A 26% rise in the number of such wealthy individuals in Asia-Pacific set the pace globally, followed by North America, where there were 16.6% more individuals than a year earlier who met the Merrill Lynch/Capgemini definition of high net worth individuals – persons with investable assets of $1m (£676,300, €813,800) or more, excluding their primary residence, collectibles, consumables and consumer durables.
For the first time since Merrill Lynch and Capgemini began conducting their survey 14 years ago, Asia Pacific now has as many HNWIs as Europe – currently, 3 million.
UK wealthy also gained in ’09
High net worth individuals also had a better year in 2009 in the UK, where their numbers climbed by 24% to 448,000, after having plunging by 26% the previous year. The resurgence was helped by last year’s 49.5% rise in the UK stock market’s capitalisation, the Merrill Lynch/Capgemini survey shows.
This is still fewer UK-resident HNWIs than there were in 2007, when their numbers peaked at 495,000.
The Merrill Lynch Global Wealth Management and Capgemini report is closely watched by the global luxury goods and services industries, as well as by wealth managers and financial advisers who help high net worth individuals to become and to stay rich.
Implications for wealth managers
In unveiling the report today in London, Capegemini Financial Services’ global head of capital markets Edward Merchant called attention to its findings that HNWIs remain much more conservative in their investment outlook as a result of events in 2007 and 2008, and have failed to regain their faith in the world’s financial markets and regulatory bodies.
What this means for wealth managers “is that the HNWI is now looking to [them] to not just give them advice, but to provide them with additional types of protection that they now don’t feel they can get from financial markets and from the regulators”, he added.
This is a finding with major implications, particularly for advisers who look after HNWIs at the lower end of the wealth scale, according to Merchant.
“They [these HNWI customers] are much more engaged – they’re reading the fine print [and] they are becoming much more hands on in trying to understand the nature of the products that they’re investing in, and the way that those products react to the market,” Merchant said.
“They are re-validating the advice that they have been given, that [previously] they had just accepted.”
How HNWI’s accumulate, invest and spend it
As it has in previous years, the Merrill Lynch/Capgemini report looks at how the world’s HNWIs and ultra-high net worths accumulate wealth, invest it, spend it and donate it. It also looks at similar patterns among the ultra high net worths, or ‘ultras’, whose definition is similar to that of the HNWIs except that their investable assets total $30m or more.
The survey’s researchers worked from data covering 71 countries accounting for more than 98% of global gross national income and 99% of world stock market capitalisation, in addition to interviewing advisers from some 23 wealth management firms.
The Merrill Lynch/Capgemini report was released within hours of the unveiling by Britain’s new government of a raft of new taxes on the UK’s wealthiest citizens, including increases in VAT and capital gains.
Other key findings of the Merrill Lynch/Capgemini report:
• The global HNWI population remains “highly concentrated” in the US, Japan and Germany, which together accounted for 53.5% of the world’s HNWI population last year, down slightly from 2008
• HNWIs last year reduced their allocations to cash in their portfolios “to 2007 levels” as the proportion of their assets held in fixed income and equities rose. By 2011, their equity allocation “is expected to increase an additional six percentage points” as they regain their risk appetite; however, their newfound fondness for fixed income investments – now at 31% of their average portfolio, compared with 21% in 2006 – is expected to remain unchanged in 2011
• While the number of HNWIs rose by 26% in Asia and 16.6% in North America last year after plunging in 2008, the number of HNWIs in the Middle East grew by only 7.1%, reflecting that region’s recent and continuing real estate crash-driven troubles
• Ultra-high net worths fared even better last year than their less well-to-do HNWI counterparts, increasing their wealth as a group by 21.5% — a significant change from 2008, when they saw their holdings plummet by 24%. This result “was most likely due to a more effective re-allocation of assets”
• A disproportionate amount of wealth remains concentrated in the hands of these UHNWIs, who represent only 0.9% of the global HNWI population but last year accounted for 35.5% of global HNWI wealth
• As wealth managers look to deliver more of the kinds of additional services today’s more cautious and engaged HNWIs are now seeking, their biggest challenges will be “scalability, efficiency and profitability”
• While art remains a top category for UHNWI in the “investments of passion” category, asset allocations to this area fell as prices for contemporary art dropped last year, hitting HNWIs more than their ‘ultra’ counterparts. Allocations to “luxury collectibles” – jets, cars and yachts – rose in 2009, as did spending on jewelry, jems and watches amid inflation fears
• World GDP growth is likely to be positive in 2011, led by Asia Pacific, but the survey’s researchers have concerns about the outlook for a sustained global economic recovery
