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Wealth Management – The World’s Wealth in 2014

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On October 3, 2014, , In Business, By , With Comments Off

Today’s blog gives unparalleled insight into the world’s high net-worth population, exploring how millionaires are spending their money and examining what the future holds for the world’s wealthiest HNWIs.

What is a High net worth individual?

The term HNWI (High net worth individual) relates to anyone with a high-net worth, and typically is regarded as someone whose assets are in excess of $1 million US. To put it simply, a HNWI is a millionaire. Last year saw a surge in the worldwide HNWIs, with nearly 2 million people becoming millionaires throughout the course of 2013. In 2014, there are 15% more millionaires worldwide than ever before.
Today over 14 million people are considered HNWIs worldwide, which is approximately twice the population of Hong Kong! Global HNWI wealth grew by 14% in 2013 and reached a record $52.6 trillion US dollars. The wealth owned by the richest people in the world is three times larger than the GDP of the United States.

Getting to know a High net worth individual

Those in the high net worth population tend to overwhelmingly possess quite a number of similar traits. More than three in every four (84%) High net worth individuals is a man, with an average age of 63. Just over half of them (57%) are self-made millionaires with the remaining 43% having inherited their money.

How the world’s richest manage their money

During the global economic recession the world’s high net worth population were being cautious in relation to their investments, and a steady focus was placed on wealth preservation. In 2013, a marked improved was seen in the global financial markets and high net worth individuals have shifted their focus once again to wealth growth.
In 2013 only 18% of high net worth were primarily focused on wealth preservation (which was down 17% from 2012) and a much larger 31% of the high net worth population have begun to focus on wealth growth (which is up 13% from 2012). Interestingly, the high net worth population has begun to focus on the larger, worldwide scene. This year high net worth individuals spent over one third of their wealth outside their home region so far, a rise from 25% in 2013.

Popular Investment Areas include:

  • Cash & Cash Equivalents – 26.6%
  • Alternative Investments e.g. art – 13.5%
  • Fixed Income – 16.4%
  • Property – 18.7%
  • Equities – 24.8%

What the world’s wealthiest want from life

A recent survey outlined what high net worth individuals are seeking from their wealth management professionals. Almost one in three HNWIs would simply like to maintain their current lifestyles in retirement, and this was the largest concern for all of those polled. The next area that the high net worth population is concerned with is college education funding with one in five stating that this is a large concern, similarly 4.2% expressed that charitable giving was a primary concern for them.
Almost 15% of HNWIs polled said that protecting their current level of wealth was their primary concern, while 14% wish to aggressively grow their wealth. One in ten HNWIs wishes to focus on leaving an estate for their heirs, while 1.9% want to improve their household cash flow. Of the high net worth individuals polled 2.4% want to minimize income and capital gains taxes and 1.9% would like to better manage market risk.

Who are the big players?

While there are 14 million high net worth individuals on the planet, there are less than 200,000 ultra-high net worth individuals. To distinguish the varying levels of wealth there are a three overriding categories, those in the high net worth community are recognised as having $1 million US in liquid financial assets, the upper end of HNWI category is around $5 million, at which point the individual is then referred to as “very HNWI”. If someone has more than $50 million US in wealth they are classified as an “ultra-high net worth individual” (UHNWI).
The number of UHNWIs rose by 6% last year to 199,235, and their combined net worth equates to 40% of the world’s GDP. Of those that are ultra-high net worth individuals 1% are billionaires, and the average UHNWI is worth $139 million US.

The Top Five Richest People in the World

1. Bill GatesBill Gates

  • Net Worth – $80 Billion
  • Age – 58
  • Country – United States
  • Source Of Wealth – Microsoft

2. Vladimir PutinVladimir Putin

  • Net Worth – $70 Billion
  • Age – 61
  • Country – Russia
  • Source of Wealth – Oil, Gas, Investments

3. Carlos SlimCarlos Slim

  • Net Worth – $64.8 Billion
  • Age – 74
  • Country – Mexico
  • Source of Wealth – Telecom

4. Amancio OrtegaAmancio Ortega

  • Net Worth – $63.5 Billion
  • Age – 78
  • Country – Spain
  • Source of Wealth – Inditex

5.Warren BuffettWarren Buffett

  • Net Worth – $63 Billion
  • Age – 83
  • Country – United States
  • Source of Wealth – Berkshire Hathaway

The Future of Global Wealth

By 2016 global wealth is expected to reach $64.3 trillion, increasing at an annual rate of 6.9%. Three out of four HNWIs are confident that they will generate wealth in the future, and they have higher trust in their wealth managers. The wealth of the Asian-Pacific market is projected to grow at nearly 1.5 times the global average, with the global average sitting at 6.9% while the Asia-Pacific average is projected to be 9.8%.

At All Finance Tax we provide wealth management services to our clients, and consequently the status of the world’s wealth is of particular interest. With nearly 2 million new millionaires joining the HNWI club in 2013 the future of world wealth is a fascinating topic.

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