I have a rather perverse penchant for reading the "wealth reports" that are routinely churned out by the likes of private bankers, insurers, credit card companies, accountants, and luxury peddlers. It’s a masochistic assignment, not at all for the faint of heart. There are so many bar charts to get through. But I am looking for something slightly offbeat, something unknown, below the surface of what the report authors think is the headline news.
I usually find what I am looking for. I have found everything from disconnects between publicly stated philanthropic goals of the wealthy and how their money is actually flowing to non-profits, to why Miami is freakishly one of the most attractive real estate markets for the globe’s hyper wealthy, despite that state's generally dire housing market.
There is also a serious purpose to the exercise. The 2.7 million American households earning more than $250,000 a year are sitting on $23.3 trillion in wealth, once you add up all their assets, so where they put their money has a lot of repercussions to the US economy as a whole.
The same truism holds globally. Last evening, I was rereading the 2011 World Wealth Report, produced by Capgemini and Merrill Lynch Global Wealth Management, refreshing myself about what has passed before they produce their 2012 report. The study, now in its 16th year, is always good for some weird facts.
Here's what caught my eye during this recent read of the 2011 report: For all the public hand-wringing about the sclerotic economies of the developed world, and the much-ballyhooed rise of Asia's go-go new money, here's a fact about the globe's spread of High Net Worth Individuals (defined as those with investable assets of $1 million or more, excluding assets like primary residence and collectibles) that made me do a double take.
Three countries"”Japan, Germany and the US"” account for 53% of the globe's entire HNWI population of 10.9 million. The 3.1 million HNWIs in the US alone equal 29% of the globe's total.
Yes, the Asian economies are coming up fast, but off very low bases, and it's going to be a long while yet before their wealth clusters rival anything comparable to what those three "mature" economies have accomplished. Furthermore, the lock those three developed economies had on the global HNWI community back in 2006 was 54.7%, before experiencing a 1.7% decline in “marketshare” over the subsequent four years, which, incidentally, coincided with the worst economic decline the West has seen since the Great Depression.
That's got me scratching my head. To me that looks like a rather glacial retreat, rather than an earthquake-like rupture in the wealth game, which the breathy doomsayers on the TV news are constantly claiming as fact.
Here’s an example of the hype that doesn’t withstand closer scrutiny. The Wealth Report made much over the fact that India's 153,000 HNWIs became the globe's 12th largest population of wealthy, bumping Spain down to 14th place. My reaction: Let's not get out our hair shirts and start flagellating ourselves quite yet.
Italy, ranked 9th in the world with its 155,000 HNWIs, has a total population of 60.5 million. India, ranked 14th in the world with 153,000 HNWIs, has a population of 1.171 billion. On a per capita basis, in other words, there are 20 times more wealthy people living in Italy, six decades after that country was flattened by a world war, than there are currently living in India.
The figures are even more dramatic when you move up to Ultra-HNWI crowd, defined as those with investable assets of $30 million, not including primary residence and collectibles. In 2010, that entire universe of privileged folk grew a heady 10.2%, to 103,000 individuals globally, while their wealth jumped 11.5%, after surging 21.5% in 2009. But here's the dirty fact everyone is overlooking: North America alone was home to 40,000 of those 103,000 mega rich.
The increasing fragmentation of wealth across the globe, compared to the concentrations of wealth that historically existed in just a few countries, is generally a good thing for the world, however much it makes us feel threatened. Africa currently is, for example, the fastest growing market in the world for HNWIs, their numbers rising 13.6% between 2009 and 2010, compared with 12.5% in the Middle East, 12.1% in the Asia-Pacific, and 9.1% in North America. That has to be good news - for all of us.
But it's easy to get big percentage rises off of low bases. Analyze the numbers and it’s clear the death of North American wealth-creation is, to paraphrase Mr. Clemens, much exaggerated. At its current rate, wealth fragmentation still has many decades to go before it is a reality, our decline not nearly as imminent as the nattering news nabobs and the alarmist politicians would have us believe.
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Italy may have been flattened 60 years ago but the British also stopped stealing India’s wealth only 60 years ago and they did this for over 200 years. For most of that time India was used to make the British wealthy. But I guess Britain counts less than a third world country now, so it doesn’t really matter.
Written with Barron's wit and often-contrarian perspective, Penta provides the affluent with advice on how to find the hidden value in wealth management, how to make savvy acquisitions ranging from vintage watches to second homes, and how to smartly manage family dynamics.
Richard C. Morais, contributing editor at Barron's, was formerly Forbes magazine's European bureau chief in London, where he won multiple Business Journalist Of The Year Awards. Returning to the US in 2003, he focused on family wealth issues and chaired the Forbes Family Business Forum. In 2009, he left Forbes to launch his career as a novelist. His debut novel, The Hundred-Foot Journey, is an international best seller in active film development. Scribner is publishing his second novel, Buddhaland Brooklyn, in July, 2012.
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