The wealth management opportunity of the century!
Being a nation that values egalitarianism, Australia offers scant recognition for the premium consumer, a market that will provide the next wave of opportunity and demand from emerging nations, such as China. The premium class of consumers are part of a new market of ultra high net worth individuals (UHNWI) who make up a market that is truly out of reach for the majority. To be clear, this opportunity is different from the “mass affluent” market. Mass affluent refers to exclusive goods and services that can be accessed by the masses (e.g. Chanel bags, Louboutin shoes, first class airfares etc.) if they put their mind to it. On the other hand, the “premium market” is unattainable to 99.9% of the population, invitation only experiences and events that offer exclusive personal experiences that are both hard to imitate and discrete. If Australia is to remain competitive as an international destination of choice for the world’s elite, it must, in both business and tourism, redesign the delivery and experience of the products and services it provides. Australian businesses and marketers must move quickly to keep pace with the rapidly changing taste and demand of China’s wealthiest consumers.
China’s new wealth has the potential to accelerate growth in the private banking and wealth management sectors for those who can provide tailored services and fully understand the needs of the premium market. According to official numbers (which may understate the actual position) China has over one million millionaires and 122 billionaires (second only to the USA) and it will have the world’s fourth largest concentration of wealthy people in the next two years. Currently, China is the largest market for luxury goods in the world and by 2015 will account for one third of all luxury good purchases. China’s top 500 wealthiest have a combined wealth of almost US$600billion and an average net worth of US$1.2billion. With such fast growing wealth, there is enormous potential for those in the private banking and wealth management sectors to tailor their services and capabilities to cater for the wide range of needs of wealthy Chinese individuals.
China’s premium consumers have a diverse range of needs to be met as they look to diversify, invest and restructure their investments, both domestically and overseas. This growing number of individuals will need exclusive advice, support and services to manage their wealth and assets offshore. The Australian “Significant Investment Visa Program” (subclass 888 visa) is one mechanism for wealth managers to facilitate this investment opportunity, specifically targeting those with plans to emigrate, and therefore with long term interests in Australia. It would be amiss for wealth managers to fail to fully embrace this premium market so as to start developing and investing in relationships with China’s wealthy. Building access and a healthy reputation amongst the network of China’s wealthiest will give access to a rapidly deepening pool of wealth at a rate of growth we won’t see in the West in the near future.
With most premium consumers relatively new to the consumer market and wealth, their consumer behaviour is very different from their international and middle class counterparts. In fact, more than half of China’s wealthy today were not wealthy five years ago and more than half of those who will be wealthy in the next five years are not wealthy today. China has many “rags-to-riches” stories, and perhaps most famously, Mr Zong, the 67 year old CEO who was born into a poor rural family, and prior to starting his own business selling soda and iceblocks at 42, he worked on a farm, as a factory worker and salesman. Mr Zong’s company, Hangzhou Wahaha Group is now the largest beverage company in China, worth US$4.88billion, it employs over 30,000 employees and Mr Zong’s estimated wealth is around US$11billion. Most Chinese billionaires have emerged from total poverty, where there was not enough to eat, as opposed to those who have risen from the relative poverty of a typical middle class family in the West. Furthermore, most of China’s wealthiest were born in the 1970s and were involved in finance, trade or manufacturing.
Australia must welcome and engage with China’s elite to compete with the USA, Canada and Europe and remain a top emigration, business and investment destination for China’s wealthy. Interestingly, over 70 per cent of China’s wealthiest have emigrated or are in the process of emigrating. This presents a huge opportunity for Australia to attract the brightest, wealthiest and most entrepreneurial minds to our shores.
The three main drivers behind this trend are:
(i) Asset Protection
Many of China’s high net worth individuals are seeking a legitimate means to move their assets offshore for the purposes of asset protection, particularly in terms of cross-border structuring, tax mitigation and long term investment planning.
(ii) Retirement and succession planning
Many of the children of high net worth individuals choose to study and live abroad and require advice and assistance with retirement, succession planning and the long term growth and protection of their family’s wealth.
Wealthy entrepreneurs and high net worth individuals are looking to diversify their assets across a variety of markets, currencies, industries and sectors that they cannot access in China. Australia has a wide array of safe and viable opportunities that, with the right advice, service and support, provide access to attractive investment opportunities overseas.
There is an overwhelming opportunity for Australian financial services (and other) businesses to provide elite and exclusive experiences for those who can easily afford it. There are already a large group of wealthy families and ‘second generation’ sons and daughters living in Australia whose demands and needs are simply not being met as they seek to accumulate their wealth out of the spotlight. Wealth Management and Private Banking businesses which can seize this opportunity will be handsomely rewarded. Money is not the issue here - experience, service and discretion is paramount. Whilst Australians by no means undervalue the importance and achievement of success, it remains to be seen whether a nation plagued with the “tall poppy” syndrome has the will to respect, serve and value the time, expectations and demands of the world’s elite.