Despite Great Recession, the Rich Grew Richer

It’s ironic that — even in the depths of the Great Recession — the number of millionaires around the world grew by 17 percent to 10 million.  Their collective wealth surged 19 percent to $39 trillion, according to the latest world wealth report from Merrill Lynch-Capgemini. “We are already seeing distinct signs of recovery and, in some areas, a complete return to 2007 levels of wealth and growth,” said Bank of America Corporation wealth management chief Sallie Krawcheck.

India, China and Brazil are home to the majority of the world’s newest millionaires, despite the fact that they were some of the hardest hit markets in 2008.  Asia now has three million millionaires – meaning it has caught up with Europe – thanks to a 4.5 percent economic expansion rate.  Their combined wealth soared 31 percent to $9.7 trillion, outstripping Europe’s $9.5 trillion.

North America’s wealth grew by 18 percent, while the number of individuals considered rich climbed 17 percent; their wealth totals $10.7 trillion.  Last year, the United States boasted the most millionaires – 2.87 million.  Japan was next with 1.65 million; Germany had 861,000; and China 477,000.  Switzerland boasts the highest concentration of millionaires, with approximately 35 for every 1,000 adults.

According to Lyle LaMothe, Merrill Lynch’s U.S. wealth management chief, “The wealthy allocated, as opposed to concentrated, their investments.”  In other words, they put their money into fixed-income investments that provided predictable cash flow.  The trick now is to convince the wealthy to return to higher risk investments that have a higher income potential.  “There is still a hesitancy,” LaMothe notes.  “Liquidity is incredibly important and people need cash flow to preserve their lifestyle – but they want to replace that cash flow in a way that does not increase their risk profile.  Investors are open to areas they hadn’t thought about before as they try to preserve their ability to be philanthropic, to preserve their lifestyle.  To me, the report underscored that clients are involved and they’re not inclined to stay in one percent savings accounts.”