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`The rich get richer' because of financial planning

The number of millionaires around the world grew to 7.3 million last year, but the US saw for the first time a drop in the number of high-wealth people and their net worth, a survey showed Wednesday.

The survey by Cap Gemini Ernst and Young with brokerage Merrill Lynch concluded that the number of "high-net-worth individuals" -- with at least US$1 million in assets, excluding real estate -- grew by 200,000 last year.

This was the lowest growth rate in the seven-year history of the "World Wealth Report."

Overall, the assets of these individuals grew 3.6 percent to US$27.2 trillion (25.9 trillion euros) last year, the report showed. This occurred even as global stock market wealth declined by 16.9 percent last year.

The report said that as global financial markets were clobbered, the wealthy were able to "use knowledge and professional financial assistance to overcome difficulties" and keep their assets intact.

But in North America, wealth among these individuals declined 2.1 percent, or US$200 billion, to US$7.4 trillion. There also was a 1.9 percent decline in the number of millionaires in North America, down to 2.22 million individuals.

North America was the only region to record a drop in the numbers and wealth of high net worth individuals.

"Their numbers and wealth was undermined by continued declines in US equities markets," said James Gorman, president of Merrill Lynch's Global Private Client group.

"However, the decline in their wealth was substantially less than the 22 percent drop in the value of the Standard and Poor's 500 index over last year, indicating that high-net-worth investors had strategies in place for wealth preservation."

European millionaires fared better, with their wealth up 4.8 percent, or US$400 billion, to US$8.8 trillion (8.4 trillion euros) last year. The number of wealthy people increased 3.9 percent, or 100,000 people, to 2.6 million individuals, the survey found.

Despite Japan's economic woes, Asia-Pacific wealthy saw their assets rise 10.7 percent, or US$400 billion, to US$5.7 trillion. The number of millionaires in Asia rose 4.9 percent, or a net 100,000 people, to 1.8 million.

In Latin America, financial assets of the wealthy increased 2.7 percent, or US$100 billion, to US$3.6 trillion, but the number of millionaires fell 3.6 percent to 270,000 individuals.

Globally, the number of so-called "ultra-rich" people with financial assets of more than US$30 million rose two percent to 58,000 people globally, and their combined wealth grew an estimated 3.6 percent, the survey found.

The report, which is aimed at drawing attention to the value of investment advice, indicated wealthy people used a conservative strategy during the market turmoil of recent years.

"They increased their holdings in fixed income and cash, and also diverted funds to alternative investments, real estate and other investments less correlated to equities," said James Greene, vice president at Cap Gemini.

Most of the wealthy, especially in the US, held onto existing stocks, but "avoided funneling new income into the stock market," Greene said.

"In 2002, the investor mantra became `cash [and fixed income] is king,'" he said.
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