Currently there are nearly 20,000 high net worth individuals in Denmark and thanks to the country’s strong economic performance, this number will increase by nearly a quarter by 2022, according to GlobalData, a leading data and analytics company.
The company’s latest report: ‘Wealth in Denmark: Sizing the Market Opportunity’ reveals that the value of investable assets held by Danish investors will grow at a compound annual growth rate (CAGR) of 4.6% between 2018 and 2022. As this growth will be even more pronounced among more affluent individuals, this is set to increase the number of millionaire’s in Denmark’s population by nearly 5,000 during the forecast period.
Bartosz Golba, Head of Wealth Management Research at GlobalData, comments: “The future growth rates of Denmark’s wealth market are forecast to be above those recorded in the past five years, reflecting the country’s strong and stable economic growth.”
GlobalData’s report also found that at the end of 2017, nearly 47% of total liquid investments in Denmark were held in mutual funds and equities. This is a large proportion, typically seen only in developed markets, proving the maturity of the Danish market.
Golba explains: “Just like many other economies, Denmark is experiencing low interest rates and this situation is unlikely to change in the near future. Consequently, returns from bank deposits are marginal, particularly when inflation is factored in.
“No wonder retail investors are looking for alternatives, notably mutual funds, which have been attracting positive inflows since 2012. High participation in investment products with potentially attractive returns makes Danes’ portfolios well-positioned for growth.”
However, this also leaves investors vulnerable to any volatility or downturns on capital markets. Another risk to be aware of is the high level of personal debt. Gross debt in the Danish household sector amounted to 131.7% of GDP at the end of 2017, while – for comparison – across the EU as a whole it stands at 50.1%.
Golba concludes: “Those with the highest incomes tend to have the most debt, and are also more likely to opt for riskier investments than average investors. It is absolutely critical for wealth managers and advisors to understand their client’s full financial picture.
“They should be able to prepare their clients for any market shocks and then advise on how to proceed. This requires an understanding of client’s assets as well as liabilities. A mere focus on the former tells only half the story – especially in a country where debt runs high.”