The Rich Get Poorer
|June 30, 2009||Posted by Roshawn Watson under Uncategorized|
By: Roshawn Watson
Results of 13th Annual World Wealth Report
In an effort to better understand the economic climate and the needs of their clients, Merrill Lynch and Capgemini conduct an annual survey on wealth (I wrote about last year’s report here), and their results were summarized in a report that was released on last Thursday. Apparently, the number of millionaires (individuals with investable assets of at least $1 million USD excluding primary residence, consumables, collectibles, etc.) plummeted by a record 19.5% in 2008 to 8.6 million worldwide (down from 10.1 million). This is the largest decline in the 13-year history of the Merrill Lynch and Capgemini wealth survey. Similarly, the value of millionaire assets also decreased by 19.5% from $40.7 trillion in 2007 to $32.8 trillion in 2008. Undoubtedly, this stems from the decimated real estate and stock markets, contracted gross domestic product, and the declined values of private equity and hedge funds around the world.
One particularly disheartening “nugget” from the report was that last year’s losses in the US erased all the gains from the previous two years.
In other words, America’s wealth boom is back to around 2004 levels.
The report also highlighted a change in the global landscape of wealth as well. Although the United States is globally-known for having the highest concentration of wealth, with 28.7% of world’s millionaires residing here, the millionaire population in other countries have seen some major changes. While the United States’ millionaire population fell 19%, the United Kingdom dropped 26%, while Russia had a 27% drop, India declined 32% and Australia and Canada both fell 23%. Those countries least effected include Brazil, with a 9% drop, and China, with a 12% fall. Millionaires in the Asia-Pacific region are expected to outnumber those in North America by 2013, in part due to strong economic growth in China. In fact, China now has more millionaires than the United Kingdom. In addition, Brazil moved up on the list to the country with the 10th largest millionaire population, surpassing the more developed Spain and Australia.
Implications of Study: Wealth Distribution and Benevolence
In addition to providing a more complete perspective of the global economy, this survey also provides insight into the distribution of wealth and the impact that declining wealth will have on charitable endeavors. For example, the ultra-wealthy (defined as those with a net worth of at least $30 million) saw their ranks drop 25%, with their wealth dropping 24%. This is important because the loss of wealth among the ultra-wealthy disproportionately affected the overall trends. Although the ultra-wealthy make up less than 1% of the total millionaires, they hold 34.7% of the wealth. This survey also sheds light on the drastic decline in the number living donors noted earlier this year by Slate Magazine and Chronicle of Philanthropy. Simply put, wealthy individuals were less magnanimous because they felt poorer.
Perhaps, the biggest lesson from this report to me is to not place your trust in uncertain riches. To lose years worth of work in one year can be disheartening to anyone, regardless of how many digits comprise your net worth.
Copyright 2012, Roshawn Watson, Pharm.D., Ph.D. All Rights Reserved.