It's Expensive To Be Rich, And Getting More So Every Day
The Merrill Lynch / Capgemini World Wealth Report 2005 shows that for the Ultra–Wealthy, the Cost of Living Escalates
28 June 2005
According to the World Wealth Report 2005, an increase in the number of ultra–wealthy was accompanied by price inflation in luxury consumption running at a rate of nearly four times the average.
In 2004, the number of Ultra–High Net Worth Individuals (ultra–HNWIs), those with financial wealth of $30 million or more, grew by 8.9% over 2003 and amounted to 77.5 thousand worldwide.
“While this trend means that more people can afford luxury consumption, price inflation for top–of–the–line luxury goods and services is still increasing at a faster pace than mass–produced consumer products, which will have implications for how the wealthy managed their money,” observed Petrina Dolby, Vice President in Capgemini’s Wealth Management Practice.
Using Forbes Magazine’s Cost of Living Extremely Well Index* as a base, the World Wealth Report has created two modified indices that separate Ultra–HNWIs’ luxury consumption from that of the HNWI.
According to the World Wealth Report, the Ultra–HNWI index rose by 11.3% between 2003 and 2004, while the index for luxury goods and services more broadly favored by HNWIs (individuals with at least $1million in financial wealth) increased by only 6.4%, suggesting that price inflation for ultra–luxury products was considerably stronger than that of more moderately priced luxury items.
The Ultra–HNWI index is calculated using a basket of products and services typically reserved for the wealthiest individuals, including private jets, Rolls Royces and luxury yachts. The HNWI basket of goods contains relatively lower–priced items in the same categories, such as first–class airfare, BMWs, motor yachts, etc.
Both indices show a considerable premium compared with the US consumer price index, which grew at 3%.
This rising trend–line translates into a two–fold challenge for Ultra–HNWIs and their financial advisors:
“Not only do they face the complexities of managing their wealth, they need to anticipate and deal with an inflation rate far in excess of what most people have to handle,” noted James Wiggins of Merrill Lynch’s Global Private Client Group.
A complete copy of the 2005 World Wealth Report is available online at www.us.capgemini.com/worldwealthreport or www.ml.com.
* Forbes Magazine, “The Cost of Being Rich; Recession? Luxury goods cost more than ever” (New York: Forbes, October 6th 2003) p.105
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 the Capgemini Group
Capgemini, one of the world’s foremost providers of Consulting, Technology and Outsourcing services, has a unique way of working with its clients, which it calls the Collaborative Business Experience. Through commitment to mutual success and the achievement of tangible value, the company helps 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 6.3 billion euros.
Contacts:
Joanna Mikolajewski - Capgemini
Joanna.Mikolajewski@capgemini.com
917-934-8851
Jennie Laird - Capgemini
Jennie.Laird@capgemini.com
+44 870 904 5720
