The Rich, The Wealthy, & “The Others”

In case you are not one, and didn’t know any, the world’s richest got even richer last year. Even as world financial markets broke down last year, personal wealth around the world grew 5 percent to $109.5 trillion. It was the sixth consecutive year of wealth expansion around the planet.

The fastest growth rate was not on America’s shores but among households in developing regions, such as China and the Gulf States. In these regions, the world-wide axiom applies: the families who were already rich got richer. Wealth is growing among households in Asia and the Pacific Rim – rising 14 percent. Wealth growth was fueled by manufacturing in Asia and commodities in Latin America and the Middle East.

The world’s wealth is increasingly concentrated among those that have the most. The top 1 percent of the world’s households owned 35 percent of its wealth last year. Meanwhile, the top 0.001 percent, ultra-rich households holding at least $5 million in assets, commanded $21 trillion – a fifth of the world’s wealth. Forbes lists 1,125 individuals and families as billionaires. Americans account for 42 percent of the world’s billionaires and 37 percent of their total wealth. Russia is number two with 87 billionaires. Germany is third with 59 billionaires. Africa has two of the world’s richest, South Africa’s Patrice Motsepe and Nigeria’s Aliko Dangote. Mohamed “Mo” Ibrahim is a Sudanese-born communications billionaire based in Briton. The planet continues to mint new millionaires rapidly. The biggest jumps in 2007 of second-tier rich came from emerging countries in Asia and Latin America. Overall, the number of millionaire households in the world grew to 10.7 million last year.

Hampered by the mortgage crisis and credit crunch North Americans’ personal wealth growth slowed to 3.8 percent last year. The number of U.S. millionaire households is now roughly seven percent of all households – 9.3 million. The number of millionaire black households in America is 110,000. Most black millionaire households get their wealth from family businesses – funeral homes, medical practices, real estate and construction, retail and service sector businesses. America’s two black billionaires, Oprah Winfrey and Bob Johnson amassed their fortunes in communications and entertainment, and real estate.

TNS research company reports that the median age of the head of millionaire US households is 58 percent – 45 percent are retired. Roughly 19 percent own in whole or part a professional practice or privately held business. Over 50 percent of millionaires said they had become more conservative in their investment approach over the past year. Their wealth is the result of long-term wealth accumulation. Although real estate is not their sole source of wealth, it remains a staple for many American millionaires. Forty-six percent own investment real estate like a second home or rental properties and 70 percent of millionaire households own stocks and bonds, and 68 percent own mutual funds.

Reports show that while the world’s rich have been making some adjustments as a result of the financial crisis. This year, assets are being shifted to more conservative investments, more money is being kept onshore in home markets and some investments have been curtailed. The outlook for wealth markets and the banks who serve them remains dimmed by the current financial crisis. Banks, brokerages and money managers will have little choice, but to expand their presence among these individuals, families and investment programs in the world’s fastest growing centers.

Personal wealth in America is expected to continue growing, but at a slower pace. With Wall Street’s slump, growth in assets is expected to rise less than 1 percent. Things are expected to improve over the next five years with personal wealth growing more than 3 percent annually – well off the 8.5 percent set between 2002 and 2007. While Black Americans have increased their presence in mainstream and middle-class-status numbers, their wealth profile remains comparatively low. The median black household income was $33,916 (national median: $50,233). Blacks’ per capita incomes was $18,428 (national figure: $26,804). Their poverty level was 24.5 percent (national rate: 12.5%). Blacks’ rate of poverty remained statistically unchanged.

By William Reed, Week of October 19, 2008

Tags: National

Category: Business Exchange