Warren Enskat Group

Merrill Lynch and Capgemini this week published their annual World Wealth Report, a useful benchmark of HNW trends for over 20 years. It includes lots of nuggets and data touched on by us in our research – among the highlights for 2010/2011:

• 10 million hold $45 trillion: Global HNW wealth is up by 10% in 2010, approaching 11 million individuals with $43 trillion in assets.

• Asia-Pac surpasses Europe, LatAm packs Ultra HNW punch: Asia-Pacific now is the second largest HNW market behind North America; Latin America has the highest percentage of Ultra HNW investors relative to overall HNW population: 2.5% versus a global average of 1%.

• Big Three still hold half of everything, but a downward trend: Global HNW population is still dominated by the US, Japan and Germany, but decreasing (from 55% to 53% in 2010).

• Big gains for Asia/Southeast Asia: Global HNW growth in 2010 reached 33% in Hong Kong, 31% in Vietnam, 27% in Sri Lanka, 24% in Indonesia, 21% in Singapore and India.

• Crises and Gains in 2010: Emerging markets drove 2010 growth, especially equities and commodities; sovereign debt crisis in Europe/Greece; fiscal deficits in the US; political turmoil in the Middle East; earthquake in Japan; all impact asset allocation decisions.

• Household savings highest in Asia, lowest in North America: 2010 savings increased everywhere except Sub-Saharan Africa; as a percentage of GDP, highest in Asia-Pac (Japan 40%), lowest in North America (10%), dropped in most G7 economies in 2010, likely to rise again in 2011 and 2012.

• Allocations to Equities up, Away from Cash: HNW investors in 2010 had 33% in equities, up from 29%, likely to continue into 2012; both fixed income and cash percentages are down; regional differences: focus on equities in the US, real estate in Asia, Japan the most conservative with 55% in cash and bond vehicles.

• Alternatives down, but up for the two Cs: Allocations to alternatives down from 6% to 5%, but the two Cs are up and are likely continue to rise further – commodities from 16% up to 22% of alternatives, foreign currency holdings up from 13% to 15%; hedge funds down from 27% to 24%. Regional variances: commodities for the Americas, Japan foreign currencies, Asia-ex Japan structured products.

• HNW home biases continue, but less pronounced for some regions: US HNW investors have 76% at home, expected to go down to 68% in 2012; Europe at 56% (down from 59%), decrease to 49% expected in 2012; Asia-Pac down to 57% from 64%, likely the same next year; no change for LatAm in 2010, 47%, but drop to 38% anticipated for 2012.

• Investments of passion differ by region: luxury collectibles highest in Asia-Pacific, Russia and the Middle East, art in LatAm and Europe, wine in Hong Kong, sports in the US.

• Demographic changes for HNW investors means more complex needs and solutions: for now, 73% of HNWIs are male, and 83% are over 45 years old; however, inflection points are fast approaching: HNWIs under 45 grew from 13% two years ago to now 17%; Asia-Pac ex Japan, 41% of HNWIs are under 45; Mideast HNWIs 21% under 45, 56% under 55; Japan, the opposite: 80% over 55, 8% under 45.

• Women have more complex needs: Female HNWIs account for 27% globally, most established in the US with 37%, versus 14% in the Middle East, second and third largest are Japan (31%) and Asia ex Japan (24%); advisors need “to fully comprehend the network of influences on which female HNWIs rely”.

• HNW investors trust again, but are more cautious: advisors regained client trust post-crisis, but Capgemini and Merrill see a greater need to deliver an integrated response to HNWIs complex post-crisis needs around crisis-related concerns and a cautious search for returns.

• HNW investors are more engaged in their financial affairs, ask for innovative communication: 84% of HNWIs want more frequent and more innovative communication, and expect choice in how to communicate, including digital media and mobile applications.