The number of high net worth individuals – those with free assets of more than $1m – has grown exponentially, as booming stock markets in the US and Europe propelled more than a million people into the ranks of the super wealthy, bringing the current global count to a record 16.5 million.
According to a recent report by business consultancy Capgemini, the world’s high net worth individuals (HNWI) have collectively amassed an eye-watering fortune of $63.5 trillion. Last year alone, 1.1 million people joined this exclusive club – a rise of 8.2% – far outstripping the 6.5% annualised growth across the previous five years. Researchers predict that HNWI wealth is on track to exceed $100 trillion by 2025.
The rich get richer
The report confirms what most of us already know: that the rich are getting richer at a much greater rate than the broader population. Capgemini researcher Cliff Evans believes this is largely down to their ability to access better investment advice. He said, ‘For people with a lot of money the service they’re getting from investment managers is proving its worth. If you can afford the advice you get a much greater return.’
The facts speak for themselves. The report shows that HNWIs earned average returns of more than 24% on their managed portfolios; this in sharp contrast to the average high-street bank interest rate on savings which can be well under 1%.
Big gains in Latin America
Capgemini revealed that the number of those with investable assets from $1m to $5 – the so-called ‘millionaires next door’ – grew by 7.4% to 14.9 million in 2016, while the rate at which people hit the ultra-high net worth threshold (boasting assets of $30 million+) increased by more than double the 2015 rate. There are now in excess of 150,000 ultra-high net worth individuals holding a combined total of $22 trillion in investable assets.
The report says that this is due, in part, to the jump in Latin American economic performance. As Latin America accounts for more ultra-high net worth wealth than any other region, it impacts overall growth in this segment.
Overall, though, the wealthiest people by far are in the US (4.8 million), with Japan a distant second (2.9 million), followed by Germany (1.3 million) and China (1.1 million).
Tipping the balance
It’s not good news for everyone. These latest figures fuel the concern that economists feel over the global rise in inequality. As the gap between the haves and the have-notes increases every year, there are fears that social cohesion will suffer as a consequence and will undermine sustainable economic growth in the future.
Economists from the International Monetary Fund (IMF) this month raised their concerns over the potential fallout from the widening wealth gap, saying:
‘Inequality has risen in several advanced economies and remains stubbornly high in many that are still developing. This worries policymakers everywhere for good reason. Research at the IMF and elsewhere makes it clear that persistent lack of inclusion – defined as broadly shared benefits and opportunities for economic growth – can fray social cohesion and undermine the sustainability of growth itself.’
And even the wealthiest Americans are sounding a note of caution. Ray Dalio, founder of one of the world’s most successful hedge funds, Bridgewater Associates, said in a recent interview that the disparity of wealth in the US was ‘the biggest issue of our time’.