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Germany's rising rich to break 10 million barrier

3rd November 2005
By IB Staff Writer

Germany is currently home to more than 850,000 high net worth (HNW) and over 7.2 million mass affluent individuals, and the number of individuals with more than E50,000 in onshore liquid assets in Germany will break through the 10 million barrier by 2009. However, wealth managers operating in Germany must not be complacent at a time of changing attitudes among wealthy clients.

The German wealthy population has been making a good recovery following the difficult investment and economic conditions of the past few years. While the total number of individuals with more than E50,000 in liquid assets declined by 14% in absolute terms between 2000 and 2002, the wealthy population has since been increasing again, rising 9% in 2003 and a further 5% in 2004.

At the same time, the combined liquid wealth held by these high net worth and mass affluent individuals rose by 10% and 6% respectively. Some groups have done better than others, as the number of individuals with liquid assets worth between E1.5 million and E3 million swelled by 20% between 2002 and 2004.

This recovery reflects a 10% increase in overall household savings and investments in Germany between 2002 and 2004 driven by improving stock market and economic conditions. Within this, the value of direct equity and mutual fund investments - the two components for which wealthy individuals represent a significant proportion of the investor base - have risen at 23% and 21% respectively since the end of 2002.

In light of this Datamonitor expects solid growth for the next five years and anticipates that the number of wealthy individuals in Germany will exceed 10 million by 2009.

However, wealth managers in Germany need to take action if they are to retain their client base as the needs and attitudes of wealthy Germans have undergone a transformation during the past few years. While clients are not generally seen to be moving more towards the self management of their portfolios, they are demanding more contact with their wealth manager.

Furthermore, according to more than 80% of wealth managers from the German market that were interviewed by Datamonitor, German clients are now demanding to know more about the management of their portfolio than they were two years ago. As a result German wealth managers are under even greater pressure, from both the client base and the authorities, both to make their business and investment decisions as transparent as possible and to staff their operations sufficiently and effectively to meet the changing requirements of this lucrative client base.

Making the environment even tougher, Datamonitor's research also shows that wealthy Germans are categorically more prone to switching now than before the 2000 crash. Every single wealth manager surveyed in Germany stated that they believed that clients were now more likely to change their wealth manager than five years ago, with 69% of competitors stating that they strongly agreed with this statement.

While service has always been cited as a vital aspect of the wealth management relationship, the bar has now been raised and private banks must take note. If they are to continue to compete effectively in this changed market, they cannot afford to be complacent. They need to adjust to the wealthy clients' demands for an even more personalized service or risk those clients looking elsewhere.

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