EU WEALTH IN 2007
With the expansion of the EU to 27 states in January 2007 and the continuing legislative push to create a single market in financial services, it is no longer appropriate to consider the UK HNW sector in isolation. There are now significant numbers of EU HNW individuals working in the UK (a trend that is likely to increase) and there are an increasing number of EU parented firms operating in the UK HNW space. There are, of course, substantial reciprocal opportunities for UK wealth managers across the EU, where there are now some 2.8m HNW individuals - an increase of 7.4% over 2007.
Although 2007 overall was another year of strong growth in individual wealth across Europe, the sharp decline in asset values seen in the second half of the year put a brake on HNW growth and in the fourth quarter of 2007 the number of EU HNW individuals declined by 0.83% – the first quarterly decline since 2002.
Not all regions of the EU experienced this decline; in the countries of Western Europe (particularly the UK) individual wealth creation had already experienced some slowing and the decline in equity values seen in Q3 and Q4 2007 accelerated this trend, while in while the countries of central and eastern Europe individual wealth continued to grow albeit at a slightly slower rate.
The UK has had one of the fastest growing HNW sectors in the EU in recent years and the factors that have driven the growth in this sector are now being replicated across the other EU states. Across the EU – but particularly in the recent entrants - there is evidence of an increasingly successful entrepreneur sector that has been able to benefit from the EU’s single internal market. Across Europe there is also a growing professional services sector seeing substantial growth coming from the enlargement of the EU. Both these trends have created a significant increase in the numbers of HNW individuals particularly in the 8 states that joined the EU in 2004. Poland, the Czech Republic, and Slovakia had the 3 fastest growing HNW sectors in 2007 with virtually all the growth coming from new wealth.
However, It is the rise in domestic property prices that has been the largest single driver of HNW growth across the EU. For example in Poland, there has been a sharp increase in the number and price of luxury homes not only in the capital city (where it might be expected), but also in the regional capitals of Wroclaw and Krakow.
One of MDRC’s main interests is the analysis and understanding of HNW behaviour and the development of segmentation models. Part of our work in the EU years has been focused on building behavioural segmentation models for the countries in the EU. Although this work is still at an early stage, at an EU wide level we see that 62% of HNW are in the “Value Seekers” and the “Self Directed” behavioural segments, these segments are the more challenging for wealth managers. The segments that are more amenable for wealth managers (“Traditionalists” and “Enthusiasts”) account for 24% of EU HNW individuals.