Seven Million Millionaires Make For Happy Bankers

by Ulrika Lomas, Tax-News.com, Brussels

20 June 2002

In spite of falls in almost all major stock indices in 2001 and prevailing low interest rates around the world, the World Wealth Report released by Merrill Lynch and Cap Gemini Ernst & Young yesterday says that the number of high net-worth individuals world-wide (defined as those with financial assets of at least $1 million, excluding real estate) rose by 3% to 7.1 million last year, and they had slightly higher combined wealth of $26.2 trillion.

The 3% growth in 2001 is down from 6% in 2000 and 18% in 1999, but is still healthy given the conditions, and reflects a number of trends, including the shift of HINWI assets into hedge funds, which continued to grow strongly last year, and the extent to which HINWIS are successful in keeping their assets in offshore jurisdictions, out of the clutches of tax collectors.

Many high net-worth individuals started moving their money toward hard assets such as real estate, fixed income and alternative investments near the end of 2000, said Alvi Abuaf, vice president, global financial services at Cap Gemini Ernst & Young.

Surprisingly, the most successful region was Latin America where wealth grew 8% to $3.5 trillion; less surprisingly, the worst performing region was Europe, where 20% falls in equity capitalisation less to the maintenance of a flat $8.4 trillion in wealth.

If, as is often claimed, Switzerland is the home to 30% of the world's investible wealth, these figures would suggest that the country looks after no less than $7 trillion for its rich clients. If they earn 10% on their investments, their returns amount to $700 bn per year, about the size of the UK's GDP - a figure to remember when thinking about Switzerland's reluctance to introduce information sharing. How much of that $700 bn would be liable to tax if EU member states knew about it?

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