Global billionaire wealth hits $6 trillion on back of sustained pension growth

02 January 2018

Global billionaire wealth has risen by 17% to $6 trillion, while the global collective of affluent High Net Worth Individuals (HNWI) have seen their total haul increase to $72.3 trillion. Pension funds and sovereign wealth funds have also seen their capital increase at a steady pace, following uncertain years.

Wealth managers have seen their total assets under management (AuM) increase steadily in recent years, in part due to growing pension pots, and new wealth being created across Asia. In a report from PwC, titled ‘Asset & Wealth Management Revolution: Embracing Exponential Change’, the Big Four firm has examined changes in the level of investment in the segment.

According to the study, given a number of key economic fundamentals remaining relatively stable – low interest rates and no large scale geopolitical upheaval – total AuM is set to increase from $84.9 trillion to $111.2 trillion by 2020, before increasing again, albeit somewhat more slowly, to $145.4 trillion by 2025. In the firm’s most conservative assessment, in which equity and/or bond markets take a tumble, wealth is still projected to increase by 2025, up from $84.9 trillion to $107.8 trillion.

Global AuM by region

The research notes that growth rates will vary considerably between regions in its base-case. Between 2016 and 2020, the 7% average CAGR is boosted in particular by Asia-pacific and Europe, at 8.7% and 8.4% respectively, while the US sees more reserved growth of 5.7%.

According to the study, considerable changes in distribution between active, passive and alternative fund types are expected between 2016 and 2025. The changes reflect shifts in the wider market as technologies, such as robo-investors, as well as cost cutting, changes in fee structures and changes in fund demand, shift.

Global AuM projection to 2025

EFTs are increasingly popular, with particularly young, wealthy investors, opting to invest in a range of such funds, pushing up the passive fund total asset as a share of total AuM by 2025 to 25% from around 17% in 2016. Alternative assets, meanwhile, are set to grow from 12% in 2016 to 15% by 2025.

Alternatives market

The alternatives market has grown in leaps and bounds since 2004, initially at CAGR 28.5% to 2007, before growth fell to 4% over the crisis years. In the years since (from 2012), however, growth picked up again to 11.8% - with total assets in the category growing to $13.9 trillion.

Going forward, infrastructure investment is likely to see the strongest interest in the segment, with AuM in the built environment projected to grow at 27.5% between 2016 and 2020, from $0.6 trillion to $1.7 trillion. Private equity, meanwhile, is set to see growth of around 7.8%, up from $4.7 trillion to $6.4 trillion. Hedge funds are on track for the least growth, relatively, up 4% annually over the years to 2020, from $3.3 trillion to $4 trillion – in the base scenario.

Total assets under management

In terms of client types, asset growth is projected to be relatively even across major client categories. Pension funds are set to grow by around 6% to 2025, while insurance companies are set to see their assets increase by around 4.8%, the lowest equal to the mass affluent. HNWI will likely see their assets increase by an average of 5.8%, to $119 trillion. Sovereign wealth funds are likely to see their total assets up by 7% to $13.6 trillion.

According to the study, total client assets across the major categories will stand at around $345 trillion in 2025, at an average increase across all categories of 5.4% annually. AuM are set to grow slightly more, at 6.2%, with their AuM at around $145 trillion – at penetration rates of 42.1%, up from 39.6% in 2016.

In contrast, while society’s elite enjoy continuous good times amid this growth, the bulk of the population are seeing little, if any, benefit from this. Heightened inflation and the stagnation of wages, mean that the consumers have become increasingly defensive in their spending behaviour, while the net expansionary spending behaviour has fallen. In a consumption-based economic system, this increased disparity could spell economic crisis in the future – impacting the potential growth of HNWI wealth, as the number of consumers willing and able to invest in their companies dwindles.



Accenture's push into the creative sector is an identity crisis

18 April 2019

In its latest push into the creative sector, Accenture Interactive acquired New York and London-based ad agency Droga5 earlier this month, adding illustrious clients such as HBO, Amazon and The New York Times to its roster of clients. With the latest in a long line of similar purchases, Accenture Interactive further demonstrated its ambition of becoming the globe’s leading trusted advisor to chief marketing officers. Yet according to Ben Langdon, Chairman of Class35, Accenture’s strategy may be heading in the wrong direction.

A press release on Accenture’s website announcing the acquisition sits next to a quote stating that “brands aren’t built through advertising” – a huge contradiction from a consultancy firm hell-bent on becoming the ‘CMO agency of choice’. It’s not alone of course. The entire consulting industry wants a piece of the creative pie right now. In addition to Accenture Interactive, recent acquisitions by PwC Digital, IBM iX, and Deloitte Digital meant that in 2017, for the first time ever, four of the world’s ten largest creative agencies were consultancies.

So just what it is that Accenture wants to achieve from this? For one thing, it’s clearly trying to be a digital transformation business. A one-stop creative shop rivalling more traditional models, it wants to lure CMOs in with the promise of lower ad spend and a “more impactful customer experience”. At the same time, though, it’s still in thrall to those same slinky, shiny branding and advertising agencies it’s attempting to disrupt. The Droga5 acquisition and that of Karmarama a few years before are both testament to this.

There’s a fundamental problem with this, though. Digital transformation businesses don’t sell to CMOs. These people have enough on their plates trying to transform their own marketing skills in order to keep up with an ever-changing market – they just don’t have the time or the energy to concern themselves with digitally transforming a whole business. If Accenture’s purpose is digital transformation, then going after creative agencies is barking up the wrong tree.Is Accenture's push into the creative sector an identity crisis?

Worlds apart

Perhaps more importantly, these two industries are worlds apart in terms of the way they think. Creative agencies are all about ideas, campaigns and consumers. Digital businesses, on the other hand, are customer-driven – they think in terms such as lifetime value, measurement, and efficiency. Customer-led thinking is an entirely different beast to consumer-led thinking.

The reality is that the arrival of digital and an all-encompassing obsession with technology, measurement and social has led to the death of agencies in a reductive, zero-sum, efficiency-focused battle with brands. Indeed, agencies have become so obsessed with the latest tech fads, they’re beginning to forget how brands work. Worse still, they’re beginning to forget how brands are built. And, by forgetting, they’re destroying their own values.

Killing creativity

All things considered, it really feels to me as though Accenture is a chip leader in a game it doesn’t understand. Expensive acquisitions like these show that they’ve got the big money, but they don’t appear to have any idea what they’re doing with it. Take talent, for example. The best talent in the creative industry right now is out in the market; it’s not tied to any one agency. Both agencies might well be at the top of their game, but why would a consulting firm waste so much money on buying them when they could hire high-quality creative talent on a contingent basis instead?

As their presence in the top 10 creative agencies shows, there is a growing trend in which Accenture, like many of the other big players, are buying up agencies as if they were nothing more than keywords. What they’re really buying, though, is a collection of credentials, clients and IP. Unfortunately, the talent that created those credentials aren’t going to stay at the business, the clients that hired the agency in the first place won’t be interested in buying what is basically just another part of Accenture, and the IP never really existed to begin with.

Droga5, for example, was one of the few agencies that did great brand work the old-fashioned way – undoubtedly something that made it attractive to Accenture in the first place. The irony, though, is that by leading it further away from the way of working that made it so special, the consulting giant will kill its creativity.

“Accenture Interactive has been dazzled by its ambitions to become the CMO agency of record…. But, in flashing its cash, it is spending millions on acquiring nothing of any value.”

If pressed, the recently acquired agency staff at Accenture will tell you just how dysfunctional the new arrangement is. They’re largely unfulfilled. Rarely do they feel their work has any sort of meaning or purpose. What’s more, the different disciplines have found little or no common ground, and find it hard to work together as a cohesive whole. It’s not surprising, then, to see talented people leaving in droves.

Beyond the window dressing 

It’s clear, then, that consulting firms and creative agencies are no easy bedfellows. But in his company’s defence, Accenture Interactive’s Senior Managing Director for North America, Glen Hartman, described its culture as being “far, far away from what a stereotypical consulting firm would look like. Our office and studios look a lot like Droga5’s.”

In demonstrating a belief that office design equates to workplace culture, this statement serves as an illustration of how confused Accenture is right now. It wants to justify its new strategy so badly, it’s started dressing like a creative agency. But if you look beyond the window dressing and see that you and your partners are speaking a different language with a different purpose, selling to different people in a different market, there’s no getting away from the fact that you’re different.

Accenture Interactive has been dazzled by its ambitions to become the CMO agency of record, and it wants to dazzle others with its new direction. But, in flashing its cash, it is spending millions on acquiring nothing of any value.

Related: Space between consulting firms and creative agencies is converging.