Millionaires grow in number while their wealth declines

Private jetThe world's dollar millionaires have swelled their numbers to 11 million due to the addition of newly wealthy entrepreneurs in emerging markets, according to the latest World Wealth Report from research firm Capgemini.

For the first time, there were more dollar millionaires – individuals with more than $1 million in investable assets – in the Asia-Pacific region than in North America, though North American millionaires were still wealthier overall.

But overall wealth of these high-net-worth individuals declined 1.7% despite their growth in numbers. Slow economic growth, falls in stock prices across the world and investment strategies that favour safe, low-yielding assets were behind the decline.

“It is the first time in 16 years of publishing the report that the population of high-net-worth individuals has increased while total wealth decreased,” said Paul Patterson, head of global trust at RCB Wealth Management, which co-published this year's report.

Wealth managers are finding it tough in this environment. In 2007, the average profit margin for a wealth manager was 36% but by 2010 it had declined to 20%, said Capgemini. This was despite assets under management in 2010 having almost regained their 2007 peak of $17.4 trillion.

Patterson admitted profit margins could fall further, because managers' cost base is not going down, “if anything, it is going up”.

Wealth managers are suffering because of volatility, which has meant transaction volumes are down. Low asset-based fees, due to the preference for low-risk assets, and low interest rates have also reduced wealth managers' income.

Rowan Taylor, vice president at Capgemini, said wealth managers could make their businesses more efficient by automating procedures, employing centralised specialist teams, segmenting their clients more effectively and, in some cases, expanding through acquisitions.

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