The annual Merrill Lynch Global Wealth Management and Capgemini Annual World Wealth Report has been released, shining the spotlight on high net worth investors.
The research shows where the wealthy from the Asia- Pacific regions are investing, what they are investing in and whether their numbers are increasing or decreasing after the GFC.
The highlights
The research shows that last year Australia’s high net wealth population grew 34.3% from 129,200 to 173,600 on the back of a 23.4% decline the previous year.
The average wealth of an Australian HNW was US$2.99 million at the end of last year.
For the first time ever the HNW individual’s population in the Asia Pacific region was as large as that in Europe, rising an astounding 28.8% on the year before. China and India played a key part in our zone’s outstanding growth.
Although many HNW individuals retreated to safer investments (yawn!) the research highlighted that Australian HNW individuals recorded a rise in their wealth on the back of a 30% plus gain in the sharemarket last year with smart financial advisers playing a key role in helping to protect and grow their wealth.
I’m guessing that this may be the figure that most of you are interested in. Asia Pacific’s proportion of real estate was one of the highest of all HNW individuals compared to HNWI’s in other areas of the world. A mere 28% of their portfolio was allocated to this sector with 60% of this figure in residential real estate.
The world wide average figure allocated to real estate was 18% of their total portfolio.
What some investors never learn
Asia-Pacific is expected to lead the charge into the next phase of full recovery mode ahead of the rest of the world but this is contingent on the bumpy road ahead in the short-term expected from the gradual removal of government stimulus.
While the research points to some positive and inspiring facts for SMEs, I would be remiss if I didn’t point out the financial equivalent of sticking your finger in a socket repeatedly and of getting back with the ex that all your friends hate.
The mass delusion of home ownership and investment is still out there. Research from the now de funked US Fannie Mae (Federal National Mortgage Association) shows that 80% of the US population (I suspect this figure is even higher here) think home ownership is important to the overall economy.
We learn our investment lessons clearly from those who have gone before us; HNWI’s behaviour along with the billionaire super investors should provide the template for our own behaviours. If we emulate their successes and learn from their failures, like them we will prosper.
Not only does home ownership hamper labor mobility, but striving for high ownership typically means coercing people into homes who can’t afford them in a market caught up in massive undersupply. What you want is affordable homeownership, which inevitably means lower home ownership or we need a much stronger dose of building more homes with better reactive less prescriptive planning processes.
Buy high/Sell low
Another lesson we can draw from the HNW research which still just won’t sink in is investors continuing to stick to the buy high/sell low strategy.
A capital loss, yes, that’ll be a great one for offsetting those capital gains on the investment property. That’s going straight to the pool room.
Greed and fear continue to trump their intellect and it seems this will never change. HNWI’s wisely invested throughout the GFC period and became better educated about what they invest in. This, as you can see, achieved some stunning results.
Ah, I bet you weren’t expecting that!
If you’re not getting trusted advice as well you’ll miss out.
Nick Christian is a Financial Adviser and planner and authorised representative of Millennium3 Financial Services.
The views and opinions expressed within this letter are those of the author and do not necessarily reflect those of Millennium3 Financial Services Pty Ltd.
The above is general in nature and should not be acted upon without seeking the advice of a professional licensed financial planner.
Smart Company is the leading online publication in Australia for free news, information and resources catering to Australia’s entrepreneurs, small and medium business owners and business managers.
