking Products .................................................................... 18

3.4 Demographic Analysis .......................................................................................................... 19

3.5 Emerging Trends – Needs and Priorities .............................................................................. 20

4 Mass Affluent – Key Drivers, Restraints and Opportunities ........................ 22

4.1 Drivers ................................................................................................................................... 22

4.2 Restraints .............................................................................................................................. 24

4.3 Opportunities ......................................................................................................................... 26

5 Bank’s Strategies to Target Mass Affluent .................................................... 29

5.1 The Americas ........................................................................................................................ 31

5.1.1 Marketing and social media strategy............................................................................. 31

5.1.2 Targeting Strategy ......................................................................................................... 34

5.1.3 Case Study Bank of America ........................................................................................ 36

5.2 Europe ................................................................................................................................... 37


5.2.2 Targeting strategy ......................................................................................................... 38

5.2.3 Case Study Lloyds Banking Group ............................................................................... 39

5.3 Asia-Pacific ............................................................................................................................ 40

5.3.1 Marketing and Social media strategy ............................................................................ 40

5.3.2 Targeting Strategy ......................................................................................................... 41

5.3.3 Case Study Standard Chartered ................................................................................... 43


5.4 The Middle Eastand Africa .................................................................................................... 44


5.4.2 Targeting strategy ......................................................................................................... 44

5.4.3 Case Study Al Rajhi bank ............................................................................................. 45

6 About WealthInsight ........................................................................................ 46


LIST OF TABLES

Table 1: Mass Affluent Population in the Americas, (Million), 2008–2017 ............................................................... 5 Table 2: Mass Affluent Populations in Europe, (Million), 2008–2017 ...................................................................... 7 Table 3: Mass Affluent Population in Asia-Pacific, (Million), 2008–2017 ................................................................. 8 Table 4: Mass Affluent Populations in the Middle East and Africa, (Million), 2008–2017 ...................................... 10


LIST OF FIGURES

Figure 1: Mass Affluent Population Shares by Region, (%), 2012........................................................................... 3 Figure 2: Wealth Distribution by Population Category, 2012 (%) ............................................................................ 4 Figure 3: Mass Affluent Populations in the Americas, (Million), 2008–2017 ............................................................ 6 Figure 4: Mass Affluent Populations in Europe, (Million), 2008–2017 ..................................................................... 7 Figure 5: Mass Affluent Population in Asia-Pacific, (Million), 2008–2017 ................................................................ 9 Figure 6: Mass Affluent Populationsin the Middle East and Africa, (Million), 2008–2017 ...................................... 11 Figure 7: Investable Assets Distribution of the Mass Affluent ............................................................................... 12 Figure 8: Mass Affluent Spending Categories ....................................................................................................... 14 Figure 9: Mass Affluent Spending Shares ............................................................................................................. 15 Figure 10: Share of Mass Affluent on Banking Products Spending ....................................................................... 18 Figure 11: Mass Affluent Customers Priority for Financial Products ..................................................................... 20 Figure 12: Banking the Mass Affluent – Drivers and Their Impact ........................................................................ 22 Figure 13: Banking The Mass Affluent – Restraints and their Impact.................................................................... 24 Figure 14: Banking The Mass Affluent – Opportunities and their Impact .............................................................. 26 Figure 15: Market Segmentation and Scope of Business ..................................................................................... 29

INTRODUCTION


Page 1

1 Introduction

1.1 What is this report about?

Providing wealth management services has become a strategic priority for retail banks, wealth

management firms and their rivals. Not only have economic forces driven banks to prioritize this

business, but the deterioration of other profit sources and the need to raise deposits have meant that

providing wealth management services to affluent clients is a key business.

Within the generic category of ‘wealth management’, the mass affluent segment is one of the most ill-

defined and difficult to manage – yet it is essential in the bank’s wealth management strategy. For

retail banks and wealth management firms, today’s mass affluent customer is tomorrow’s most

profitable and lucrative high net worth (HNW) client. Increasingly, the affluent client is becoming a

more significant contributor to the profit of successful practitioners.

This report focuses on the mass affluent customer segment and charts the spending behavior of the

mass affluent with an emphasis on the banking sector. Various marketing, advertising and targeting

strategies are included, and are supported with examples and case studies.

The report includes market data and forecast for the mass affluent population from WealthInsight’s

proprietary wealth model. The review period is defined as 2008–2012, while the forecast period is

2013–2017.

The scope of the report covers four regions: America, Europe, Asia-Pacific, and the Middle East and

Africa. In the Americas, the countries covered are Argentina, Brazil, Canada, Chile, Mexico, and the

US. For Europe, the countries covered are Belgium, France, Germany, the Netherlands, Russia,

Spain, Switzerland, and the UK. In Asia-Pacific, the countries covered are Australia, China, Hong

Kong, India, Japan, Malaysia, Singapore and South Korea. In The Middle East and Africa, the

countries covered are Egypt, Saudi Arabia, South Africa, and the United Arab Emirates (UAE).

INTRODUCTION


Page 2

1.2 Mass Affluent – Definition and Scope

Defining the mass affluent segment is itself a challenge. There is a reasonable agreement among

practitioners that the key metric is the amount of the client’s investable or disposable wealth that is

potentially held in, or managed by, a financial institution. Such segmentation usually places this client

somewhere in the wealth pyramid between the mass market and HNW categories. A typical definition

places the mass affluent client in the segment between the local-currency equivalent of US$100,000

and US$1 million of investable wealth. For example, in the US, liquid assets at US$100,000 and

above are considered mass affluent, whereas, in Asian regions, the threshold value for the mass

affluent is lower due to the average incomes of populations and other factors such as government

regulations, view point on economic matters and amount of liquid asset available to an individual. In

practice, for most banks this is only a rough guide– perhaps inevitably so in a complex world where

behavior and other variables are often more relevant.

The term high net worth individuals (HNWIs) refers to individuals with wealth of US$1 million or more,

including equities, bonds, cash and deposits, fixed-income products, real estate (excluding primary

residence), alternative assets and business interests.

The ultra-high net worth individuals (UHNWIs) wealth group comprises the billionaire, cent millionaire

and affluent millionaire groups. It represents those individuals with wealth of US$30 million or more,

including equities, bonds, cash and deposits, fixed-income products, real estate (excluding primary

residence), alternative assets and business interests.

Investable assets include all assets except business interests, whereas ‘liquid assets’ are defined as

all assets that can be cashed in immediately.

Wealth management is defined as the provision of banking services to wealthy individuals and their

families. It generally involves the management of trusts and inheritance, and the allocation of client

funds.

A private bank is defined as a division of a banking group that provides wealth management services.

EXECUTIVE SUMMARY


Page 1

Executive Summary

The US has the largest mass affluent population; Asia-Pacific is the fastest-growing region

The mass affluent population is rapidly growing and accounted for a X.XX% share of the world’s

population in 2012.Although it is a relatively small segment in volume terms, it holds around 40% of

the total world’s wealth. In volume terms, the US is the leading country with a mass affluent

population of XX.X million. In regional terms, Europe has the largest mass affluent population while

the Asia-Pacific is the fastest-growing.

The mass affluent population is an entirely separate group of customers who are demographically and

economically different from HNWIs and the mass market. Their lifestyle, spending behavior and

attitudes are unlike those of the rest of the population. To tap into this opportunity, banks and wealth

management companies need to offer specialized products and services to fulfill the requirements of

this highly profitable and underserved customer segment.

Due to prevailing economic uncertainty, managing the assets and wealth with highest-profit return is

vital for prosperity. HNWIs possess the largest amount of wealth and have been adequately served by

banks. However, in wealth terms, there is another category between HNWIs and the mass market,

termed the mass affluent. This category possesses a significant amount of wealth that needs to be

managed properly.

Mass affluent customers are different; retirement plans are their top priority

The mass affluent category has a different approach to money management, and displays a

preference for spending and investments. The mass affluent have different life styles and tend to

spend more on entertainment, luxury and leisure products and services. Demographically, most of the

mass affluent population is reaching retirement age and were victims of the financial crisis of 2008.

The category has a tendency to save for retirement and their children’s education.

Conservativeness still persists within the mass affluent population

The adverse effects of the financial crisis in 2008 had a large-scale impact on the mass affluent

population. It particularly affected spending and investment behavior, and made them more

conservative and risk averse. There was a tendency to grow money by investing in financial products

with limited risk to provide safer returns. Banks and wealth management companies are endeavoring

to provide the category with products such as these.

EXECUTIVE SUMMARY


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Financial advice

As the mass affluent have a somewhat conservative and risk-averse approach to their money, sound

financial advice is required. Every mass affluent individual has a different approach to spending and

investments. This provides an ample opportunity for wealth management firms to target the mass

affluent population with tailored financial advisory services.

Online banking has very high acceptance rate among the mass affluent and emerging affluent

The emerging affluent are young, mobile and technologically literate. To cater to the emerging affluent

population with easily accessible banking products, integrated and online banking facilities are

integral. Online banking is highly accepted and adopted by the young affluent. The older mass

affluent population has also started to adopt more high-performance and convenient ways of banking.

ABOUT WEALTHINSIGHT


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2 About WealthInsight

WealthInsight provides detailed data and insightful analysis on the world’s HNWI and wealth

sector. With decades of experience providing business information, WealthInsight helps

organizations to make informed decisions and win new business.

At WealthInsight’s core is its proprietary HNWI Database of the world’s wealthiest individuals.

Around this database WealthInsight has built a number of valuable research-based products

and services that make WealthInsight much more than just a rich contact list.

WealthInsight works with and provides solutions for:

Wealth managers

Private banks

Family offices

Technology providers

Professional services – consultants, accountants, lawyers and real estate

professionals

Fund managers, hedge fund managers, asset managers, venture capitalists

Non-profit and educational institutions

WealthInsight’s corporate headquarters are located in London, with offices in New York, San

Francisco, Sydney, Seoul and Hong Kong.

For more information on WealthInsight please visit www.wealthinsight.com

Reports

WealthInsight publishes high-quality research reports focused on the wealth sector. The reports

provide comprehensive analysis of countries, regions and special topics.

With the HNWI Database as the foundation for its primary research and analysis, WealthInsight

is able to obtain an unsurpassed level of granularity, insight and authority on the HNWI

universe in each of the countries and regions covered.

All reports are available as a part of the WealthInsight Intelligence Centre. Reports can also be

purchased on a subscription or one-off basis.

Every WealthInsight report is uniquely formulated for the region, country or topic covered. Key

features of the reports include:

Market sizing

Forecasting

Benchmarking

HNWI asset allocation

Behavioral mapping

Family offices

ABOUT WEALTHINSIGHT


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Methodology

WealthInsight’s teams of in-house analysts devise and collect data over a historical period of

five years, and develop forecasts for a five-year forecast period. All WealthInsight wealth

reports are rigorously sourced and created according to a comprehensive methodological

process:

Internal audit

Review of in-house databases to gather existing data:

Historic market databases and reports

HNWI Database

Wealth management, private bank and family office database

Financial deals and news archive

Secondary research

Collection of the latest market-specific data from a wide variety of industry sources:

Government statistics

Industry associations

Company filings

Broker reports

International organizations

Primary research

Review of the latest wealth management and private banking industry trends

Surveys using panels compiled from across the wealth sector:

Wealth management and private banking professionals

Financial services experts

HNWIs

Expert opinion

Collation of opinion taken from WealthInsight interviews of leading industry experts

Analysis of third-party opinion and forecasts:

Broker reports

Industry associations

Wealth management and private banking media

Official government sources

Leading academic research and commentary

ABOUT WEALTHINSIGHT


Page 5

Data consolidation and verification

Consolidation of data and opinion to create historical datasets

Creation of models to benchmark data across sectors, asset classes and geographies

Market forecasts

Feed of forecast data into market models:

Macroeconomic indicators

Industry-specific drivers

Analysis of the WealthInsight HNWI Database and Wealth sector company databases

to identify key trends:

Latest wealth trends

Key drivers of the wealth management industry

Report writing

Analysis of market data

Discussion of company and industry trends and issues

Integration of survey results

Annual review of financial deals and wealth management trends

Standardization of market definitions using recognized industry classifications

Quality control

Peer review

Senior-level QC

Random spot checks on data integrity

Benchmark checks across databases

Market data cross-checked for consistency with accumulated data from:

Internal databases

Company filings

[CONTRIBUTORS]


Page 6

Contributors to this report:

Ouliana Vlasova

Head of Content, WealthInsight

Disclaimer

All rights reserved.

The facts of this report are believed to be correct at the time of publication but cannot be guaranteed.

Please note that the findings, conclusions and recommendations that WealthInsight delivers will be

based on information gathered in good faith from both primary and secondary sources, whose

accuracy we are not always in a position to guarantee. As such WealthInsight can accept no liability

whatever for actions taken based on any information provided herein.


Page 0

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2020 foresight: banking the mass affluent - …2020 foresight: banking the mass affluent beijing •...

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