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Picking the Brains of the Super-Rich, and Picking Up Tips

THIS week, I received five different surveys and analyses purporting to offer insights into the thinking of the rich, the really rich and the super-rich. And those were on top of the dozen or so others so far this year. The most startling statistic came from the World Wealth Report, the granddaddy of analyses of the rich, conducted by Capgemini and Merrill Lynch. In 2010, the report estimated, a mere 103,000 people of the nearly seven billion people on the planet controlled 36.1 percent of the world’s wealth. (This was up from 35.5 percent in 2009.) North America, the report went on, had the largest number of socalledultrahigh-net-worth individuals, with 40,000 people worth more than $30 million.

But not all the reports were this revelatory — or scientific. One study, from an online “dating marketplace,” rated cities based on how generous men were in paying for first dates. Denver ranked first for expensive nights out, Cincinnati last.

Then there was the report from Barclays Wealth that found that many high-net-worth individuals wished they had more self-control over their finances.

All of this time and money being put to surveying the rich, particularly at a time when most people are feeling anything but wealthy, prompted me to wonder about the value of this information. Can anything be gleaned from the reports for everyone else? Or are they, at best, sources of trivia? So I sifted through them to see what I could find. Here are some of the highlights.

THE FUN STUFF The World Wealth Report, released Wednesday, found that last year was not just a good year for the really wealthy. It was also a good year for the merely rich. The number of people with more than $1 million to invest was 10.9 million, up 8.3 percent, while the amount of money they had, $42.7 trillion, had risen by 9.7 percent. (The wealth of this group excludes the value of their primary residences, collectible items and consumable goods.)

“The wealth is growing around the world, but it doesn’t seem that way,” said John W. Thiel, head of United States wealth management and the private banking and investment group at Merrill Lynch Global Wealth Management. One consensus is not surprising — that Asians continue to gain on the rest of the world. A report released in May by the Boston Consulting Group said that the United States still led the world in the number of families worth more than $100 million, 2,692. But it said that China experienced the fastest growth rate, with a one-year jump of 30 percent, to 393 families.

The Merrill report noted that the number of high-net-worth people in Asia, 3.3 million, surpassed the number in Europe, 3.1 million, for the first time. China ranks fourth behind the United States, Japan and Germany for the number of high-net-worth citizens.
Pricewaterhouse Coopers’s Global Private Banking and Wealth Management Survey of people who work at wealth management firms, which came out this week as well, predicted that fees from managing money in Asia would grow by about 18 percent in 2011, as against a growth rate of 6 percent in the Americas.

While most reports are pointing to the growing wealth in China, an analysis from Deloitte noted that South Korea was set to join the top 10 list of countries with the most wealthy people by 2020.

ADVICE FOR EVERYONE ELSE These reports also offered some practical insight for those who are not super-rich.

For one thing, the wealthiest people around the world put more money into equities last year and plan to continue to do so. The World Wealth Report said the wealthy increased their percentage in equities in 2010 to 33 percent, from 29 percent, and the report expected them to increase that to 38 percent by 2012.

The Boston Consulting Group report said people in North America had the highest percentage of their wealth in equities, with 44 percent, up from 41 percent in 2009.

Regardless of what they were investing in, the wealthiest indicated that they were spreading their investments around the world to reduce the risk from political, economic and financial uncertainty. The Institute for Private Investors’ Family Performance Tracking survey, which looks at how its members invest, said the wealthiest people had at least a third of their portfolios outside their home countries. One in five had 50 percent of their money invested internationally.

The wealthy in Latin America had the least amount of their money tied up in their own region, according to the World Wealth Report. Those in North America had the most. But identifying that safe place is more difficult. The rich generally agreed that they were concerned about the American economy and the potential for political and economic unrest elsewhere.

A study due for release next month from Zogby and Insite Security of people with more than $3 million found that most had a negative view of the global economy and many were worried that the United States would not be able to improve its fiscal situation anytime soon.
And the World Wealth Report found that wealthy Asians were the only ones confident in investing in their own region. The report estimated that Asians would maintain the current percentage of their money invested in the region in 2012, while the wealthy in Europe, North America and Latin America indicated that they planned to reduce their allocations to their own regions.

While there is little that anyone can do about the state of the world, the wealthiest are asking more from their financial advisers, and that is something anyone can emulate. The PricewaterhouseCoopers analysis found that most investors had less trust and were less loyal to their advisers and were demanding more service than they were a couple of years ago.

“Two years ago, I would have said people would take performance over less than stellar service as long as they’re getting a good return,” said Steven Crosby, the Americas leader for PricewaterhouseCoopers’s private banking and wealth management leadership team. “Now it’s, ‘I want quality service or I’m leaving.’ ”

But the World Wealth Report (remember that Merrill Lynch is one of its sponsors) said that advisers had regained client trust. And now is the time, it said, to sell those clients on other products and services that large financial services firms offer, like unique investments through an investment bank and preferred financing for entrepreneurs.

U.S. Trust, meanwhile, which like Merrill Lynch is part of Bank of America, found that many people with at least $3 million had not given any real thought to leaving an inheritance to their children. More worryingly, hardly any entrepreneurs said they had a succession plan in place for their businesses.

That said, Barclays found that the United States ranked fifth out of 20 countries in how satisfied its people were about their financial plans.

Contradictions are inevitable in these various analyses. And all of this attention to the thoughts and strategies of the very rich may seem to be a bit much to some readers. The rich are still getting richer, while everyone else is not. But knowing how the very rich think about their investments and diversification in an uncertain world can be useful to everyone else. Or it could provide some cocktail party tidbits.

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