Summary Rising disposable income, a relatively strong economic outlook, and a healthy stock market performance will all drive growth in the German wealth market. The retail savings and investments market increased by 4.8% in 2015, and is forecast to grow by 4.3% a year to 2019, reflecting the maturity and strength of the sector in Germany. Indeed, compared to many of its European peers, the German economy is in relatively good shape. Domestic consumption is increasing, with record employment, rising wages, and falling oil prices combined with low interest rates and inflation all fueling growth Key Findings -Affluent individuals account for 20% of the German population, holding 77% of liquid assets. This wealth distribution is similar to other developed economies. -Increasing disposable income, a relatively strong economic outlook, and a healthy stock market performance will drive growth in the savings and investments market, which is forecast to grow by 4.3% a year to 2019. -Deposits dominate, accounting for 67% of balances. This reflects a habitual, persistent risk aversion that is forecast to remain, in spite of the European Central Bank (ECB) lowering the main interest rate to 0%. -Germany's stock market performance, alongside the poor returns available in other asset classes, is increasing investor appetite in equities and mutual funds, which will grow by 7.9% and 5.5% respectively a year to 2019. In contrast, negative yields are deterring investors from the bond market, which is forecast to decline by 4.8% a year to 2019. -Germany's high net worth (HNW) individuals invest 28% of their investible assets outside traditional investments. Property accounts for two thirds of illiquid assets, where returns are greater than in some other liquid asset classes. -Offshore investments account for 9% of HNW individuals' illiquid assets, distinctly below the global average. These investments are driven by the desire for better returns rather than tax efficiency. Synopsis 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 the number of individuals and value of their liquid assets) using Verdict Financial's 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. Reasons To Buy -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 2019. -Identify your most promising client segment by analyzing the penetration of affluent individuals in Germany, both at country and regional level. -Evaluate your HNW proposition by understanding how the changing German tax systems will impact HNW clients. -Review your offshore strategy by uncovering the HNW motivations for offshore investments and their preferred booking centers.
Table of Contents
EXECUTIVE SUMMARY The German economy is showing signs of growth, supporting wealth creation Key findings Critical success factors SIZING AND FORECASTING THE GERMAN WEALTH MARKET The wealth market remains concentrated at the top end Affluent individuals account for 20% of the total adult population German affluent individuals hold 77% of liquid assets DRIVERS OF GROWTH IN THE GERMAN WEALTH MARKET Growth in Germany's mature savings and investments market will be driven by the economy and an increasing appetite for stock market exposure The relatively strong German economy will drive growth in the savings and investments market Increasing appetite for stock market exposure is slightly reducing a strong bias towards deposits Deposits will grow steadily over the forecast period The ECB lowering the main interest rate to 0% has reduced the appeal of deposits Negative yields are deterring investors from the bond market Germany's stock market performance is increasing investor appetite in equities and mutual funds HNW INVESTMENT PREFERENCES HNW individuals allocate 28% of their investible assets outside traditional investments Property investment accounts for two thirds of illiquid assets Offshore investments form a relatively small proportion of assets and are driven by the desire for better returns rather than tax efficiency Only a small proportion of HNW individuals' wealth is invested offshore The availability of better investment returns is the biggest driver of offshore investment The UK and Switzerland are the preferred offshore booking centers The German government has taken numerous steps to tackle offshore tax evasion Several key taxes are currently subject to increases or changes APPENDIX Abbreviations and acronyms Supplementary data Definitions Affluent Domicile DTA FATCA HNW Liquid assets Mass affluent Onshore Residency TIEAs Methodology Verdict Financial's 2015 Global Wealth Managers Survey Global Wealth Model methodology Global Retail Investments Analytics methodology Bibliography 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), 2016f-19f Table 4: Germany: onshore liquid assets by asset band ($bn), 2011-15 Table 5: Germany: onshore liquid assets by asset band ($bn), 2016f-19f Table 6: Euro to US dollar exchange rate, December 31, 2014 and December 31, 2015
List of Figures
Figure 1: Affluent individuals account for 20% of the total adult population in Germany Figure 2: Affluent individuals account for 77.3% of total liquid assets in Germany Figure 3: The savings and investments market is expected to stabilize up to 2019 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, but equities and mutual funds will see the fastest growth into 2019 Figure 6: Retail deposits will outperform GDP growth out to 2019 Figure 7: Bonds are forecast to perform below GDP growth Figure 8: Germany's stock market has performed well since 2011 Figure 9: Mutual funds and equities remain volatile despite positive growth rates Figure 10: Direct property constitutes the bulk of investments outside traditional asset classes for German HNW investors Figure 11: German investors hold limited offshore investments Figure 12: Better investment returns constitute the main driver of offshore investments for German HNW individuals Figure 13: The majority of German offshore booking is performed within Europe Figure 14: The German government has signed TIEAs with many offshore centers globally
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