France Wealth Management – HNW Investors 2021

Financial services and healthcare are the key industries for HNW wealth generation followed by construction & engineering, real estate, tech & telecommunication, transport and logistics, retail, fashion & luxury, FMCG, hotels restaurants and leisure, media, diversified, government, basic materials, and energy & utilities. A stellar investment banking performance throughout the year helped boost the revenue and profits of banks during 2021. In addition, a sustained recovery in French retail banking since Q2 2021 and lower risk financing costs also contributed to the positive performance of the sector. In 2021, the CAC Financials Index made up its earlier losses with over 29% gain. It is expected that the sector will keep hold of loan loss provisions until the third quarter of 2022. Such measures are likely to positively impact the performance of the sector in the country.

The healthcare sector which is the second-largest contributor to HNW wealth continued to hold up strongly in 2021 given the essential nature of the healthcare sector during the pandemic. The CAC Healthcare Index registered over a 28% increase in its performance in 2021. In October 2021, the government adopted the Health Innovation Plan 2030 to drive innovations in France’s healthcare sector, which will further contribute to the performance of the sector going forward. Moreover, the tech and telecommunications sectors is the third-largest contributors to HNW wealth, remaining resilient in the face of the COVID-19 crisis. This sector has benefitted from rising internet usage and a greater need for connectivity amid increased working from home and online purchasing. The French government is aiming to establish 100% internet connectivity in all parts of the country by 2022.

What are the market dynamics of the French wealth management market?

The prominent drivers for expatriation to France are better lifestyle conditions, followed by tax efficiencies and retirement. Constituting a comparatively high proportion of the total HNW population in the country, the French HNW expat market is a lucrative target for wealth managers in the country and the region. Wealth managers should ensure they develop offerings suitable to investors within Europe. In the US Various benefits encourage HNW individuals to move to France. Specific provisions in the France-US double taxation treaty offer Americans living in France tax credits, deductions, and income exclusions. This mainly benefits American retirees, who can use this agreement to live in France while only paying US taxes. Moreover, the UK is also a key source of HNW expats for France. Uncertainties amid Brexit resulted in some UK investors acquiring French nationality. This represents an opportunity for wealth managers, as these expats are likely to seek guidance on their wealth structuring amid ongoing uncertainty. If catered for effectively, they could be retained in the future.

What are the HNW product and services provisions and demand in France?

French HNW investors show strong demand for products and services such as lifestyle privileges, life insurance, and portfolio secured lending. Meanwhile, tax planning is set to record the highest increase in demand over the next 12 months. France is among the European countries that impose the heaviest tax burden on high earners. As per the OECD’s Annual Revenue Statistics Report 2021, France ranked second out of 38 OECD countries in terms of tax-to-GDP ratio in 2020. In 2020, France had a tax-to-GDP ratio of over 45% compared with the OECD average of 33%. Consequently, sound tax planning services have become a crucial component of French wealth managers’ overall service proposition.

Despite the forecasted growing levels of demand in the life insurance space, wealth managers are currently failing to meet existing demand levels. Currently, over 55% of wealth managers do not offer life insurance as part of their proposition in France. As discussed earlier, French HNW individuals tend to use multiple wealth managers to address their needs. Wealth managers could reduce this investor promiscuity and capture a greater share of their wealth by providing a more comprehensive service proposition.

What are the segment classifications in the wealth management market in France?

France’s wealth management market is classified into investment style preferences, asset allocation preferences, and offshore investment preferences.

Investment Style Preferences: The French HNW individuals have the highest forecasted demand for execution-only asset management. Most French HNW investors are inclined towards self-directed investments to gain some control over their assets. The French HNW population is a slightly less promiscuous bunch compared to the European average, working with 2.1 wealth providers. On average, French HNW investors’ primary providers can secure 62.1% of a client’s wealth, in line with the regional average. Another important factor in France relates to investors’ investment style preferences. As French HNW investors make use of different types of mandates for their different servicing needs, a multi-service proposition is critical in the country.

Asset Allocation Preferences: The majority of onshore HNW wealth is held in bonds, equity, and property. Looking at the one-year forecast, there is a clear consensus that investors expect the current bull run to continue over the next 12 months, with equities expected to experience a notable increase in demand. However, investors will hedge their bets with increased allocation to alternatives and bonds to diversify their holdings. Equity ETFs and equity funds are the preferred asset classes among HNW investors in France. In line with investment preferences in the wider European region, French HNW investors show strong demand for equity-based investments, despite the heightened volatility witnessed by this asset class amid the economic crisis caused by the COVID-19 pandemic. Looking at the equity portfolio in detail, we see a bias towards fund products thanks to a desire to achieve greater diversification.

Offshore Investment Preferences: French HNW individuals hold slightly less of their wealth offshore than the regional average. The average French HNW investor offshores 42.5% of their wealth abroad, in line with the preferences of investors in the wider region. This proportion is expected to strongly increase over the next 12 months. This indicates that many HNW investors are uncertain about the country’s economic recovery and are willing to look for investment avenues in other markets. France recorded steady growth in its economic performance indicators in 2021, such as a rising GDP growth rate, increased household spending, and stable unemployment levels. But issues such as the recent resurgence in COVID-19 cases in the country and Europe continue to pose a threat to the progression of this positive performance.

France wealth management market, by segment

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Market report scope

Scope

• Expats constitute more than 13% of the local HNW population. They represent an attractive target market thanks to their more complex service requirements.
• Robo-advice accounts for just more than 4% of the French HNW portfolio. The market for robo-advisory services is at a very nascent stage of development in the HNW space in France, with a limited number of wealth managers offering this service.
• French HNW individuals spread their investments in line with the European average, with bonds, equities, and property dominating.
• The average French HNW investor offshores more than 42% of their wealth abroad. This proportion is expected to strongly increase over the next 12 months, indicating indicates that many HNW investors are uncertain about the country’s economic recovery and are willing to look for investment avenues in other markets.

Reasons to Buy

• Develop and enhance your client targeting strategies using our data on HNW profiles and sources of wealth.
• Enhance your marketing strategies and capture new clients using insights from our data on HNW investors’ asset management style preferences.
• Tailor your investment product portfolio to match the current and future demand for different asset classes among HNW individuals.
• Develop your service proposition to match the demand expressed by French HNW investors and react proactively to forecast changes in demand.