Spare a thought for the world’s ultra-rich. These people make up a mere 1 per cent of the world’s millionaires, but control about 35 per cent of the global millionaire cohort’s total wealth of $US42 trillion ($41.2 trillion, as at December 31, 2011).
In calendar 2011, ultra high net worth individuals (UHNWIs) got smashed by falling asset prices. There were hit harder than their more hard-up brethren thanks to a proclivity for relatively high risk and illiquid assets. As prices plunged, they were unable to get out.
The Capgemini/RBC Wealth Management 2012 World Wealth Report reveals that the world’s high net worth (HNW), or millionaire, population increased by 0.8 per cent to 11 million – which means that more people reached the threshold level to be classified as a millionaire – yet the global HNW population’s total wealth declined by 1.7 per cent.
Dorus van den Biezenbos, a wealth management specialist with Capgemini Financial Services, says the apparently contradictory figures can be explained by the extent of losses suffered by the UHNWIs and the consequent impact on the global averages for all HNWIs.
UHNWIs wealth declined by 4.9 per cent in 2011, after increases of 10.2 per cent and 11.5 per cent in 2009 and 2010 respectively.
In Australia the number of millionaires declined slightly, from 193,000 at the end of 2010 to 180,000 at the end of 2011. Van den Biezenbos says Australian HNWIs’ wealth was eroded by a decline of almost 18 per cent in the S&P/ASX 200 Index and a fall of almost 5 per cent in property values during the year.
Australia remained in ninth place in the world rankings for its number of HNWIs.
Applying the Capgemini global averages to the Australian figures figures, there are about 1800 Australians categorised as having ultra-high net worth, which is defined as $US30 million or more of investable assets, not counting their primary residence, collectibles, consumables and consumer durables.
For the first time, the number of millionaires in the Asia Pacific region passed the number in north America, 3.37 million to 3.35 million.
Asia-Pacific millionaires’ total wealth, at $US10.4 trillion, continues to lag their northern American counterparts’, at $US11.4 trillion, but van den Biezenbos says “it is only a matter of time” before Asia-Pacific wealth overtakes north American.
Van den Biezenbos says the behaviour of HNWIs has changed in recent years, from being very transaction-focused and always looking for the next great opportunity, to being cautious and favouring security. Typically this involves investing money in cash, term deposits or bonds, and sitting tight.
Van den Biezenbos says this has implications for the business models of advisers and institutions serving the HNW market: a business model that relies on transactions or volume is likely to come under threat, whereas one that is based on longer-term relationships is more likely to survive and be stronger.
