Wealth surveys - a consistent picture

There are a number of publicly available surveys of wealth. Some of the better known examples include:

1. the Merrill Lynch Cap Gemini World Wealth Report - focusing on global HNWIs and UHNWIs using thresholds of USD1.0 million and USD30 million in investable assets

2. the Barclays UK Wealth Map - focusing on UK HNWIs and UHNIs with thresholds of GBP1.0 million and GBP5 million in investable assets

3. the US Trust Insights on Wealth and Worth - focusing on "wealthy Americans" with USD3 million in investable assets

Although each of these reports focuses on a different segment of the market and uses data prepared at different times, they do present some consistent themes:

1. although the wealthy took substantial financial losses during the financial crisis, they have recovered well. This suggests (and there is some useful data in the Merrill Lynch Cap Gemini report) that the wealthy have considerable exposure to risk assets and/or income streams which considerably exceed their living expenses;

2. while the number of HNWIs and UHNWIs is growing (in spite of the dip caused by the financial crisis) and is expected to grow further as the developing world plays catch up with the developed world, the absolute number of HNWIs and UHNWIs as a percentage of the total population remains relatively small, stressing just how difficult it is to achieve that status. As and aside, this should make it pretty obvious that higher taxes on the rich alone cannot close the spending deficits that a number of countries currently face;

3. as a generalisation, very few of the HNWIs and UHNWIs are young. It takes time for most people to accumulate that kind of wealth. Those who manage to amass a fortune at a relative young age are very much a minority. For most of us, it will take many years of perseverance and self discipline to get to HNWI status;

4. a million dollars isn't what it used to be. Inflation is very real, so it is no surprise that the number of people who are, on paper at least, HNWIs is growing. The reality is that, absent additional income streams, a net worth of USD1.0 million will probably only generate a perpetual inflation adjusted income stream of around USD30-40,000 (before tax). Even if you already own your own home outright, in most developed markets that level of income puts you firmly at the bottom end of the middle class. If you want to live a lifestyle comparable to the millionaires of popular imagination you will need an awful lot more than that.