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2007 World Wealth Report

2007 World Wealth Report. Massimo Fortuzzi. Chief Operating Officer Merrill Lynch Global Private Client – Italia. Market Sizing and Growth. Key Findings – Market Sizing and Growth 2006.

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2007 World Wealth Report

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  1. 2007 World Wealth Report

  2. Massimo Fortuzzi Chief Operating Officer Merrill Lynch Global Private Client – Italia

  3. Market Sizing and Growth

  4. Key Findings – Market Sizing and Growth 2006 • In 2006, 9.5 million people globally held more than US$1million in financial assets – an increase of 8.3% over the 2005 HNWI population • HNWI wealth gained 11.4% over 2005 to total US$37.2 trillion • The total population of Ultra-HNWIs, people with more than US$30million in Financial assets, now stands at 94,970 an 11.3% increase over 2005 • In 2006 GDP Growth and Market Capitalization worked in concert to fuel wealth creation • Emerging markets registered strong advances - Singapore, India, Indonesia and Russia witnessed the highest growth in HNWI populations • HNWI financial wealth is expected to reach US$51.6 trillion by 2011, growing at an annual rate of 6.8%

  5. The Global HNWI Population Grew 8.3% in 2006 to 9.5M, Up from 6.5% Growth in 2005 HNWI Financial Population by Region (Millions), 2004-2006 8.2 Million (1) 9.5 Million 8.8Million (2) Annual Growth2005-20068.3% % Change Total HNWI Population2005 - 2006 Africa 12.5% Number of HNWIs Worldwide (in Millions) Middle East 11.9% Latin America 10.2% Asia-Pacific 8.6% Europe 6.4% North America 9.2% Note: (1) In 2004, number of Asia HNWIs (and thus Global HNWIs) was restated as a result of updated data made available. (2) Bahrain and Qatar added to model for years 2005 onward. As a result, number of HNWIs in 2005 is 8.8M instead of 8.7M as stated in WWR 2006. Source: Capgemini Lorenz curve analysis, 2007

  6. HNWI Wealth Grew by 11.4% in 2006, up from 8.5% in 2005, to Total $37.2 Trillion HNWI Financial Wealth by Region (Trillions), 2004-2006 30.7 Trillion (1) 37.2 Trillion 33.4Trillion (2) Annual Growth2005-200611.4% % Change Total HNWI Wealth2005 – 2006 Africa 14.0% HNWI Financial Wealth ($USD Trillions) Middle East 11.7% Latin America 23.2% Asia-Pacific 10.5% Europe 7.8% North America 10.3% *note: (1) In 2004, HNWI wealth figures were restated as a result of updated data becoming available; (2) Bahrain and Qatar added to model for years 2005 onward Note: All chart numbers are rounded Source: Capgemini Lorenz curve analysis, 2007

  7. Wealth Continued to Grow Increasingly Concentrated with The Richest 1% of HNWIs Controlling Over 35% of Total HNWI Wealth Global Number of Individuals per Wealth Band (k), 2006, and Growth (%), 2005-2006 UHNWIs accounted for 1% of total HNWI population and held 35% of HNWI wealth ($13.07 T) in 2006 Number of Individuals – 2006 2005-2006 Growth (1) % Total Wealth 95 k (1.0%) 11.3% 35.1% ’05-’06 + $30 m Ultra High Net Worth 33.6% ’04-’05 85.4 k (1.0%) 10.2% “Mid-TierMillionaire” 881.7 k (9.3%) 9.4% 22.7% ’05-’06 $5 - $30 m 803.6 k (9.2%) 8.4% 23.0% ’04-’05 8515.9 k (89.7%) 8.2% 42.2% ’05-’06 $1 m – $5 m 7853.5 k (89.8%) 6.2% 43.4% ’04-’05 Source: Capgemini Lorenz Curve Model; Capgemini World Wealth Report 2007 Note: (1) Figures from Bahrain and Qatar are not included in growth calculation as both countries were added in WWR 2007 and reflected in 2006 HNWI population and wealth figures only – effect on growth at global level is insignificant ; numbers do not add up to 100% due to rounding

  8. The Global Economy Grew at 5.4% in 2006, Led by Eastern Europe and Asia-Pacific Real GDP Growth Rates, 2005-2006 % World North America Western Europe Eastern Europe Asia Pacific Latin America Strong labor markets and rising real wages in Western Europe helped support private consumption and real GDP growth. Source: The Economist Intelligence Unit Forecasts, 2006-2007

  9. Similar to GDP, Most Worldwide Market Capitalizations Experienced Accelerated Growth In 2006 Market Capitalization Growth Rates for Major Stock Exchanges by Region*, 2001-2006 • Market capitalization growth rates have risen significantly following their stabilization in 2005 • In 2006, market capitalization remained a strong driver of HNWI wealth growth • European markets performed well compared with prior years % % Source: “Focus”, World Federation of Exchanges, Jan 2007;

  10. Emerging Economies Drove Growth and North America Remained Strong While Europe Picked Up Pace Region HNWI Population Growth Why? • Robust GDP growth – (US 3.3%, Canada 2.7%) • Increase in savings rate as percentage of GDP in the US • Solid gains in stock indices in US – (Dow Jones 16.3%, S&P 13.6%) North America 9.2% • GDP growth strong across all of EU-27 - 2.7% in 2006 up from 1.8% in 2005 • Solid stock market returns in Germany, France • High stock market returns in economies such as Poland and Czech Republic Europe 6.4% • Continued high savings rates – China 50.1%, South Korea 38.4% • High, sustained, GDP growth - China 10.5%, India 8.8% • Robust stock market performance in China and Indonesia • Strong increase in market capitalization in pockets – China 220.6%, Philippines 57.5% Asia-Pacific 8.6% • Strong GDP growth – 10.4% in Venezuela, 8.2% in Argentina • Continued strong market capitalizationgrowth – Mexican Exchange – 45.7%, Sao Paulo SE – 49.6% aided by rising commodity prices Latin America 10.2% • High GDP growth in the Middle East • Historically high oil prices helped buoy real GDP growth in GCC nations • African commodity exporting nations benefited from rising worldwide commodity and energy prices ME 11.9% Middle East/Africa Africa 12.5%

  11. Looking Ahead, HNWI Wealth Is Projected to Total US$51.6 Trillion By 2011, Growing at a Rate of 6.8% HNWI Financial Wealth Forecast by Region, 2004-2011E (US$ Trillions) US$51.6 T Annual Growth Rate, 2006-2011E US$37.2 T 6.8% Global US$33.4 T US$30.7 T 6.1% Africa 9.5% Middle East At 6.8% Global Growth 7.2% Latin America 8.5% Asia-Pacific Europe 4.3% 7.0% North America Note: All chart numbers are rounded. Source: Capgemini Lorenz curve analysis, 2007

  12. Asset Allocation

  13. Key Findings – HNWI Asset Allocation • HNWI allocations in 2006 varied from 2005: • Allocations to real estate increased while allocations to alternative investments dipped • Globally, high returns in commercial real estate and REITs drove increased allocations to real estate: • In 2006, real estate investments became more liquid and more transparent driven by the increase, globally, in legislation which allows for REIT-type investment structures • Certain alternative investments which capitalize on market volatility did not fare well during 2006, a year of relatively low volatility • HNWIs globally continued to diversify their holdings as they pulled funds away from North America and Asia-Pacific to Europe Source: Capgemini Analysis.

  14. In 2006, HNWIs Allocations to Real Estate Increased As Alternative Investments Dipped Breakdown of Financial Assets of HNWIs, 2004 to 2008F (%) 100% 100% 100% 100% * Includes: Structured products, hedge funds, derivatives, foreign currency, commodities, private equity/venture capital ** Includes: Commercial Real Estate, REITs, and Other Investment Properties Source: Capgemini/Merrill Lynch Financial Advisor Surveys, March 2006, March 2007

  15. Asia-Pacific and Latin America Lead the Real Estate Trend with Allocations of 29% and 25% Respectively Breakdown of Financial Assets of HNWIs by Region, 2006 (%) 100% 100% 100% 100% 100% 100% * Includes: Structured products, hedge funds, derivatives, foreign currency, commodities, private equity/venture capital ** Includes: Commercial Real Estate, REITs, and Other Investment Properties Source: Capgemini/Merrill Lynch Financial Advisor Surveys, March 2006, March 2007

  16. From 2005 to 2006, HNWIs Increased their Investmentsto Europe Geographic Breakdown of HNWI Investment, 2005 to 2008F (%) 100% 100% 100% *: weighted based on the net financial wealth of that region and aggregated to create a weighted global allocation *: In 2005 investments to Africa were less than 0.4% Source: Capgemini/Merrill Lynch Financial Advisor Surveys, April 2006, March 2007

  17. Mauro Masciarelli Vice President Financial Services Responsabile Wealth Management Capgemini - Italia

  18. Spotlight

  19. Spotlight Key Findings:Dynamic, Client-Needs Based Service Models are Emerging • Leading firms take a new approach to client service • Needs-Based approaches provide the most appropriate products and services and unlock potential value for clients • Wealth management firms have adopted a needs-based approach to client segmentation • Several factors beyond client assets under management affect the optimal product and service bundling needed for any single client • Advisor practice models and servicing approaches can be customized based upon client and firm needs • Optimizes the life time value of advisor/client relationships • Leading firms provide wealth management advisors with more advanced tools • A sophisticated technology platform supports delivery to ensure long-term relationships with HNW clients

  20. We Recommend Four Critical Success Factors for a Needs-Based and Dynamic Service Model Wealth management firms need to reconfigure the process for understanding their clients, and provide the right service model.

  21. A Needs-Based Approach Requires a Continuous Reevaluation of Client Needs Traditional Approach Needs-Based Approach • Clients segmented by criteria beyond AUM and demographics: • Current and future investment objectives • Behavioral characteristics • Aspirational models • External interests • Preferred communication style/desired level of interaction • Client needs determined based on product, service, and investment criteria • Needs drive firm strategy and service offering • Clients segmented by: • Assets under management • Risk Profile • Other demographic characteristics • Client needs are not proactively reviewed prior to firm strategy determination Client Needs Determination and Segmentation • Firm looks at book of business, and existing and target clients to assess its own core competencies and offerings • Clients offered products on a needs-based approach. Expected client life-time value drives level of service • Strategy and product offers determined prior to analysis of client needs • Marketing primarily based on AUM and risk profile • Clients offered products based on wealth band Product & Service Alignment Practice Model & Service Approach Determination • Clients placed into practice model based on AUM • Service approach driven by practice model • Practice model and service approach tailored to client needs • Multiple delivery channels and practice models used as necessary Service Review • Once clients are assigned to a model, service approach is static unless significant changes in AUM occur • Ongoing reviews to uncover opportunities for products, services, and investments based on behavioral dynamics, valuation analytics, and other criteria

  22. A Technology Framework for Information Gathering Is Critical to Anticipating Client Needs • Service-oriented architectures support improved business agility • Detailed and dynamic client information is key to anticipating client needs • Business rules need to be adjusted to move from static to dynamic service models • Business intelligence dashboards allow firms to continuously monitor client satisfaction and retention

  23. Industry Leaders Have Already Started Developing Needs-Based Service Models • Creation of Non Resident Indian Wealth Management Teams • Support of Sharia Investing in the Middle East • Globalization of European Wealth Management Practices

  24. Merrill Lynch & Capgemini March 2007 2007 World Wealth ReportEconomic Review – Italy

  25. ISTANTANEE NAZIONALI – ITALIA Italia – Analisi economica 2006 Numero degli HNWI in Italia (migliaia), 2005-2006 Drivers Crescita (05-06) 3,8% • Crescita del PIL reale del 1.7 nel 2006 (aggiornato a maggio ad 1,9% - fonte: Relazione Annuale Banca d’Italia), partendo da una crescita dello 0,1% nel 2005 • Guidata dalla crescita nel consumo privato • Inflazione bassa, che riflette l’alleggerimento dei prezzi del petrolio Ostacoli • Il deficit del bilancio è aumentato al 4,4% (Fonte Eurostat) del PIL nel 2006: • Esso dovrebbe abbassarsi al 2,1% (fonte: Commissione UE) nel 2007 e al 2,2% (fonte: Commissione UE) nel 2008 • Deficit del bilancio/previsione Commissione UE sul PIL: inferiore al 3% nel 2007 • Il deficit delle partite correnti è aumentato al 1,8% del PIL • Le finanze pubbliche sono in miglioramento • La crescita economica rimane indietro rispetto alla media dell’area dell’euro, ma è previsto un miglioramento N. di HNWI (000) Fonte: Analisi della curva di Lorenz da parte di Capgemini, dati di base da fonti molteplici, compreso MSCI; Analisi Capgemini, 2006; Eurostat; Previsioni della Commissione Europea (Reuters, il 7 Maggio 2007), Relazione della Banca d’Italia del 31 maggio 2007.

  26. ISTANTANEE NAZIONALI – ITALIA Italia – Analisi economica 2006 Drivers chiave della ricchezza e della crescita degli HNWI Driver Eventi 2006 Drivers 2006 Impatto sul Modello Previsione 2007 Crescita del PIL e risparmio • crescita del PIL reale del 1,7% • Incremento dallo 0,1% del PIL reale nel 2005 • Risparmi al 20,7% del PIL • Si prevede che il PIL sarà confermato al 1,7% nel 2006 (aggiornato a maggio ad 1,9% - fonte: Relazione Annuale Banca d’Italia), al 1,9% nel 2007 (fonte:Commissione UE), prima di ridursi ad un valore previsto del 1,7% (fonte:Commissione UE) nel 2008: • La crescita per quadrimestre è rallentata allo 0,3% nel terzo quadrimestre, se confrontata con lo 0,8% nel primo e lo 0,5% nel secondo • Il consumo privato è aumentato del 2% nel 2006, dopo periodi di stagnazione per buona parte del 2004 e del 2005 • Si stima che il rapporto debito/PIL subirà un aumento al 107,1% nel 2006 e scenderà a 106,9% nel 2007 (fonte IMF) • Si stima che il deficit delle partite correnti subirà un aumento del PIL fino al 1,8% nel 2006 da 1,6% nel 2005, situazione che riflette i prezzi del petrolio più elevati e le aumentate importazioni • Il risparmio aumenterà nel 2007 poichè le spese ricorrenti si ridurranno dello 0,7% del PIL sia nel 2007 sia nel 2008: la previsione dell’Italia è favorevole poichè il bilancio italiano del 2007 implica aumenti delle entrate e tagli alla spesa (fonte IMF). Capitalizzazione di mercato • +28,6% nel 2006 • +1,1% nel 2005 • +42,9% nel 2004 • Il numero ed il valore delle IPO (Offerta Pubblica di Vendita) nel 2006 è stato il più alto dal 2000 • La crescita MIB è stata del 19%, e ha raggiunto un massimo di 30,949 il 18 Dicembre • La Borsa Italiana ha raggiunto e superato i massimi registrati nel Gennaio del 2001 Politica Fiscale • Nonostante una crescita più forte e correzioni sostanziali al bilancio all’inizio del 2006, il deficit del PIL è cresciuto dal 4,1% (fonte: Conti Econ. Naz. ISTAT 2006) nel 2005 fino a quasi 4,4% (fonte ISTAT) nel 2006; ciò è dovuto in parte a: • L’ordinanza della Corte Europea di Giustizia richiede al governo di ripagare circa €16 mld di trattenute di imposta sul valore aggiunto (IVA) sulle auto aziendali • Il bilancio 2007 presentato al parlamento si è focalizzato sull’aumento delle entrate piuttosto che sui tagli alla spesa per ridurre il deficit del bilancio • Il deficit è orientato verso il ribasso, ma il PIL si aggirerà attorno al 2,3% (fonte ISTAT) • La spesa pubblica è aumentata del 2,3% (fonte IMF), ma il bilancio 2007 comprende diverse iniziative di contenimento della spesa. Fonte: Relazioni nazionali EIU, 2006-2007; Analisi Capgemini, 2007; World Federation of Exchanges 2005; ISTAT, Conti economici nazionali, 03/01/06, “Documento di Programmazione Economica-Finanziaria”, Governo Italiano, 2006-2009; Commissione Europea ; Relazione IMF 2007sull’Italia, Relazione della Banca d’Italia del 31 maggio 2007.

  27. ISTANTANEE NAZIONALI – ITALIA Italia – Analisi economica 2006 Drivers chiave della ricchezza e della crescita degli HNWI Driver Drivers 2006 Impatto sul Modello Previsione 2007 Politica Monetaria • La Banca Centrale Europea (BCE) ha aumentato il suo principale tasso di riferimento di 1,25 punti percentuali negli ultimi 12 mesi per portare il tasso al 3,25% in Ottobre 2006, sono attesi ulteriori rialzi: • In Dicembre la BCE ha alzato il suo tasso chiave di rifinanziamento al 3,5% • È possibile almeno un ulteriore tasso di aumento prima che il ciclo di inasprimento monetario termini • La forza del tasso di cambio dell’euro dovrebbe evitare il bisogno di ulteriori rialzi nel 2007/08 • Si prevede che l’inflazione si riduca leggermente da un valore stimato del 2,1% nel 2006 ad un valore appena inferiore al 2% nel 2007 e 2008 Altri Fattori • Il bilancio 2007 si propone di lanciare la crescita economica e ridurre il deficit del bilancio • Le riforme attuate dal 1997 per liberalizzare i contratti di impiego hanno ridotto la disoccupazione, ma il mercato del lavoro italiano rimane uno dei più rigidi nella UE • Una recente riforma sulle imposte del reddito personale si propone di circoscrivere la spaccatura tra i ricchi e i poveri aumentando le imposte sui redditi più elevati e riducendole su quelli più bassi • Sia Standard & Poor’s che Fitch Ratings hanno ridotto il rating del debito pubblico italiano di un punto dopo l’annuncio del bilancio: • Entrambi hanno rilevato l’inadeguatezza a ridurre il deficit e i timori che le imposte ostacoleranno la crescita economica (agenzia di Rating Moody’s Italia, aggiornato al 7 maggio 2007: conferma Aa2, previsione stabile). Fonte: Relazioni nazionali EIU, 2006-2007; Analisi Capgemini, 2007

  28. Questions & Answers

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