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Number of super-rich individuals on the rise


Nicki Bourlioufas, Morningstar 

A new report reveals the world's ultra-high net worth (UHNW) population--individuals who hold US$30 million or more in net worth--grew by 3.5 per cent to 226,450 individuals in 2016, though Australia's UHNW population grew at a slightly slower rate of 2.5 per cent.

The combined wealth of all the world's super-rich population increased by 1.5 per cent to US$27 trillion. The US posted the biggest gains, with UHNW rising 6.0 per cent to US$8.72 trillion, the Wealth-X Ultra Wealth Report found.

As at the year's end, the US accounted for around one third of all wealth held by the global UHNW population.

China was next, with the wealth held by the very rich rising 2.2 per cent to US$1.95 trillion, held by 16,040 individuals. That was followed by Japan, where UHNW rose 13.8 per cent to US$1.55 trillion, held by 16,740 individuals.

Asia has seen its share of the world's ultra-wealthy population grow at the fastest rate of all regions, up to 26 per cent from 18 per cent over the last 10 years, largely due to resilient economic growth, the report found.

The picture was subdued in Australia. Ultra wealth fell 0.8 per cent year on year to US$240 billion, though the population of UHNW individuals rose by 2.5 per cent. An improved equity performance and still rising real estate prices helped offset the country's exposure to subdued commodity markets.

In a separate report, the Australian Bureau of Statistics (ABS) found that household net worth in Australia struck a fresh high in the March quarter of 2017, rising to $9.64 trillion, up from $9.41 trillion in the December quarter.

During the quarter, household net worth increased by $227 billion, driven by gains in property prices.

Bruce Brammall of Bruce Brammall Financial says the bulk of Australians' household wealth, or $6.58 trillion, is held in property, accounting for around 70 per cent of all household wealth.

"For many, that will be the family home. But it will also be investment property and in shares," he says.

But creating your own business is the more likely route to super wealth. "Where real wealth tends to be created most rapidly ... is creating a business asset that will both create good cash flow for you, but also create equity in the value of the business to be able to sell later," says Brammall.

"If people made their money in business, then they expand the gains from there into other businesses, which gives them diversification, or into other asset classes, such as property or listed equities.

"Clearly, a lot of them hold their money in lower-risk assets such as cash and fixed interest."

That ties in with findings from the Wealth-X Ultra Wealth Report that cash accounted for roughly a third of assets owned by the super-rich.

Brammall says that sacrificing spending now to create wealth later is important: "I think the first thing that people starting from scratch who are aiming to achieve wealth need to understand is the first rule of money. It's global. It's called 'delayed gratification'. That is, nothing comes without sacrifice and if you want to create wealth down the track, it's going to start with not spending money now."

"So, you can use that money to invest to help you create income and assets later in life. Identify what it is that you can put towards an investment strategy. That's not necessarily just a lump sum of savings, but includes how much you are prepared to commit, ongoing, each and every month or year, to put aside to expand your wealth.

"Where is best to invest, for you, is going to take a bit of investigation and understanding of what sort of risks you are prepared to take. For some it will be property. For others it will be shares. But it's got to start at some point. And the sooner the better."

The Weath-X report also found that wealth accumulates with age, as is the case in Australia.

"As with the general population, our research has shown that the net worth of ultra-wealthy individuals rises steadily with age," the report says. Recipients of inherited wealth are a minority, with two thirds having made their fortunes through their own endeavours.

"This small share is a testament to the difficulty in amassing substantial levels of wealth at a relatively young age. Despite the media attention given to young tech billionaires or property heirs ... wealth creation and accumulation is more often than not a long-term process," the report says.

But not all the news is good in Australia. Reflecting high levels of debt to fund property purchases, the ABS says household long-term loan borrowing hit the $2-trillion mark. Household net saving fell substantially to $7.7 billion at 31 March 2017 from $12.7 billion at 31 December 2016.

"This is the lowest household net saving since June quarter 2008," the ABS says.

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