Wealth in Germany: Sizing the Market Opportunity ; Sizing the wealth market in Germany and its growth potential.

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Rising disposable income, a relatively strong economic outlook, and a healthy stock market performance will all drive growth in the German wealth market. The retail savings and investments market increased by 4.8% in 2015, and is forecast to grow by 4.3% a year to 2019, reflecting the maturity and strength of the sector in Germany. Indeed, compared to many of its European peers, the German economy is in relatively good shape. Domestic consumption is increasing, with record employment, rising wages, and falling oil prices combined with low interest rates and inflation all fueling growth

Scope

• Affluent individuals account for 20% of the German population, holding 77% of liquid assets. This wealth distribution is similar to other developed economies.

• Increasing disposable income, a relatively strong economic outlook, and a healthy stock market performance will drive growth in the savings and investments market, which is forecast to grow by 4.3% a year to 2019.

• Deposits dominate, accounting for 67% of balances. This reflects a habitual, persistent risk aversion that is forecast to remain, in spite of the European Central Bank (ECB) lowering the main interest rate to 0%.

• Germany’s stock market performance, alongside the poor returns available in other asset classes, is increasing investor appetite in equities and mutual funds, which will grow by 7.9% and 5.5% respectively a year to 2019. In contrast, negative yields are deterring investors from the bond market, which is forecast to decline by 4.8% a year to 2019.

• Germany’s high net worth (HNW) individuals invest 28% of their investible assets outside traditional investments. Property accounts for two thirds of illiquid assets, where returns are greater than in some other liquid asset classes.

• Offshore investments account for 9% of HNW individuals’ illiquid assets, distinctly below the global average. These investments are driven by the desire for better returns rather than tax efficiency.

Reasons to Buy

• Benchmark your share of the German wealth market against the current market size.

• Forecast your future growth prospects using our projections for the market to 2019.

• Identify your most promising client segment by analyzing the penetration of affluent individuals in Germany, both at country and regional level.

• Evaluate your HNW proposition by understanding how the changing German tax systems will impact HNW clients.

• Review your offshore strategy by uncovering the HNW motivations for offshore investments and their preferred booking centers.

private banking
wealth management
Brazil
investments
savings
allocation
HNW
offshore
mass affluent
mutual funds
hedge funds
FATCA
AEOI
CRS

Table of Contents

EXECUTIVE SUMMARY

The German economy is showing signs of growth, supporting wealth creation

Key findings

Critical success factors

SIZING AND FORECASTING THE GERMAN WEALTH MARKET

The wealth market remains concentrated at the top end

Affluent individuals account for 20% of the total adult population

German affluent individuals hold 77% of liquid assets

DRIVERS OF GROWTH IN THE GERMAN WEALTH MARKET

Growth in Germany's mature savings and investments market will be driven by the economy and an increasing appetite for stock market exposure

The relatively strong German economy will drive growth in the savings and investments market

Increasing appetite for stock market exposure is slightly reducing a strong bias towards deposits

Deposits will grow steadily over the forecast period

The ECB lowering the main interest rate to 0% has reduced the appeal of deposits

Negative yields are deterring investors from the bond market

Germany's stock market performance is increasing investor appetite in equities and mutual funds

HNW INVESTMENT PREFERENCES

HNW individuals allocate 28% of their investible assets outside traditional investments

Property investment accounts for two thirds of illiquid assets

Offshore investments form a relatively small proportion of assets and are driven by the desire for better returns rather than tax efficiency

Only a small proportion of HNW individuals' wealth is invested offshore

The availability of better investment returns is the biggest driver of offshore investment

The UK and Switzerland are the preferred offshore booking centers

The German government has taken numerous steps to tackle offshore tax evasion

Several key taxes are currently subject to increases or changes

APPENDIX

Abbreviations and acronyms

Supplementary data

Definitions

Affluent

Domicile

DTA

FATCA

HNW

Liquid assets

Mass affluent

Onshore

Residency

TIEAs

Methodology

Verdict Financial's 2015 Global Wealth Managers Survey

Global Wealth Model methodology

Global Retail Investments Analytics methodology

Bibliography

Further reading

Table

Table 1: German personal income tax rates for a single person, 2016

Table 2: Total German adult population by asset band (000s), 2011-15

Table 3: Total German adult population by asset band (000s), 2016f-19f

Table 4: Germany: onshore liquid assets by asset band ($bn), 2011-15

Table 5: Germany: onshore liquid assets by asset band ($bn), 2016f-19f

Table 6: Euro to US dollar exchange rate, December 31, 2014 and December 31, 2015

Figures

Figure 1: Affluent individuals account for 20% of the total adult population in Germany

Figure 2: Affluent individuals account for 77.3% of total liquid assets in Germany

Figure 3: The savings and investments market is expected to stabilize up to 2019

Figure 4: The total retail savings and investments market is expected to remain strongly skewed towards deposits

Figure 5: Deposits dominate the retail savings and investments market, but equities and mutual funds will see the fastest growth into 2019

Figure 6: Retail deposits will outperform GDP growth out to 2019

Figure 7: Bonds are forecast to perform below GDP growth

Figure 8: Germany's stock market has performed well since 2011

Figure 9: Mutual funds and equities remain volatile despite positive growth rates

Figure 10: Direct property constitutes the bulk of investments outside traditional asset classes for German HNW investors

Figure 11: German investors hold limited offshore investments

Figure 12: Better investment returns constitute the main driver of offshore investments for German HNW individuals

Figure 13: The majority of German offshore booking is performed within Europe

Figure 14: The German government has signed TIEAs with many offshore centers globally

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