The outlook is good for providers of financial services to high net worth individuals (HNWI). According to a recent study published by Capgemini and RBC Wealth Management titled Asia-Pacific Wealth Report, Australia saw its millionaire population grow by 15.5% in 2012.
The growth in Australia’s HNWI population was helped along by a 3.6% rise in GDP, a 16.4% rise in the share market and a 2.1% rise in property prices according to the report. Australia’s growth also outpaced that of the broader Asia-Pacific region, which reportedly grew at 9.4% over the year.
Highlighting Australia’s love affair with property, the report found that over 40% of HNWI wealth was tied to property assets – this is twice the global average. The report also found that Australia accounts for 5.6% of the HNWI market in the Asia-Pacific region and that on average there is a high level of trust and commitment to a single advisor in Australia.
These finding are certainly a positive for Australia’s financial planning and wealth management industry, particularly those firms that cater to the HNWI market. Firms including AMP (ASX: AMP), Macquarie Group (ASX: MQG) and Perpetual (ASX: PPT) have all built commanding positions in the HNWI space and stand to benefit from these trends continuing.
With an expanding population of high net worth individuals and a superannuation system that encourages saving, and is set to continue to do so at an increased rate, there is a positive tailwind for firms offering financial planning and wealth management services to Australia’s population.
Our established financial processes and systems and location near Asia also creates significant growth opportunities for financial services firms if they can successfully tap into the Asian market; a position AMP has recently moved to capitalise on through its joint venture with China Life Insurance Company.
Investors searching for stock ideas in this fully priced market may find it worthwhile to research investment opportunities within the wealth management space. The operating leverage firms enjoy to increased assets under management creates the potential for above average growth in earnings per share, an opportunity that is particularly hard to identify in most other sectors at present.
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Motley Fool contributor Tim McArthur owns shares in Macquarie Group and Perpetual.