| USA. It's getting more expensive to be rich |
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| Wednesday, 29 June 2005 | |
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Press release: According to the World Wealth Report 2005, an increase in the number of ultra-wealthy was accompanied by price inflation in luxury consumption running at a rate of nearly four times the average. In 2004, the number of Ultra-High Net Worth Individuals (Ultra-HNWIs), those with financial wealth of $30 million or more, grew by 8.9% over 2003 and amounted to 77.5 thousand worldwide. "While this trend means that more people can afford luxury consumption, price inflation for top-of-the-line luxury goods and services is still increasing at a faster pace than mass-produced consumer products, which will have implications for how the wealthy managed their money." observed Petrina Dolby, Vice President in Capgemini's Wealth Management Practice. Using Forbes Magazine's Cost of Living Extremely Well Index(1) as a base, the World Wealth Report has created two modified indices that separate Ultra-HNWIs' luxury consumption from that of the HNWI. According to the World Wealth Report, the Ultra-HNWI index rose by 11.3% between 2003 and 2004, while the index for luxury goods and services more broadly favored by HNWIs (individuals with at least $1 million in financial wealth) increased by only 6.4%, suggesting that price inflation for ultra-luxury products was considerably stronger than that of more moderately priced luxury items. The Ultra-HNWI index is calculated using a basket of products and services typically reserved for the wealthiest individuals, including private jets, Rolls Royces and luxury yachts. The HNWI basket of goods contains relatively lower-priced items in the same categories, such as first-class airfare, BMWs, motor yachts, etc. Both indices show a considerable premium compared with the US consumer price index, which grew at 3%. This rising trend-line translates into a two-fold challenge for Ultra-HNWIs and their financial advisors: "Not only do they face the complexities of managing their wealth, they need to anticipate and deal with an inflation rate far in excess of what most people have to handle," noted James Wiggins of Merrill Lynch's Global Private Client Group. |
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| Last Updated ( Wednesday, 29 June 2005 ) |
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