Mass Affluent Target Propositions, 2021 Update – A Key for Sustainability and Growth

The global wealth market will increase by 8% in 2021. Targeting the mass affluent demographic has worked its way up the priority list for banks and wealth managers in recent years. Some banks are not new to capturing this demographic with dedicated services, but in this digital transformation period competition for this lucrative group is on the rise. Heightened competition and regulatory costs for wealth managers, low interest rate margins for banks, and new digital entrants keen to keep their business afloat are all reasons a host of players are targeting the mass affluent.

A wide-ranging service with both a high-tech and high-touch feel is in demand in this day and age. As a result, success with this demographic will be dependent on how well such needs can be met. The mass affluent demographic is being targeted by a wide range of financial services players, from wealth managers, to banks, to digital new entrants. On average, banks with the overall largest share in a market also tend to have the largest proportion of mass affluent individuals.

Multi-faceted services among banks offering mass affluent propositions are the norm, including investment options, insurance offerings, lending, credit cards, travel and lifestyle benefits, family options, and access to financial advisors. The early 2010s saw mass affluent products launched with the aim of growing footprints worldwide for banks with offices globally and the second half saw more players incorporate a digital element into their mass affluent propositions, moving services to a banking app, introducing robo-advisors, and using technology to improve the overall customer experience and reach more clients at speed.

How COVID-19 pandemic has impacted the wealth market?

The COVID-19 pandemic in 2020, was found resulting in severe economic and financial market downturns. Stock markets fell-down, interest rates were around the 0% mark into 2021, and government support schemes reduced yields from other fixed-income products, to name a few asset classes that were devastated by the pandemic. As a result, investor wealth was negatively impacted, with the upper echelons taking the biggest hit due to their adventurous risk appetite.

Therefore, to keep their wealth secure, many investors relied on shifting their wealth to safe asset classes such as deposits and bonds despite low returns. The global wealth market grew by 5% in 2020 to reach approximately $139 tn by the end of 2020. This growth was 7 percentage points lower than in 2019.

The second year of the new decade was expected to end on a much more positive note, with several major economies edging closer to full recovery largely due to mass COVID-19 vaccinations encouraging a level of normality across the globe. As a result, we expect the global wealth market to record strong 8% growth in 2021, surpassing the $150 tn mark by the end of 2021.

How regional markets recovered after post-pandemic?

The financial markets in Asia-Pacific saw a rapid recovery. This was largely due to key markets strict imposition of border controls, quarantining of arriving passengers and infected individuals, contact tracing, physical distancing, and high rates of face mask usage. This aided a very positive end to the year for the region’s wealth market, which grew by more than 9%.

Europe was devastated by the COVID-19 pandemic in 2020. Therefore, with the vaccine rollouts starting in Q4 2020 the market was forecasted to show a 5% growth for the region’s wealth market in 2020. Looking ahead, although 2021 was expected to be another year of growth due to mass vaccinations and large events gradually being allowed again, it was expected to be more of a slow burner compared to Asia-Pacific. Therefore, it is forecasted to show a respectable CAGR of 4% for the European wealth market between 2021 and 2025.

Due to COVID-19, pandemic the US region was impacted at a large scale in 2020. Both the US and Canada were found having a strong affinity towards investing in riskier asset classes such as equities and mutual funds, which meant devastating financial losses early on in the year.

As a result, the region’s wealth market grew by an estimated growth rate of more than 2% in 2020. With the post-pandemic recovery continuing into 2021, vaccination rollouts underway, and restrictions being lifted, the wealth market in North America was forecasted to grow by more than 9% in 2021. Thus, going forward, as markets settle the North American wealth market is expected to record a CAGR of more than 5% between 2021 and 2025.

What was the competitive dynamics of the banks?

Across key markets, the banks with the largest overall market shares such as HSBC in Hong Kong, DBS in Singapore, and Bank of America in the US tends to have the largest mass affluent current account market shares.

Market share proportions do vary across different regions, with Asia-Pacific witnessing strong dominance for leaders against the rest. In China, ICBC has the highest share of the mass affluent current account market, with China Construction Bank ranking second. In Hong Kong, HSBC holds the major market of the mass affluent current account market, with Bank of China in second place. In Singapore, DBS accounts for the highest one as the second-placed is taken up by OCBC’s.

In China, as most players do not provide dedicated mass affluent services, the most popular overall bank continues to dominate in this space. In Canada, TD Bank leads in terms of overall market share, followed by RBC. However, RBC leads from a mass affluent perspective.

Wealth market, by key players

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Market report scope

Scope

This report provides a comprehensive analysis of the Mass Affluent Target Propositions-

• The global wealth market will increase in 2021.
• With 2021 expected to be a more prosperous year than 2020, mass affluent investors will see their wealth grow by more than 6% in 2021
• On average, banks with the overall largest share in a market also tend to have the largest proportion of mass affluent individuals.

Reasons to Buy

• Understand the size of the mass affluent market opportunity, currently and over the next five years.
• Gain insight on mass affluent investor behaviors.
• Compare your mass affluent proposition to those of banks with the largest market share in selected countries.