Study on High Net Worth Individuals Reveals Interesting Math

Stephen Chung

Managing Director

Zeppelin Real Estate Analysis Limited

November 2006

We have reviewed briefly the recent study done by Cap Gemini and Merrill Lynch on global high net worth individuals (HNWI), defined as individuals with US$1M or more in financial assets not counting his or her residence. Reportedly, there are now some 8,700,000 HNWI and they own a total of US$33,300,000,000,000 or approximately US$3,800,000 each. Readers interested in obtaining a copy of the study may wish to visit this webpage: 

http://www.capgemini.com/resources/thought_leadership/2006_world_wealth_report/

Toward the end of the study, 9 of the countries investigated have been selected for comparison in terms of the number of HNWI which they have and the growth rates from 2004 to 2005. These countries and their numbers of HNWI are listed below: 

Countries

 

 

Australia

Brazil

Canada

China

Germany

India

Russia

UK

USA

No. of High Net Worth Individuals HNWI - 2005

146,000

109,000

232,000

320,000

767,000

83,000

103,000

448,000

2,669,000

We have out of curiosity collected via the web the respective population (2005) and household (mostly late 90s to early 00s except for the estimated China figure) figures on these 9 countries as follows: 

Countries

Australia

Brazil

Canada

China

Germany

India

Russia

UK

USA

Population

20,090,000

186,113,000

32,805,000

1,306,314,000

82,431,000

1,093,563,000

142,776,000

60,441,000

295,734,000

Households

7,195,170

41,929,992

11,690,000

300,000,000

34,865,300

191,963,935

51,800,000

20,423,000

99,487,000

And the percentages of HNWI over the population and household figures for each of the selected 9 countries are: 

Countries

Australia

Brazil

Canada

China

Germany

India

Russia

UK

USA

% Population

0.73%

0.06%

0.71%

0.02%

0.93%

0.01%

0.07%

0.74%

0.90%

% Households

2.03%

0.26%

1.98%

0.11%

2.20%

0.04%

0.20%

2.19%

2.68%

As anticipated, developed countries such as the USA and the UK tend to have significantly higher percentages of HNWI than developing countries such as China and India, notwithstanding China percentages are (more than) double of those of India. Very roughly and on a household basis, around 2% of households in the developed countries have a HNWI.  

We have also collected the 2005 nominal GDP (Gross Domestic Product) in US$ on each of the 9 countries via Wikipedia: 

Countries

Australia

Brazil

Canada

China

Germany

India

Russia

UK

USA

GDP / cap US$

34,740

4,320

35,133

1,709

33,854

705

5,349

37,023

42,000

In general, one would expect that countries with higher GDPs per capita would have higher percentages of HNWI and vice versa, i.e. say a country with US$10,000 GDP per capita would have more or less double the HNWI percentage over say another country with only US$5,000 GDP per capita given all things being equal. Thus, using the USA・s data as based (100%), we have compared the other 8 countries・ GDP per capita, % of HNWI to population, and % of HNWI to households and these are the results: 

Countries

Australia

Brazil

Canada

China

Germany

India

Russia

UK

USA

GDP / capita

82.71%

10.29%

83.65%

4.07%

80.60%

1.68%

12.74%

88.15%

100.00%

HNWI / population

80.52%

6.49%

78.36%

2.71%

103.10%

0.84%

7.99%

82.13%

100.00%

HNWI / household

75.64%

9.69%

73.98%

3.98%

82.00%

1.61%

7.41%

81.77%

100.00%

 Based on the foregoing, it can be seen that by and large, with the exception of Russia, the other countries・ GDP per capita and their % HNWI to population and / or % HNWI to households are quite correlated. For instance, the UK・s set of figures are quite in line compared to those of the USA, with all being in the 80%+ range. Likewise, developing economies such as China and India・s GDP per capita and % HNWI to households (if not their % HNWI to population) are in line when compared to the USA. However, Russia・s percentages HNWI to both population and households are below its GDP per capita when compared to the USA.  

What implications this may have is best left to economists and statisticians though it appears the wealth concentration in Russia may be quite / more skewed than the other economies. Also, if one is optimistic of the economic development of emerging countries such as China and India, then one should expect their numbers of HNWI to grow in line with their GDPs per capita, in particular when their population and household bases are huge to begin with. A very crude example below: 

a)      Say we use the HNWI figure for the USA to 2,700,000 or around 0.90% of population

b)      Say for China to reach this same number of HNWI, this means around 0.20% of population

c)      0.20% / 0.90% = around 22%

d)      Roughly China needs only to have 22% of USA・s GDP per capita to achieve a similar number of HNWI = US$42,000 x 22.64% = US$9,240

 

While this US$9,240 figure seems quite a distance from the current China GDP per capita of US$1,709, this may not feel so remote IF one looks forward to having only 1/3 of the HNWI figure which the USA has, which implies a GDP per capita of only around US$3,200, which in turn seems quite possible in the not too far distance given China・s relatively high rate of GDP growth.

Notes: The article and/or content contained herein are for general reference only and are not meant to substitute for proper professional advice and/or due diligence. The author(s) and Zeppelin, including its staff, associates, consultants, executives and the like do not accept any responsibility or liability for losses, damages, claims and the like arising out of the use or reference to the content contained herein.                                

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