MERRILL LYNCH AND CAPGEMINI REPORT DOUBLE-DIGIT GROWTH IN THE NUMBER OF WEALTHY INDIVIDUALS IN INDIA WORLD WEALTH REPORTS High Net Worth Wealth Grows Strongly at Over 8%, Surpassing $30 trillion in 2004, according to Merrill Lynch and Capgemini World Wealth Report 2005 Discloses That Number of "Millionaires" Grows by Over 7% to 8.3 Million Worldwide
Mumbai, June 10, 2005: There were an estimated 70,000 High Net Worth Individuals (HNWIs) in India at the end of 2004, up14.6% compared with the previous year, according to the 2005 World Wealth Report published today by Merrill Lynch and Capgemini. HNWIs are individuals with financial assets of at least US$1 million, excluding their primary residence.
"India continued to be one of the high growth areas in 2004 as around 9,000 more people joined the elite list of HNWIs in 2004,"said Raj Sehgal, Merrill Lynch Global Private Client's Country Head for India and Global NRI Market Manager. Despite a strong slump in the stock prices in the middle of 2004, Indian HNWIs were able to recover as capital markets recorded sharp upward rally in the second half. "India featured prominently amongst the major stock exchanges in emerging economies with strong growth rate in Market Capitalization."
"We identify trends in the marketplace to assist wealth advisors in providing timely and sophisticated advice that help to improve their clients' portfolio performance. Capgemini provides innovative technology tools, solutions and processes to wealth advisors that transitions Financial Advisors into the role of the highly trusted "CFO" so they can run their clients' investments like an institution, said Mr. Baru Rao, CEO, Capgemini India."
The world's high net worth wealth grew strongly in 2004 for a second consecutive year, increasing 8.2% to $30.8 trillion, according to the 2005 World Wealth Report, released today by Merrill Lynch and Capgemini.
The number of high net worth individuals (HNWIs) — individuals with a net worth of at least US$1 million, excluding their primary residence — grew by 7.3% to 8.3 million, a net increase of 600,000 worldwide. North America led with a nearly 10% growth rate to 2.7 million HNWIs, surpassing the 2.6 million in Europe. Asia-Pacific's growth rate of over 8% — to 2.3 million HNWIs – was twice that of Europe.
"The two main drivers of personal wealth creation – economic growth and market capitalization – worked together to generate the strongest growth in high net worth wealth that we've seen in three years," said James P. Gorman, President of the Merrill Lynch Global Private Client Group. "Looking regionally, Singapore, Hong Kong, Australia and India saw the highest rates of HNWI population growth, while wealthy people in South Africa and the Middle East benefited from the rise in commodity and oil prices. Growth generally lagged in Europe, with only two nations – the United Kingdom and Spain – showing growth comparable to the worldwide rate," Mr. Gorman said.
2004 also witnessed the expansion of the European Union, with 10 new countries admitted as members. While the GDP growth varied from country to country, Germany, France and Italy, which together account for half of Europe's economic output, remained in an economic trough. Bertrand Lavayssiere, Managing Director, Global Financial Services for Capgemini commented "While structural issues in the European economy – notably high unemployment and slow GDP growth – constrained wealth creation across most of the region, the so-called BRIC nations – Brazil, Russia, India and China – continued to emerge as an economic force and create wealth in the process."
"Stock market gains as measured by the world's largest indices tended to moderate in 2004 after a very strong recovery in 2003, while growth in some of the smaller, developing markets was extremely strong, driven by commodities and oil," he continued.
Growth leading to Challenges for the Mid-Tier Millionaire
As wealth continues to grow, the report notes that HNWIs with financial wealth between $5 million and $30 million are facing particular challenges in managing their increasing net worth. "Those HNWIs, whom we have termed the "Mid-Tier Millionaires" tend to respond to the paradox they are facing, added complexity and their desire to have customized solutions, by increasing the number of specialist providers to manage their wealth" stated Ms. Dolby of Capgemini's Wealth Management Practice. "This, as well as the increase in cost of maintaining their lifestyle overall, places additional pressures on performance expectations, especially in a recovering or stabilizing market such as we have experienced over the past two years."
According to Mangesh Hirve, Manager Sales- Central and Southern Europe from Capgemini India, "The challenges in the Mid tier Millionaire market necessitates leveraging technology to support Relationship managers in delivering high touch customer service. More than a quarter of MTM clients invest in offshore tax havens and many more in emerging economies. This necessitates the need to simplify the overall costs for clients, advisors and providers alike."
Forecast for 2005
After 2004, a year that marked the strongest economic growth worldwide in 20 years, growth is expected to temper in 2005. A combination of factors, including rising inflation and interest rates, is expected to slow global growth and affect the value of financial assets.
As a result, the Merrill Lynch Capgemini World Wealth Report projects that global high net worth wealth will grow at a compound annual rate of 6.5% over the next five years, reaching US$42.2 trillion by 2009.
The key regional highlights and drivers are listed below:
North America: Low interest rates and tax reform drive growth
- Low and stable interest rates throughout 2004 drove spending on fixed investments, which doubled from 2003.
- HNWIs continued to benefit from tax reform, with protection from estate taxes steadily rising through the end of the decade, before "sunsetting" by the end of 2010.
Asia-Pacific: As goes China, so goes the region
- China, growing at 9.5%, drove economies across the Asia-Pacific region, with Australia, Taiwan, South Korea, Malaysia, Singapore and Japan all benefiting.
- If China's growth slows as expected in 2005, its neighbors are likely to feel the pinch. One exception is India, the region's other 2004 success story.
Europe: With low growth, wealth creation lags
- Europe's HNWIs grew at a far slower rate as a result of the slow GDP growth of its largest economies: France, Germany and Italy along with high unemployment and tax burdens in the region.
- In contrast, HNWI population growth in the UK and Spain, at 8.9% and 8.7% respectively, appears to be significant and follows 2003 performance where these economies also outperformed the rest of Europe.
Latin America: Wealth advances, led by Brazil
- HNWIs grew by 6.3% in 2004, substantially higher than the 1.3% rate of 2003. Nevertheless, wealth remained highly concentrated.
- Brazil, accounting for roughly one-third of South American GDP, continued to dominate South America's economic landscape. There, government fiscal and monetary policies helped drive growth.
Middle East and Africa: Oil and commodities are the story
- The HNWI population in the Middle East and Africa (primarily South Africa) grew by 9.5% and 13.7% respectively, well ahead of 2003.
- Oil and commodities drove dramatic gains in stocks trading in the United Arab Emirates and
HNWI Growth by Region, 2004
About Merrill Lynch
Merrill Lynch is one of the world's leading financial management and advisory companies with offices in 36 countries and total client assets of approximately $1.6 trillion. As an investment bank, it is a leading global underwriter of debt and equity securities and strategic advisor to corporations, governments, institutions, and individuals worldwide. Through Merrill Lynch Investment Managers, the company is one of the world's largest managers of financial assets. Firmwide, assets under management total $479 billion. For more information on Merrill Lynch, please visit www.ml.com.
About Capgemini and the Collaborative Business Experience
Capgemini, one of the world's foremost providers of Consulting, Technology and Outsourcing services, has a unique way of working with its clients, called the Collaborative Business Experience. Backed by over three decades of industry and service experience, the Collaborative Business Experience is designed to help our clients achieve better, faster, more sustainable results through seamless access to our network of world-leading technology partners and collaboration-focused methods and tools. Through commitment to mutual success and the achievement of tangible value, we help businesses implement growth strategies, leverage technology, and thrive through the power of collaboration. Capgemini employs approximately 60,000 people worldwide and reported 2004 global revenues of 6,291 million euros. For more information on Capgemini, please visit www.capgemini.com