By Antonio S. Lopez
Would you believe that there are only 24 Filipinos with wealth of $500 million or more, the so-called Ultra High Networth (UHNW) individuals?
And that the Philippines has 32,354 US dollar millionaires (or high networth individuals) whose combined wealth is $518 billion, an amount 1.67 times the country’s Gross Domestic Product (GDP) of $310 billion?
The Philippines is a country of 24 million families and a population of 106 million people, of which 62,043,000 (62.043 million) are adults.
On average, each adult Filipino (19 or older) has wealth of $8,335 (debts included), according to Credit Suisse.
Credit Suisse (CS) defines networth as the value of financial assets, plus non-financial assets—principally housing and land, less debts.
To be among the wealthiest half of the world in mid-2018, an adult needs only $4,210 in assets, once debts are subtracted.
That the Philippines has only 32,354 dollar millionaires of which 24 are UHNW is one of the findings of the study conducted this year by the Credit Suisse Research Institute entitled “Global Wealth Databook 2018”.
Credit Suisse is one of the world’s leading banks in wealth management, with a strong presence in its home market, Switzerland, the hiding place of much of the world’s wealth, legal and the mostly illegal.
The bank’s study found the Philippines has only 32,354 US dollar millionaires.
Of the 32,354 Filipino millionaires, 27,369 (84.59%) have wealth of between $1 million and $5 million; 2,757 (8.5%) have wealth of between $5 million and $10 million; 190 (.587%) have wealth of $50 million to $100 million; 130 (.4) have wealth of $100 million to $500 million; and 24 individuals (.074%) have wealth of $500 million or more.
Credit Suisse’s “Global Wealth Databook 2018” indicates the world has 42 million dollar millionaires. Of that number, 17.349 million individuals are in the United States; 3.479 million in China; 2.8 million in Japan; 183,736 in Singapore; 88,845 in Indonesia; 39,814 in Thailand; and 4,943 in Vietnam.
The 17.34 million American millionaires have combined wealth of $98,154 billion ($98.15 trillion) or 34.,5% of the world’s wealth of $285.25 trillion; the 3.47 million Chinese millionaires have combined wealth of $46.49 trillion or 16.3% of global wealth; and the 2.8 million Japanese millionaires have combined wealth of $23.88 trillion or 8.4% of global wealth. India has 343,075 millionaires. Their combined wealth is $5.25 trillion or 1.85% of global wealth.
UHNW individuals with net assets above $50 million now number 149,890 worldwide. The United States leads with 47% of UHNW adults. China is a distant second with only 11% of the total membership.
North America is the world’s richest region with total wealth of $97 trillion; followed by Europe $73.66 trillion; the Asia Pacific (outside China and India) $52.9 trillion; China $46.49 trillion; Latin America $8.06 trillion; and India $5.25 trillion. Africa has $2.29 trillion.
For mid-2018, CS estimates that 42 million HNW adults have wealth between $1 million and $50 million, of whom the vast majority (37.1 million) fall within the $1 million–5 million range.
North America accounts for the greatest number of millionaires, significantly above Europe, which in turn hosts nearly double the number in Asia-Pacific countries, excluding China and India. China now accounts for 8% of all HNW individuals, while Latin America, India and Africa together account for only 2% of the total.
However, a person needs at least $93,170 to belong to the top 10% of global wealth holders and $871,320 to be a member of the top one percent.
The bottom half of the global population own less than 1% of total wealth. The richest 10% hold 85% of the world’s wealth, and the top 1% alone accounts for 47% of global assets.
CS visualizes the global wealth distribution in the form of a wealth pyramid which places adults in one of four wealth bands: under $10,000; between $10,000 and $100,000; between $100,000 and $1 million; and over $1 million.
The base level of the pyramid contains 3.2 million adults, or 63% of the global population, but accounts for only 1.9 % of global wealth. In contrast, dollar millionaires comprise 0.8% of all adults, but collectively own 45% of all assets.
Wealth per adult has grown from $31,381 to 63,100 over the period 2000–2018, an average growth rate of 4.1% per annum. Most of this growth occurred before the financial crisis.
Credit Suisse (CS) has provided estimates of the wealth holdings of households around the world for each year since 2000.
While the base of the wealth pyramid is occupied by people from all countries at various stages of their life cycles, 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.
More specifically, CS was interested in the distribution within and across nations of individual net worth, defined as the marketable value of financial assets plus non-financial assets (principally housing and land) less debts.
The valuations of individual wealth holdings are dominated by financial assets, especially equity holdings in public companies traded in international markets.
For practical reasons, less attention is given to non-financial assets apart from major real estate holdings and trophy assets, such as expensive yachts. Even less is known – and hence recorded – about personal debts.
The Asia-Pacific region (excluding China and India) mimics the global pattern more closely still, although the apparent uniformity of the Asia-Pacific region masks a substantial degree of polarization between high-income countries, such as Hong Kong, Japan and Singapore, and lower income countries, such as Bangladesh, Indonesia, Pakistan and Vietnam.
In fact, when high-income countries are excluded from the Asia-Pacific group, the wealth pattern within the remaining countries resembles that of India.
Residents of Africa are even more heavily concentrated at the bottom end of the wealth spectrum: half of all African adults are found in the bottom two global wealth deciles.
In sharp contrast, North America and Europe are heavily skewed toward the top tail, together accounting for 56% of adults in the top 10%, and 73% of those in the top percentile.
CS has three ways in which wealth levels data are assembled: direct estimates via national household balance sheets (HBS) or household surveys; regression estimates using likely correlated variables; and imputations based on the region- income class average. In practice, the situation is slightly more complicated because some countries have direct observations for, say, financial wealth, but require non-financial wealth to be estimated.
For financial wealth and debts at least, direct estimates for the first quarter of 2018 were available for 38 countries: Australia, Austria, Belgium, Bulgaria, Canada, Chile, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Malta, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Russia, Singapore, Slovakia, Slovenia, Spain, Sweden, Turkey, the United Kingdom and the United States. These countries account for 72% of global wealth in 2018.
In contrast, regression-based estimates are impossible for many countries in recent years because data is missing on core regressors. In these situations, wealth estimates are obtained by taking the figure for the most recent year and updating using subsequent movements in stock market capitalization, house price indices, or – if nothing better is available – growth of GDP.
Wealth per adult has grown from $31,381 to 63,100 over the period 2000–2018, an average growth rate of 4.1% per annum. Most of this growth occurred before the financial crisis.
In the period since 2007 average wealth has stagnated in the world outside China and North America, although this is due in part to appreciation of the USD.
The three main subcomponents of household wealth are: financial assets, non-financial assets (principally housing and land) and debts.
At the turn of the century, financial assets accounted for 56% of gross household assets.
This share fell until 2008, when it briefly touched 50%. In the aftermath of the global financial crisis, non-financial assets showed little growth worldwide, in contrast to financial wealth, which grew robustly.
As a consequence, the share of financial wealth recovered to 54% by 2015, almost the same division of the portfolio as in 2000.
But non-financial assets have done relatively well since 2015, causing the share of financial assets to slip back to 52.5%.
Expressed as a proportion of gross household wealth, debt has moved in a similar way to non-financial assets, and within a relatively narrow range.
Globally, household debt rose from 14% of gross wealth in 2000 to 15% in 2008, and has since declined to 13%, below the level at the start of the century.
CS tracked changes in household wealth in the 12 months to mid- 2018.
The United States continued its remarkable unbroken spell since the financial crisis with a gain of $6.3 trillion, while second place China gained $2.3 trillion.
On the downside, Brazil was the biggest loser, shedding $378 billion due in large part to currency depreciation against the US dollar.
CS method of estimating global personal wealth is essentially a bottom-up approach. It begins by establishing the average level of wealth in different countries onto which we graft the pattern of wealth holding derived from household surveys and other sources.
Although sample surveys do not formally exclude high net worth (HNW) individuals with net assets above $1 million, they tend to be under-represented, and their wealth holdings are likely to be undervalued.