Who wants to be a millionaire...? At the last count, 383,000 Britons

World's wealthy cash in on the recovery in shares ahead of everyone else, says report
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The Independent Online

The past 12 months have been a boom time for the world's wealthy individuals, who were first to catch the upside of recovering stock markets and renewed economic growth.

The past 12 months have been a boom time for the world's wealthy individuals, who were first to catch the upside of recovering stock markets and renewed economic growth.

Britons were some of the most successful at spotting the upturn in global markets, with the number of people breaking into the category of having $1m (£550,000) of assets jumping by 8 per cent in 2003 to 383,000.

That compared to growth of millionaires of just 2.4 per cent through Europe as a whole, according to survey of trends among the most well-heeled individuals in the world, published yesterday by the investment bank Merrill Lynch and the consultants Cap Gemini.

While Americans notched up the most rapid growth in accumulating members of the wealthy elite, Europe could still boast the largest number of people deemed to be "high net worth individuals".

Some 2.6 million Europeans qualified for the accolade in the latest Merrill World Wealth Report. Their assets, excluding their main home and any money in pension funds, were found to be $1m or more. That is slightly more than the 2.5 million in America and Canada as at the end of last year.

Merrill, which has been tracking the super-rich for eight years, said: "Last year's upwards trend among high net worth individuals clearly indicates that while the wider populations of most countries are only now beginning to feel the effects of the global recovery, this group have been enjoying the fruits of the recovery over the past 12 months."

For the world's millionaires who were bold enough to cast off political uncertainties, an end was brought to the gloomy economic conditions of the previous two years. "High net worth financial wealth returned to levels only seen before the global recession took hold in 2001," Merrill said.

Wealthy individuals, who are mainly sophisticated investors, have been decisive in their move out of money held in bank deposit accounts - despite the backdrop of ongoing difficulties in Iraq, and more recent uncertainties over the oil price - to plough cash back into the stock market (see table).

They have also been one of the main drivers behind the boom in hedge funds, which have become popular with private as well as institutional investors because, in return for hefty fees, they aim for positive returns despite operating in falling or volatile stock markets. Overall, the number of high net worth individuals globally rose 7.5 per cent to 7.7 million in 2003, out of the world's total population of six billion. Their wealth grew to $28.8 trillion ($28,800bn, or £15.7 trillion) - just slightly less than the gross domestic product of the entire world, of $31 trillion.

Those who belong to the even more exclusive group of super-rich - who have $30m of assets at their disposal - were increasing at a more rapid pace than their more moderately well-off counterparts, Merrill found. Some 70,000 individuals were classed as "ultra high net worth", with their numbers strongest in regions where income disparities are highest. As a proportion of the more modest high net worth pool, those with extreme wealth were heavily represented in Latin America and Africa, followed by the US.

Robert Fairbairn, chief operating officer of Merrill Lynch Asset Management, said America and the Asia Pacific region were the overall winners in 2003. "The very favourable tax environment of the US, the entrepreneurial nature of its economy and the boom in the US stock market as it recovered" helped those stepping up into the $1m category increase by 14 per cent. About one of every 130 Americans now has more than $1m of shares, bonds and other financial assets, Merrill said.

The report did not name any of the individuals it counted. However, Forbes magazine recently published its own roll call of the rich, showing that eight of the world's 10 richest billionaires come from the US.

In number one slot for the seventh year in a row was Bill Gates, 48, founder of Microsoft, whose net worth was estimated at $46.6bn. Number two was Warren Buffett, 73, the investment guru known as the "sage of Omaha", who runs Berkshire Hathaway. His net worth climbed $12.4bn, or 41 per cent, to $42.9bn, according to Forbes.

The Merrill report showed that in Asia, strong growth of the Indian and Chinese economies, plus stronger-than-expected growth in Japan, injected life into the group of affluent individuals, with the number of people qualifying for Merrill's officially wealthy status rising by 8.4 per cent. While China notched up a "red-hot" increase in GDP and personal wealth, Merrill warned the country's economy could overheat, making it unlikely to generate opportunities for people to break into the band of millionaires at the same rate in the future.

In Europe, Britain's strong 8 per cent increase in millionaires was in contrast to other parts of Europe. The number of new entrants to the very comfortably off in France was only 1.5 per cent and Germany was also hit by economic stagnation and a "complex and burdensome" tax system, Merrill said.

A striking feature in the World Wealth Report is the increasing sophistication of investors and their growing demands on advisers to offer them complex financial products to pour their cash into.

There is also a "cascading" effect in the marketplace, according to Merrill, which has seen those known as the "mass affluent", with maybe a few tens of thousands to invest, demanding the same service as the millionaires' club. At the top end of the spectrum, very sophisticated private investors are demanding the kind of deals which are normally only cut by institutions, which can drive particularly hard bargains because of the huge volume of business they can direct to stock brokers and investment houses.

Asset management for the wealthy lags other parts of the banking world, where a handful of giant investment banks have come to dominate markets across national borders.

Offering services for rich private clients remains a very fragmented business, with local firms still dominating national jurisdictions. In the UK, the bespoke adviser Coutts, which counts the Queen among its customers, remains one of the best known names in the business, while in Switzerland, UBS dominates the market.

Investment banks such as Merrill are battling to become the first major player to win a dominant position world wide. If they manage it, their slice of the profits generated from fees from wealthy customers should only increase. According to Merrill, the wealth of the world's elite will continue its upward trajectory, hitting $41 trillion by 2008.