Personal Finance
Ranks of Rich in U.S. Grow at Faster Pace
28 June 2007
The Wall Street Journal <javascript:void(0)>
The ranks of the richest Americans expanded last year at an increased
pace, driven by a strong economy, but that growth is expected to
moderate in coming years, according to a new study.
The 11th annual World Wealth Report, compiled by Merrill Lynch & Co. and
Capgemini Group, shows that in 2006, the U.S. population of
high-net-worth individuals -- those with at least $1 million in
investible assets, excluding their primary residences -- rose 9.4% to
2.92 million. In 2005, the same population increased 6.8% to 2.67
million.
Robert McCann, president of Merrill Lynch Global Private Client Group,
attributed the increased pace of wealth generation to gains in economic
output and continued growth in the world's stock markets, two primary
drivers of wealth creation.
World-wide, the number of wealthy individuals climbed to 9.5 million in
2006, an 8.3% increase from 2005, according to the report. The combined
wealth of high-net-worth individuals world-wide increased to $37.2
trillion, up 11.4% from 2005.
The number of ultra-high-net-worth individuals -- those with at least
$30 million in investible assets -- increased by 11.3% to 94,970, in
2006, according to the report.
However, the report forecasts slower world-wide growth going forward
than that seen this year. "Looking ahead, mature markets like the U.S.
are expected to act as an anchor on the world economy as moderate growth
rates settle in," the report said. It projects that the wealth of high
net-worth individuals will reach $51.6 trillion by 2011, growing at an
annual rate of 6.8%.
The study uses a mixture of primary and secondary research, including
data provided by the World Bank, the International Monetary Fund and
surveys with hundreds of advisers at Merrill Lynch and other firms.
North America ranked first in both the number of high-net-worth
individuals and the size of their accumulated assets. The growth in the
U.S. more than compensated for the deceleration in the growth of the
high-net-worth population in Canada, to 6.9% in 2006 from 7.2% in 2005,
according to the report.
The population of high net-worth individuals in Europe increased by 6.4%
in 2006, a result of robust gross-domestic-product growth and strong
market capitalization in Eastern Europe's emerging markets as well as
strong market-capitalization growth by the region's more developed
nations, mainly in Western Europe, where merger and acquisition activity
was strong, the report said.
The BRIC nations -- Brazil, Russia, India and China -- continued to play
increasingly important roles in the global economy in 2006. China and
Russia were among the top 10 countries with the fastest-expanding
populations of high net-worth individuals, the report said. China's
population of those individuals rose by 7.8%, while Russia's increased
15.5%. Brazil and India showed continued strength based on domestic
private consumption and competitive service and manufacturing sectors,
the report said.
The highest growth in high-net-worth populations took place in Singapore
and India, where the increases over 2005 were 21.2% and 20.5%,
respectively, the report said.
The wealthy shifted their investment strategies in 2006, according to
the report. "More money went to real estate at the expense of
alternative investments," such as hedge funds and foreign currencies,
says Mr. McCann. That shift was driven primarily by commercial real
estate and real-estate investment trusts.
However, the report projects that this is a temporary tactical move
rather than a long-term asset allocation shift, and projects a greater
allocation to alternative investments in 2008.
The report also found that high-net-worth individuals' passion for
luxury is growing. Using data from Forbes's Cost of Living Extremely
Well Index, it found that the cost of luxury goods and services rose
nearly twice as fast in 2006 as the cost of everyday consumer products,
signaling that demand for luxury goods is outpacing demand for everyday
consumer items.
Among "investments of passion," high net-worth individuals allocated the
most money to luxury collectibles, including automobiles, boats and
airplanes. They allocated 26% of their "investments of passion" dollars
to luxury collectibles in 2006, 20% to art and 18% to jewelry, the
report said.
In the report's first breakout of philanthropic giving, it found that
high-net-worth individuals, led by the ultra-wealthy, gave an estimated
$285 billion to charitable causes in 2006.
---
The Rich Get Richer
-- According to a new report, 9.5 million people globally hold more
than $1
million in financial assets, an increase of 8.3% over 2005.
-- The wealth of high-net-worth individuals world-wide totals $37.2
trillion, an 11% gain since 2005.
-- Singapore, India, Indonesia and Russia witnessed the highest growth
in
high-net-worth populations.
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