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Rapid growth of HNWI
This chapter looks in detail at the pattern of wealth holdings across adults through the lens of the wealth pyramid. Unlike other studies, we analyze the full spectrum of asset ownership from the wealthiest individuals in the top echelons down to the less wealthy people in the middle and bottom segments of the wealth pyramid. We estimate that 3.3 billion individuals – over 70% of adults worldwide – have wealth below USD 10,000, while the group of millionaires, which makes up less than 1% of the population, holds 44% of global wealth. The number of High Net Worth individuals has grown rapidly in recent years, adding to the debate on whether inequality has worsened in recent years. This year, for the first time, we are able to offer data to assess this claim.
Personal wealth varies across adults for many reasons. Some of those with little wealth may be at early stages in their career, with little chance or motivation to accumulate assets. Others may have suffered business setbacks or personal misfortunes, or live in parts of the world where prospects for wealth creation are severely limited. Opportunities are also limited for women or minorities in some countries. At the other extreme of the spectrum, there are individuals who have acquired a large fortune through a combination of talent, hard work and good luck.
The wealth pyramid in Figure 1 captures these differences in striking detail. It has a large base of low wealth holders, alongside upper tiers occupied by progressively fewer people. In 2014, we estimate that 3.3 billion individuals – over 70% of adults worldwide – have wealth below USD 10,000. A further billion adults (21% of the global population) fall in the USD 10,000–100,000 range. While average wealth holdings are modest in the base and middle segments of the pyramid, total wealth here amounts to USD 39 trillion, underlining the potential for growth and for new products and services targeted at this often neglected segment.
The remaining 408 million adults (8% of the world) each have a net worth above USD 100,000. They include 35 million US dollar millionaires, a group that comprises less than 1% of the world’s adult population, yet holds 44% of global household wealth. Within this group, we estimate that 128,200 individuals are worth more than USD 50 million, and 45,200 have over USD 100 million.
The base of the pyramid
The layers of the wealth pyramid have distinctive characteristics. The base tier has the most even distribution across regions and countries (see Figure 2), but it is also very diverse, spanning a wide range of family circumstances. In developed countries, only about 20% of adults fall within this category, and for the majority of these individuals, membership is either transient – due to ill health or unemployment, for example – or a lifecycle phenomenon associated with youth or old age. In contrast, more than 90% of the adult population in India and Africa is located within this range. In some low-income African countries, the percentage of the population in this wealth group is close to 100%. For many residents of low-income countries, life membership of the base tier is the norm rather than the exception.
Middle class wealth
The one billion adults in the USD 10,000–100,000 range are the “middle class” in the context of global wealth. The average wealth holding is close to the global average for all wealth levels, and the combined net worth of USD 31 trillion provides the segment with considerable economic clout. This is the tier whose regional composition most closely matches that of the world’s adult population, although India and Africa are under-represented and China’s share is relatively high. The comparison between China and India is especially interesting. India has just 3% of the global middle class, and that share has changed very little during the past decade. In contrast, China’s share of the middle class has doubled since 2000 and now covers one-third of the global membership, ten times the share of India.
High wealth segment of the pyramid
The high wealth segment of the pyramid – those with net worth above USD 100,000 – had 217 million adult members at the start of the century. Worldwide membership has risen above the 400 million level for the first time this year, now numbering 408 million according to our estimates. The regional composition is markedly different compared to the strata below. Europe, North America and the Asia-Pacific region (omitting China and India) together account for 90% of the group, with Europe alone accounting for 161 million members (39% of the total). This compares with just 3 million adult members in India (0.7% of the global total) and a similar number in Africa.
The pattern of membership changes once again for the US dollar millionaires at the top of the pyramid. The number of millionaires in any given country is determined by three factors: the adult population size, average wealth and wealth inequality. The United States scores high on all three of these criteria and has by far the greatest number of millionaires, 14.2 million, or 41% of the worldwide total (see Figure 3). A few years ago, the number of Japanese millionaires was not far short of the United States figure, but the number of US millionaires rose just as the number of Japanese millionaires declined. Japan’s share of global millionaires fell below 10% for the first time a year ago; it is now down to 8%, barely above the leading European contenders: France, the United Kingdom and Germany.
The ten remaining countries which host at least one percent of the global membership are led by Italy, Australia and China, with shares of 3-5% each. Belgium, Sweden and Switzerland have relatively small populations, but their high average wealth elevates them to the list of countries which have more than 300,000 millionaires, the minimum requirement for a one percent share of the world total.
Changing membership of the millionaire group
Variations in wealth levels affect the pattern of wealth distribution. Since mid-2013, the increase in average wealth combined with a rising population level has boosted the number of millionaires by 3.8 million worldwide, of which the United States alone accounted for 1.6 million new members (see Table 1). The United Kingdom added a further half million and the Eurozone countries another 850,000, mainly in France (up 310,000), Germany (up 243,000), Italy (up 216,000) and Spain (up 89,000). Few countries experienced a drop in millionaire numbers and the declines were very small: Argentina, Indonesia, Norway, Russia and Turkey together shed 55,000.
High net worth individuals
To estimate the pattern of wealth holdings above USD 1 million requires a novel approach, because at high wealth levels the usual sources of wealth data – official household surveys – tend to become less reliable. We have overcome this handicap by exploiting well-known statistical regularities to ensure that the top wealth tail is consistent with the annual Forbes tally of global billionaires and similar rich list data published elsewhere. This produces plausible estimates of the global pattern of asset holdings in the high net worth (HNW) category from USD 1 million to USD 50 million, and in the ultra-high net worth (UHNW) range from USD 50 million upwards.
While the base of the wealth pyramid is occupied by people from all countries at various stages of their lifecycles, HNW and UHNW individuals are heavily concentrated in particular regions and countries, and tend to share more similar lifestyles, participating in the same global markets for luxury goods, even when they reside in different continents. The wealth portfolios of these individuals are also likely to be more similar, with more of a focus on financial assets and, in particular, equity holdings in public companies traded in international markets.
For mid-2014, we estimate that there are 35 million HNW adults with wealth between USD 1 million and USD 50 million, of whom the vast majority (30.8 million) fall in the USD 1–5 million range (see Figure 4). There are 2.5 million adults worth between USD 5 million and 10 million, and 1.4 million have assets in the USD 10-50 million range. From 2007 to 2009, Europe briefly overtook North America to become the region with the greatest number of HNW individuals, but North America regained the lead in 2010 and now accounts for a much greater number – 15 million (44% of the total) compared to 11.7 million (34%) in Europe. Asia-Pacific countries, excluding China and India, have 5.6 million members (16%), and we estimate that there are now 1.2 million HNW individuals in China (3.4% of the global total). The remaining 925,000 HNW individuals (2.7% of the total) reside in India, Africa or Latin America.
Ultra-high net worth individuals
Worldwide we estimate that there are 128,200 UHNW individuals, defined as those whose net worth exceeds USD 50 million. Of these, 45,200 are worth at least USD 100 million and 4,300 have assets above USD 500 million. North America dominates the regional rankings, with 65,500 UHNW residents (51%), while Europe has 31,400 (24.5%), and 16,600 (13%) live in Asia-Pacific countries, excluding China and India.
Among individual countries, the United States leads by a huge margin with 62,800 UHNW adults, equivalent to 49% of the group total (see Figure 5). This represents an increase of 9,500 compared to mid-2013, an astonishing rise for a single year – more than the total number of UHNW residents in China, which occupies second place with 7,600 residents (6% of the global total). The United Kingdom gained the second largest number of UHNW individuals (up 1,300 to 4,700) consolidating fourth place, behind Germany (5,500), but ahead of France (4,100). Taiwan (2,000) and Korea (1,900) each added about 550, while Brazil (1,900), Canada (2600) and Hong Kong (1,500) gained 200 apiece. The numbers for Russia (2,800) and India (1,800) were almost unchanged.
The wealth pyramid provides a convenient way of capturing differences in personal wealth, with millionaires at the top and less wealthy individuals occupying the lower strata. Discussions of wealth holdings often focus exclusively on the top part of the pyramid, paying little attention to the base and middle sections. This is unfortunate because the base and middle segments account for USD 39 trillion of household wealth, and satisfying the needs of these asset owners can drive new trends in consumption, industry and finance. Brazil, China, Korea and Taiwan are countries that are already rising quickly through this part of the wealth pyramid, with Indonesia close behind and India having the potential to grow fast from a low starting point.
At the same time, the top-of-the-pyramid segment will likely continue to be the main driver of private asset flows and investment trends. Our figures for mid-2014 indicate that there are now nearly 35 million HNW individuals, with more than one million located in China and 5.6 million residing in Asia-Pacific countries other than China and India. At the apex of the pyramid, 128,200 UHNW individuals are now worth more than USD 50 million. The recent fortunes created in China lead us to estimate that 7,600 Chinese adults (6% of the global total) now belong to the UHNW group, while 6,500 (5% of the total) are residents of Brazil, India or Russia.
The number of HNW and UHNW individuals has grown rapidly in recent years, reinforcing the perception that the very wealthy have benefitted most in the favorable economic climate. This year, for the first time, we are able to offer data to assess this claim. The four curves at the top of Figure 6 show the rise in the number of adults with wealth above USD 1bn, 100m, 10m and 1m, respectively, using 2008 as the base year. The three lowest curves capture the change in the amount needed to belong to the top 1%, top 10% and top 50% of global wealth distribution (50% being equal to median wealth). The final series shows mean wealth per adult in each year, again rebased to 2008.
At first glance, the evidence appears to confirm that the wealthiest groups have benefitted disproportionately. Between 2008 and mid-2014, mean wealth per adult grew by 26%; but the same period saw a 54% rise in the number of millionaires, a 106% increase in the number with wealth above USD 100m, and more than double the number of billionaires. However, little can be deduced about inequality trends from the fact that the number of millionaires and billionaires is growing faster than average wealth: this is almost certain to happen when wealth is growing, regardless of whether inequality is rising or falling. More relevant is the observation that the minimum wealth of the global top percentile in Figure 6 closely tracks the path of mean wealth: this shows that the 99th percentile at least has not outpaced the bulk of the population. On the other hand, the wealth required to be a member of the top 10% has risen at half the pace of wealth per adult since 2008, and median wealth shows almost no improvement, both results hinting at increased inequality. Drawing conclusions regarding inequality trends from complex data is clearly a difficult exercise. The next chapter explores wealth inequality trends in more detail and attempts to shed some light on a topic which is often the subject of public debate.