Wealth in the US: Sizing the Market Opportunity

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The US is home to the largest affluent population in the world and hosts a very advanced financial services sector, including the most sophisticated mutual fund and equity markets globally. The large affluent population is financially literate with high retail participation in both equities and mutual funds. US wealth managers thus have a lucrative target market onshore. In the future, growth in the affluent population’s liquid assets will be pronounced compared to other developed economies. At the end of 2015, nearly two thirds of the US adult population was considered affluent, making the US home to the largest affluent population in the world. This compares very favorably to Western Europe, the second-largest wealth market in the world, where only 20.1% of the population is considered affluent.

Scope

• High net worth (HNW) individuals account for 1.8% of the US population, and their numbers are expected to swell by nearly 7% year-on-year to 2019. Ultra-high net worth individuals (those with over $10m in assets) are expected to increase by over 10%.

• The US retail investments market remains buoyant, but growth slowed significantly throughout 2014 and 2015, largely due to outflows of equities following a bumper year for the stock market in 2013. Against an uncertain economic backdrop, bonds are already bouncing back and are predicted to record 4% year-on-year growth to 2019.

• HNW individuals are now allocating 28.1% of their investible assets outside of traditional investments, with hedge funds the most popular alternative option in 2015 and private equity a relatively close second.

• Offshore investment continues to decrease (now at 6.1%) following the onset of the Foreign Account Tax Compliance Act (FATCA), with client anonymity and tax efficiency the key drivers.

Reasons to Buy

Benchmark your share of the US wealth market against the current size of the market.

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

Identify your most promising client segment by analyzing penetration of affluent individuals in the US.

Evaluate your HNW proposition by understanding how FATCA is affecting your HNW clients.

Review your offshore strategy by learning HNW motivations for offshore investments and their preferred booking centers.

private banking
wealth management
US
North America
investments
savings
allocation
HNW
offshore
mass affluent
affluent
mutual funds
hedge funds
FATCA
CRS
ETFs

Table of Contents

EXECUTIVE SUMMARY

Key findings

Critical success factors

SIZING AND FORECASTING THE US WEALTH MARKET

Affluent individuals in the US account for nearly two thirds of the adult population

HNW investors account for

1.8% of the market, and the very rich will get richer

Overall growth of total liquid assets has been highly variable in recent years

Wealth held by affluent investors has risen robustly, providing wealth managers with ample opportunities

US HNW individuals hold over one third of total liquid assets, a share that will rise

DRIVERS OF GROWTH IN THE US WEALTH MARKET

2015 saw growth stagnate, and this is unlikely to change over the next five years

The US market is heavily weighted towards equity and mutual funds

The bond market will rise again, but the market will remain weighted to mutual funds and equities

Deposits will see slightly slower but steadier growth, supported by benign inflation and higher interest rates

A moderate rise in inflation and small interest rate hikes will have little effect on the deposit market

GDP growth is also unlikely to strongly affect deposit allocations, especially if there is no real wage upturn on the horizon to kick-start consumer spending

Bonds, equities, and mutual funds are more closely aligned with the fortunes of the stock market

The US stock market has struggled to add value in recent years and has had a rough start to 2016

Retail bonds are set to grow significantly in 2016 as the effects of QE and the zero interest rate policy diminish

The performance of the stock market also has a direct impact on equities and mutual funds

HNW INVESTMENT PREFERENCES

HNW individuals allocate

28.1% of their investible assets outside of traditional investments

Hedge funds are the most popular HNW illiquid asset

HNW individuals hold

6.1% of their assets offshore

Client anonymity and tax efficiency are the biggest drivers of offshore investment

The UK and Japan are now the most popular booking centers for US HNW individuals

APPENDIX

Abbreviations and acronyms

Supplementary data

Definitions

Affluent

Bonds

Cash

Deposits

Domicile

Equities

Exchange of information

FATCA

HNW

Liquid assets

Mass affluent

Mutual funds

Onshore

Residency

Methodology

Verdict Financial's 2015 Global Wealth Managers Survey

Global Retail Investments Analytics methodology

Bibliography

Further reading

About Verdict Financial

Disclaimer

Table

Table 1: Income tax rates and income bands for 2016

Table 2: US: number of affluent individuals by asset band (000s), 2011-15

Table 3: US: number of affluent individuals by asset band (000s), 2016e-19f

Table 4: US: value of liquid assets held by affluent individuals by asset band ($bn), 2011-15

Table 5: US: value of liquid assets held by affluent individuals by asset band ($bn), 2016e-19f

Figures

Figure 1: 62% of the total US population is affluent, which represents the world's largest wealth opportunity

Figure 2: HNW and mass affluent individuals account for almost all onshore US liquid assets

Figure 3: The US retail savings and investments market will stagnate over the forecast period

Figure 4: Equity and mutual fund holdings account for 67.3% of the total onshore market

Figure 5: The US market is heavily weighted towards equity and mutual funds

Figure 6: Deposits will see steadier growth, adding $2.46tn over four years

Figure 7: IT and financial services account for 37% of the NYSE Composite Index

Figure 8: Retail bond holdings will see strong growth in 2016

Figure 9: Mutual funds and equities mirror the NYSE Index

Figure 10: US retail mutual funds are heavily weighted in equities

Figure 11: Direct property investments are the most popular asset outside traditional liquid allocations among US HNW investors

Figure 12: US HNW individuals allocate 6.1% of their wealth offshore

Figure 13: Client anonymity is the primary reason HNW clients offshore wealth

Figure 14: The UK and Japan are now the booking centers of choice for US HNW citizens

Figure 15: FATCA agreements have been signed across the world

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