Not surprisingly, last year’s market took its toll on the wealthy, reducing assets, slimming their ranks and undercutting their trust in institutions associated with the market,according to the 14th annual Global Wealth Report, released this morning by Merrill Lynch Global Wealth Management and Capgemini. The report contains the results of a survey of clients, FAs and executives at 31 banks.
The report showed that total assets held by high net worth individuals (HNWI), those with $1 million or more in investable assets, dropped 19.5 percent to $32.8 trillion in 2008, on par with the total for 2005. Total assets held by ultra high net worth individuals (UHNWIs), those with $30 million-plus in investable assets, declined 23.9 percent. Meanwhile, the global population of HNWIs declined by 14.9 percent in 2008, and the global population of Ultra-HNWIs fell 24.6 percent. Many of the wealthy also shrugged off their financial advisors in 2008, with a quarter either leaving or transferring assets away. Additionally, forty-six percent of investors said they don’t trust in their financial advisor or firm and 78 percent said they had lost faith or trust in the regulators.
On a call with reporters, Dan Sontag, president of Merrill Lynch Global Wealth Management, said restoring trust in both the marketplace and among clients will be crucial to the future of wealth management. Merrill is urging advisors to communicate frequently with their clients, and Sontag says it is more important now than ever that this communication be “face to face.”
Furthermore, Sontag says clients are demanding more real time access to their information.
But Sontag took pains to point out that a recovery in sentiment among the wealthy is already under way. For instance, Merrill actually recorded a net gain in client relationships over the past five weeks. And some wealthy individuals are beginning to put their money back in the market. About 22 percent of Merrill client assets are in cash and cash equivalents, today, or $1.3 trillion dollars, down from 23 percent earlier this year, he said.
“I’ve been active with clients, in the last six months especially, traveling across the country and globe—Tokyo, Geneva, Dubai, London. There’s a consistent theme—HNWIs are beginning to want to look forward,” Sontag said. “Instead of focusing on what happened, they’re looking to start recovering some of what they lost.”
The U.S. saw its HNWI population drop 18.5 percent in 2008; however, it remains the single largest home to HNWIs with 2.5 million, or 28.7 percent of the total global HNWI population. In France, the HNWI population declined by 12.6 percent, 2.7 percent in Germany, and 9.9 percent in Japan. Hong Kong's HNWIs’ population was hit dramatically, shrinking 61.3 percent to 37,000. While the global population of HNWIs remains concentrated, the report found the distribution is shifting. China, for example, saw an important increase in its HNWI population in 2008, and surpassed the U.K. to rank fourth among countries with the largest HNWI populations. According to Sontag, there are 55 millionaires created in China every day.