More rich Australians great news for planners

Growth in the number of high-net-worth individuals (HNWIs) in Australia has trumped the global average, according to a recently released global wealth report.

The World Wealth Report, released by Merrill Lynch and Capgemini, found 12,000 Australians in 2004 had joined the ranks of HNWIs, or people with net financial assets of at least US$1 million, excluding their primary residence.

This represents growth of 8.5 per cent, comparing favourably to HNWI growth both globally (6.5 per cent) and in the Asia Pacific region (7.3 per cent).

Australia also enjoyed a 16.1 per cent boost to its numbers of ultra-HNWIs, bringing the total number of individuals with financial assets of more than US$30 million to 1,070.

“The numbers of HNWIs and ultra-HNWIs in Australia has grown at a faster rate than the global trend, with HNWIs here continuing to benefit from wealth creation opportunities, especially in areas such as alternative investments,” Capgemini Australia chief executive officer Paul Thorley said.

The total wealth of Australian HNWIs also increased by US$41 billion, or 9.7 per cent, over the same period.

Market factors played a key role in Australia’s wealth accumulation, according to Capgemini Australia financial services director Gregory Smith.

“Real GDP [gross domestic product] growth and market capitalisation were the two main drivers of wealth creation, making 2005 a year of robust but decelerating growth for some regions following two consecutive years of strong global performance,” Smith said.

The report found aggressive asset allocation had also played a role, as HNWIs rebalanced their portfolios to increase exposure to higher performing markets in Asia and Latin America, while shifting away from North America.

The trend towards emerging markets was further reflected in findings that the Asia Pacific region had passed Europe to become the second most popular region for international investment, representing 23 per cent of total assets held by the world’s HNWIs last year.

Yet, despite their increasingly aggressive outlook, maximising investment protection through diversification nevertheless remained an active strategy employed by HNWIs.

“HNWIs increased investments in equities and alternative vehicles and, anticipating higher bond rates in the future, shifted funds from fixed-income,” Merrill Lynch Global Private Client vice-president, investments Matthew Koch said.