North America overtakes Asia as home to most millionaires but crown not likely to stay.
Surging stock markets and recovering real estate prices contributed to a banner year for the world's wealthiest people.
The number of individuals with investible assets of more than $1 million grew by 9.2% to 12 million last year, and their combined wealth grew by 10% to a record high of $46.2 trillion, according to the 2013 World Wealth Report released by Capgemini and RBC Wealth Management today.
North America saw the biggest gain in the number of $1-million-plus individuals, growing 11.5% to 3.73 million. The region reclaimed its position as the largest high-net-worth market from the Asia Pacific region, which saw the HNW population grow by 9.4% to 3.68 million last year. The total wealth of the North American HNW population increased 11.7% to $12.7 trillion, while the Asia Pacific wealthy assets increased 12.2% to $12 trillion.
“High-net-worth population increases were strong in 2012,” said Jean Lassignardie, chief sales and marketing officer for Capgemini global financial services. He noted that North America likely will be surpassed permanently by the fast-growing Asia Pacific region, which is expected to grow at about 1.5 times the global average for the foreseeable future.
“North America's lead in both population and wealth is likely to be eclipsed again in the future by Asia-Pacific,” he said.
Europe, somewhat surprisingly, also saw strong growth in HNW numbers despite still-struggling economies and financial markets. The number of HNW individuals increased 7.5% to 3.41 million and they controlled wealth of $10.9 trillion. Latin America, which posted the strongest growth in 2011, saw the weakest increase in numbers last year. The HNW population was up 4.4% to 520,000. The wealth of those individuals increased 6.7% to $7.54 trillion.
The world's wealthiest achieved their gains despite the fact that they remained conservative with their investing. Based on a survey of 4,400 HNW individuals, more were more intent on preserving their wealth (33%) than increasing it (26%).
“Four years out from the financial crisis, the preservation of capital is still a major focus for high-net-worth individuals,” said John Taft, head of U.S. wealth management for RBC.
The asset allocation of the surveyed population included average cash balances of more than 28% across regions, while an average of 26% was invested in equities. The North American market was the most heavily weighted in stocks, investing 37.2% of its wealth in equities, versus 21.3% in cash. Latin American HNW individuals had the smallest equity allocations (12.5%) and the highest allocations to real estate (30.1%).
While the piles of HNW cash on the sidelines might seem like a potentially bullish factor for the stock market, don't expect the wealthy to shift their cash into stocks anytime soon.
“A lot of high-net-worth wealth is generated through risky business activities,” Mr. Taft said. “On the investing side, HNW people are often looking for less risk.”
The recoveries in both the equity and real estate markets have contributed to a renewed sense of optimism in the wealthiest segments of the population — particularly in the U.S. Eighty-three percent of HNW individuals in the U.S. expressed more confidence that they could build their wealth over the next year.
Capgemini expects that global wealth will increase by an average annual rate of 6.5% and reach $55.8 trillion by the end of 2015.
