Germanys economy looks set to continue its robust, but moderate growth. However, there are considerable political, economic, and financial uncertainties on the horizon that could significantly impact the countrys wealth market. With lower growth and return prospects, the role of wealth managers in a traditionally risk-averse market will become more challenging.
- Affluent individuals account for 20% of the German population, holding 74% of liquid assets. This wealth distribution is similar to other developed economies.
- A robust economic performance will continue to underpin growth in Germanys overall retail savings and investments market, which is forecast to grow by an average of 2.9% a year to 2020. However, it is important to highlight the predicted slowdown in this mature and conservative market.
- Deposits dominate, accounting for 68% of balances. This reflects a habitual, persistent risk aversion that is forecast to remain, in spite of a 0% interest rate and rising inflation.
- Investor uncertainties surrounding domestic elections, Brexit, and the US agenda have significantly dampened stock market appetite. As a result, equities and mutual funds are forecast to grow by only 1.7% a year to 2020.
- Germanys HNW individuals invest 22% of their assets outside traditional investments, with private equity and property proving popular.
- Offshore investments account for 10% of HNW individuals illiquid assets, distinctly below the global average. These investments are driven by the desire for better returns rather than tax efficiency.
Wealth in Germany: Sizing the Market Opportunity analyzes the German wealth and retail savings and investments markets, with a focus on the HNW segment. The report is based on our proprietary datasets.
Specifically the report:
- Sizes the affluent market (both by number of individuals and value of their liquid assets) using GlobalDatas proprietary datasets
- Analyzes which asset classes are favored by German investors and how their preferences impact the growth of the total savings and investments market.
- Examines HNW clients attitudes towards non-liquid investments, such as property and commodities.
- Identifies key drivers and booking centers for offshore investments.
- Benchmark your share of the German wealth market against the current market size.
- Forecast your future growth prospects using our projections for the market to 2020.
- Identify your most promising client segment by analyzing the penetration of affluent individuals in Germany.
- Evaluate your HNW proposition by understanding how the changing German tax systems will impact HNW clients.
- Review your offshore strategy by learning about HNW motivations for offshore investments and their preferred booking centers.
Table of Contents
1.1. The German economy will remain stable, but the wealth sector is facing uncertain and challenging times
1.2. Key findings
1.3. Critical success factors
2 SIZING AND FORECASTING THE GERMAN WEALTH MARKET
2.1. The wealth market remains concentrated at the top end
2.1.1. Affluent individuals account for 20% of the total adult population
2.1.2. German affluent individuals hold 74% of liquid assets
3 DRIVERS OF GROWTH IN THE GERMAN WEALTH MARKET
3.1. Shifting investor sentiment and market uncertainties will take their toll on savings and investments
3.1.1. The relatively strong German economy will underpin growth in the savings and investments market
3.1.2. A strong bias towards deposits will continue to shape the German market
3.2. Deposits growth will increase over the forecast period
3.2.1. The ECB lowering the main interest rate to 0% reduced the appeal of deposits
3.2.2. Inflation has remained significantly below the ECB target of 2%, but is increasing
3.2.3. Germany's strong traditional preference for deposits and high-risk aversion will continue to drive growth
3.3. A late stock market rally in 2016 will not be enough to ease investor nerves over equities and mutual funds
3.3.1. In spite of volatility, a late Q4 rally meant the DAX recorded its fifth year of growth
3.3.2. The uncertain political, economic, and financial outlook has affected investor confidence
3.3.3. The Investment Tax Reform Act will impact this sector from 2018
3.4. Negative yields are deterring investors from the bond market
4 HNW INVESTMENT PREFERENCES
4.1. HNW individuals allocate 22% of their investible assets outside traditional investments
4.1.1. Alternatives account for just under half of non-traditional assets
4.1.2. Property is the second most popular non-traditional asset class
4.2. Offshore investments form a relatively small proportion of assets and are primarily driven by the desire for better returns
4.2.1. Only a small proportion of HNW wealth is invested offshore
4.2.2. The availability of better investment returns is the biggest driver of offshore investment
4.2.3. Switzerland and the US are the preferred offshore booking centers
4.2.4. The German government has taken numerous steps to tackle offshore tax evasion
4.2.5. Several key taxes are currently subject to increases or changes
5.1. Abbreviations and acronyms
5.2. Supplementary data
5.3.6. Liquid assets
5.3.7. Mass affluent
5.3.8. Mass market
5.3.11. Exchange of information
5.4.1. GlobalData's 2016 Global Wealth Managers Survey
5.4.2. Global Wealth Model methodology
5.4.3. Global Retail Investments Analytics methodology
5.6. Further reading
List of Tables
Table 1: German personal income tax rates for a single person, 2016
Table 2: Total German adult population by asset band (000s), 2011-15
Table 3: Total German adult population by asset band (000s), 2016e-20f
Table 4: Germany: onshore liquid assets by asset band ($bn), 2011-15
Table 5: Germany: onshore liquid assets by asset band ($bn), 2016e-20f
Table 6: Euro to US dollar exchange rate, December 31, 2015 and December 31, 2016
List of Figures
Figure 1: Affluent individuals account for 20% of the total adult population in Germany
Figure 2: Affluent individuals account for 74% of total liquid assets in Germany
Figure 3: Growth in Germany's retail savings and investments market will be more muted to 2020
Figure 4: The total retail savings and investments market is expected to remain strongly skewed towards deposits
Figure 5: Deposits dominate the retail savings and investments market, and will see the fastest growth to 2020
Figure 6: Retail deposits will outperform GDP growth to 2020
Figure 7: Germany's stock market has performed well since 2011
Figure 8: Mutual funds and equities remain volatile, with lower growth rates forecast
Figure 9: Bonds are forecast to perform below GDP growth
Figure 10: Private equity and property investments form the bulk of investments outside traditional asset classes for German HNW investors
Figure 11: German investors hold limited offshore assets
Figure 12: Better investment returns constitute the main driver of offshore investments for German HNW individuals
Figure 13: Most German offshore booking is performed in Switzerland and the US
Figure 14: Germany has signed TIEAs with many offshore centers globally
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