With the release this morning of the Merrill Lynch/CapGemini World Wealth Report 2009, what had been suspected for a long time became clear and verified: the wealthiest people in the world have suffered dramatic falls in net worth and have lost trust in their advisors.
With the release this morning of the Merrill Lynch/Capgemini World Wealth Report 2009, what had been suspected for a long time became clear and verified: the wealthiest people in the world have suffered dramatic falls in net worth and have lost trust in their advisors.
The headline figure is a drop in HNW wealth of 20% to $32.8 trillion, taking it back to 2005 levels. There are now 15% fewer HNW individuals (net assets above $1 million) and 25% fewer UHNW individuals (net assets about $30 million). Only 8.6 million people now qualify as HNW.
What this means in practical terms is that there are fewer HNWs and that those who are still HNWs are now on average worth less than before.
These figures might have been bearable for wealth management advisors and firms if they had not been accompanied by the news that 46% of clients lost trust and confidence in them, and that 27% of clients withdrew assets or left their firms completely. Entrepreneurs and those under 45 years old were more likely to leave.
An effect of this has been that clients are now diversifying by establishing relationships with more than one bank, said Edward Merchant, VP of Capgemini UK & Ireland. This has reduced the AuM of major wealth managers and benefited boutiques.
Britain suffered a precipitous fall in HNWs, from 491,000 to 362,000, allowing China (which also suffered a fall, though not as severe) to move into fourth place of countries with the most HNWs. America, Japan and Germany stayed at the top, although North America lost 19% of its HNWs from 2007 to 2008, equating to $2.6 trillion.
Nick Tucker, MD of Merrill Lynch Global Wealth Management, said: ‘Last year wealth became more concentrated; this year has seen the reverse. The largest declines were in the wealthiest regions.’
As well as the expected flight to safety in asset allocation – equities down from 33% to 25%, cash up from 17% to 21% – the World Wealth Report discovered that investments of passion showed a move to jewellery/watches/gems, things which will hold their value. Absolute figures were unavailable.