The ultrarich are becoming uber-rich and high-net worth investors are watching their wealth soar.
Individuals with between $1-million (U.S.) and $5-million in investable assets – referred to as 'millionaires next door' by Royal Bank of Canada, which just released its annual World Wealth Report along with Capgemini – saw their wealth jump 15 per cent in 2013, while ultra-high net worth individuals, or those with more than $30-million in investable assets, saw their wealth pop 12 per cent.
Both groups benefited from hot equity markets, particularly in the U.S. and Europe, as well as a global business landscape that turned it up a notch, allowing business owners to generate better earnings.
The report is the third of its kind to be released by RBC and Capgemini, and the findings showed the second highest rate of growth for the global high net worth population since the start of the century. The number of high net worth individuals jumped 15 per cent to 13.7 million people globally, a growth rate that came second to only 2009 when markets started roaring back after a disastrous 2008.
Such large gains in both the number of high net worth individuals as well the amount of assets they control demonstrates why banks – including Canada's – are so keen to target this segment of the population. At home and abroad, Canadian lenders are rolling out high net worth advice platforms that cater to these investors, offering them specially tailored services such as tax and estate planning that add something extra on top of traditional investment advice.
Across the world, the biggest populations of high net worth individuals are housed in four countries: the U.S., Japan, Germany and China, which comprise 70 per cent of the total high net worth market.
Brazil stood out as a rare example where the wealthiest individuals struggled to make more money in 2013 as the country's economy stagnated after years of rapid growth and investors quickly fell out of love with emerging markets. Brazil's stumbles hurt global figures for ultra-high net worth individuals because the country is home to nearly one-fifth of these investors around the world.
After stripping their experience out of the 2013 totals, the remaining roughly 80 per cent of ultra-high net worth individuals saw their growth soar 15.5 per cent, the highest of all three categories of investors with assets of more than $1-million.
In Canada, the number of individuals with more than $1-million in investable assets jumped 7 per cent last year to 320,000, and over the past three years the growth of this population has slightly trailed the global average.
Overall, high net worth investors are putting more money into alternative investments, such as private equity and hedge funds, which now comprise 13.5 per cent of their holdings, but many of these individuals still hold a significant amount of cash. RBC and Capgemini found that roughly 27 per cent of their wealth was sitting in cash.
Since the financial crisis subsided, the cash portions of these portfolios "have been slower to come down than we would have expected," RBC wealth management head George Lewis said.