Have the Global Wealthy Become Less Wealthy?

Millionaires ended 2011, says a new report from two major global financial institutions, with a smaller net worth than when the year started.

“The rich got poorer in 2011.”

So read headlines all across the world last week after the release of the 16th annual World Wealth Report from Capgemini, a French financial consultancy, and the Toronto-based RBC Wealth Management

That headline did have some data behind it. The world’s “dollar millionaires” — those affluents who hold at least $1 million in assets above and beyond the value of their primary residence, collectibles, and consumer durables — did end 2011 with about $700 million less net worth than they held the year before, a 1.7 percent loss.

But these numbers distort the real world wealth story. Last year amounts to a blip on the world wealth radar screen. Since 2008, the year the Great Recession went full blast, the world’s rich have substantially increased their total net worth.

The wealth of the world’s wealthy, the figures from the new World Wealth Report show, increased a whopping 18.9 percent in 2009 and another 9.7 percent in 2010. Even with the 2011 dip, the world’s millionaires have upped their assets by over $9 trillion the last three years.[pullquote]Since 2008, the year the Great Recession went full blast, the world’s rich have substantially increased their total net worth.[/pullquote]

These global millionaires now total some 11 million individuals. They hold a combined $42 trillion in wealth. Most of that $42 trillion sits in the vaults of the world’s super rich, those individuals with at least $30 million in investible assets.

These ultra wealthy saw their net worths drop 4.9 percent in 2011. But the ultras had little trouble weathering that drop-off. Their net worths had ballooned by over twice that decline, 11.5 percent, the year before.

Capgemini has been tracing global wealth concentration for the past 16 years, in a partnership with Merrill Lynch Wealth Management. For this year’s wealth census, Capgemini teamed up with RBC Wealth Management, a Royal Bank of Canada unit.

The new Capgemini-RBC 2012 World Wealth Report — the wealth management industry’s “leading benchmark for High Net Worth market information” — covers 71 countries that together account for 98 percent of the world’s income.

Capgemini and RBC openly acknowledge that their dollar figures most likely understate the wealth of the wealthy. Their methodology, they note, “theoretically” accounts for the offshore investments that the global super rich make, “but only insofar as countries are able to make accurate estimates of relative flows of property and investment in and out of their jurisdictions.”

Many nations, in real life, have less than a fervent interest in making these “accurate estimates.” They value far more their status as tax havens.[pullquote]Global millionaires  hold a combined $42 trillion in wealth.[/pullquote]

Capgemini and RBC also do not make any comparisons between the wealth of the world’s wealthy and the rest of the world’s people. For the latest available research on that score, we have to go to the Credit Suisse Research Institute.

Last October, Credit Suisse researchers reported that the world’s 4.4 billion adults together hold $194.5 trillion in wealth, enough — if shared evenly — to guarantee every adult on earth a $43,800 net worth.

But our starkly unequal distribution of global wealth puts that $43,800 per-adult total well beyond the reach of the vast bulk of the world’s men and women. Half the people aged 20 and over in the world today hold under $4,000 in net worth.

This half the world’s population, the Credit Suisse Research Institute notes, holds under 2 percent of world wealth. The world’s richest 1 percent — adults worth at least $588,000 — hold 43 percent.