Rich clinging to cashNews added by Benefits Pro on June 20, 2014

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By Nick Thornton

North America has the most high-net-worth individuals (HNWIs) in the world, though the region’s lead over the Asia-Pacific rim narrowed in 2013 to less than 10,000 individuals.

According to the World Wealth Report 2014, released by Capgemeni and RBC Wealth Management this week, nearly 40 percent of the current number of HNWIs around the world has been created in the past five years.

North America’s HNWI population grew by 16 percent, to 4.33 million individuals. The Asia-Pacific region grew by 17 percent, to 4.32 million.

Slow but stable global growth, and improved equity markets, helped account for the creation of 1.76 million new wealthy individuals around the globe. All told, HNWIs’ investable wealth grew 14 percent to reach a record high of $52.62 trillion (U.S.).

The 15 percent global increase in the population of HNWIs is the second largest increase the study has on record since 2000, exceeded only by 17 percent growth as markets recovered from the financial crisis in 2009.

While the ranks of the rich and super-rich grow, new evidence emerged from the Reuters Global Wealth Management Summit suggesting that the world’s wealthy are still clinging to a disproportionate amount of cash.

The Capgemeni/RBC survey reported the world’s wealthy hold 28 percent of their assets in cash, while 26 percent is in equity, and 20 percent in real estate.

Other estimates have as much as 40 percent of HNWIs’ wealth invested in cash.

Cash allocations remained high despite a 30 percent rise in the MSCI all-country index over the past year and a half.

This poses a problem for the most prominent international private banks, which are seeing profits suffer from reduced fees and commissions on invested money, and increased costs to comply with stricter regulations in the wake of the financial crisis.

Geopolitical turmoil in the Ukraine and Middle East, as well as debt concerns in Europe and America, could have influenced the world’s wealthiest preference for cash, which has yielded nearly zero, and sometimes negative returns when accounting for inflation and fees on cash accounts.

Others think the wealthy may still lack confidence in private banks after the financial crisis.

"It is true we have disappointed many, that we have caused an economic crisis, and we all have to bear the consequences of it," said Juerg Zeltner, head of UBS' private bank, to Reuters.

"But what is also true is that these clients who are in need our help, they need our advice," Zeltner said.

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