Growth of Europe's Affluent
February 6 2004
A new report from Datamonitor reveals that Europeans are under half as likely to be affluent as US citizens (8% versus more than 16% of the population). Spain has Europe's fastest growing affluent market but the UK the most developed range of financial offerings for the better off.
Datamonitor defines affluent individuals as those who are of above average wealth, but do not have sufficient liquid assets to be classed as HNWs [High Net Worth individuals] - ie they have liquid assets of between £30k and 200k.
| Forecasted number of European mass affluent individuals and value of liquid assets held, 2007 |
|
| Country | Individuals (m) | as % of the population | Liquid Assets (EURbn) |
|
| Germany | 8.6 | 8 | 870 |
| UK | 6.5 | 8 | 682 |
| France | 7.0 | 9 | 727 |
| Italy | 6.5 | 8 | 657 |
| Spain | 3.3 | 6 | 338 |
| Nordic region | 1.9 | 6 | 188 |
|
| Total | 33.8 | 8 | 3,462 |
| Source: Datamonitor Global Wealth Model 2003 |
The report forecasts that the total number of affluent individuals in
the UK will increase by 30% to 6.5m in the next four years. Historically, the UK has offered the widest range of differentiated services for mass affluent customers of any of the major European countries, with strong premier banking offerings and a highly developed financial advice market.
Market entrants with standalone affluent offerings have found the competition fierce. Recent years have seen a return to an increased emphasis on offering core banking services to affluent customers, as a means of strengthening relationships, promoting customer loyalty and increasing cross-selling. According to report author and Financial Analyst Oliver Guirdham, 'Following the prolonged bear market, the much-vaunted development of the self-directed and financially confident affluent customer has been stunted. The desire for high quality and impartial advice remains strong in this segment of the population'.
Spain experienced the fastest growth in its affluent market from the end of 1997-2002 at 47%, as the country continued to close the gap in affluence with its EU neighbours - continued rapid growth of 7% per annum is forecast. Spanish customers' loyalty to local banks has meant that special packages introduced by foreign banks and asset managers have struggled - for example Credit Suisse abandoned its affluent strategy in Spain in 2003.
France experienced the second fastest growth. In both countries exposure to equity-linked investments is limited, protecting affluent individuals from declining equity markets.
Financial advisers, traditionally stronger in the UK and Germany, are gaining ground against the large universal banks in Italy and France by offering independence and a 'high touch' service. Italian financial advice companies such as Fideuram and Mediolanum performed better than many banks during the equity downturn.
Many banks have introduced or extended ranges of packaged premium accounts, which offer everything from superior interest rates to concierge services, which will buy theatre tickets and arrange for washing machines to be repaired. The number of these accounts has grown fast across Europe - in the UK there are now 6 million fee-paying relationship accounts, a jump of 260% between 1998 and 2002, and the packaged account market in the UK is worth more than £1bn per annum.
Advanced technology means that Nordic banks have the strongest offerings for affluent customers in Europe. For example Nordea, the leading Scandinavian bank, is the leading Internet bank in the world by transactions. Other banks such as Svenska Handelsbanken adopt a decentralised management structure, allowing staff to adapt products and services to their customers needs at the local level.
'Packaged accounts have the potential to transform the current account from an expensive problem for banks to a strong revenue generating and hooking product, from which higher value products can be cross-sold', comments Guirdham. 'While the trend is spreading rapidly, some banks have yet to adopt, either because they are looking to offer a more devolved and bespoke service to affluent customers or because they are afraid of set-up costs at a time where many banks have been cutting costs'.
Further details of the report,
Financial Services for Affluent Customers in Europe, are available from Anne Bourgeois,
abourgeois@datamonitor.com . The company's web site is at
www.datamonitor.com
All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.
