Merrill Lynch Global Wealth Management and Capgemini release 14th annual World Wealth Report

23 June 2010

Capgemini and Merrill Lynch Global Wealth Management today announced findings from the 14th annual World Wealth Report, indicating that emerging wealth recovery has nearly recouped 2008 losses, returning to levels last seen in 2007. The report reveals:

• The world’s population of high net worth individuals (HNWIs ) is growing at 17.1 percent
• HNWI wealth has increased by 18.9 percent to $39 trillion
• The BRIC countries are continuing to drive regional growth, with Asia-Pacific leading emerging wealth recovery
• HNWIs are favouring predictable returns and cash flow, as evidenced by a rise in HNWI allocations to fixed-income instruments
• HNWIs are generally seeking higher returns and greater geographic diversification in their portfolios

However, despite an increase in the number of HNWIs, investors are remaining cautious, with consumer confidence still low. This has lead to changes in investor behaviour, leading to firms and advisors having to incorporate new factors into investment strategies. The report also reveals that:

• HNWIs have remained cautious and point to effective risk management (90 percent), transparency and simplicity (93 percent), and specialised advice (93 percent) from firms and advisors as top priorities in the current environment
• HNWIs are especially keen to work more actively with their advisors to properly understand the nature and potential performance of specific investments, manage their downside risk, and receive advice that is aligned with realistic and appropriate goal-setting, based on their actual risk profile
• Although HNWI clients have regained trust in their advisors and firms, their trust in regulatory bodies and financial markets has yet to fully recover – while 59 percent of HNWIs indicated they had regained trust in their advisor over the past year, 71 percent of HNWI investors have yet to regain trust in the regulatory bodies that are supposed to monitor the markets and protect investors
• Clients are demanding fundamental changes in how they are served, and are rewarding firms that can clearly demonstrate a sharper understanding of their emotional and intellectual needs and objectives – to effectively meet the needs of HNWI investors today, firms can differentiate themselves by integrating behavioural finance into investing strategies

The report also reveals that as HNWIs re-entered the financial markets after the global economic crises, they have also returned to investments of passion. When compared to pre-crisis levels, outright global demand in 2009 remained weaker in many categories, including Luxury Collectibles (luxury automobiles, boats, jets); Art; and Jewellery, Gems and Watches; however, such demand lifted in the latter half of 2009. The demand for investments of passion overall is likely to increase in 2010 as wealth levels rebound, evidenced by the fact that auction houses, luxury goods makers and high-end service providers all reported signs of renewed demand toward the end of 2009, and in the early part of 2010.

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