MERRILL LYNCH INFORME SOBRE LA RIQUEZA AÑO 2011

8/6/2019 MERRILL LYNCH INFORME SOBRE LA RIQUEZA AO 2011..

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Wr Weath Rert

2011


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Worlds Population of HNWIs and 4

Their Wealth Continued to Expand in 2010

2010 in Review: Global Economy Returned to Growth 8

and Markets Performed Solidly

HNWIs Equity Allocations Rose in 2010 and Emerging 16

Markets Provided Profit Opportunities

HNWI Demand for Investments of Passion Rebounded 20

as Wealth Grew in 2010

Demographic Profile of HNWIs Shows Slight Shift 22

but the Impact Will Likely Be Gradual

Spotlight: Wealth Management Firms Can Leverage Enterprise 25

Value to Better Address HNWIs Complex Post-Crisis Needs

HNWIs Have Regained Trust in Advisors and Firms but Are More 25

Conservative and More Vigilant Post-Crisis

Firms Face a New Industry Reality 28

Full-Service Firms Are Likely to Be Better Positioned 29

to Weather Client and Industry Shifts

Enterprise Value Could Be Key for Firms and HNWIs 30

in the Post-Crisis Paradigm

Highest Priority for Firms is HNW Value Levers 31

That Are Important but Poorly Served

Firms Stand to Reap Significant Benefits 33

After Overcoming Challenges

Some Firms Are Already Deploying Innovative 34

Enterprise Value Tactics

Priorities in Enterprise Value Implementation Are Communication, 34

Incentives, and Support Excellence

Appendix A: Methodology 36

Appendix B: Select Country Breakdown 37


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TO OUR READERS,

Capgemini and Merrill Lynch Global Wealth Management are pleased to present the2011 World Wealth Report.

Our two firms have been workin toether for more than 20 years to study the macroeconomic and other factors

that drive wealth creation and to better understand the key trends that affect hih net worth individuals (HNWIs)

around the lobe.

In 2010, many lobal financial markets performed well, albeit rowin at more modest rates than the sharp reboundsseen in 2009 after 2008s staerin losses. The number of HNWIs and their wealth also rew moderately, with

HNWIs remainin more conservative than before the crisis but willin to be opportunistic in seekin yield.

The lobal economy returned to rowth, driven by stron activity in emerin economies, most notably fast-rowin

Asia-Pacific nations such as China and India.

Many nations are still workin throuh the after-effects of the financial crisis, as evidenced by the still-simmerin

soverein-debt crisis in Europe and the lare fiscal deficits in many nations, which have been made worse by crisis-

related stimulus.

HNW clients are very aware of these and other risks, includin the political turmoil in the Middle East and the

humanitarian and nuclear crises in Japan. In these uncertain times, HNWIs are keen to preserve capital and expecttheir financial strateies to help them achieve life oals, not just arbitrary investment benchmarks.

Wealth manaement firms and Advisors are bein challened to consider all these HNWI priorities, while manain

the rowin marin pressure and competition in their own industry.

Fortunately, Firms and Advisors have reained the trust of their HNW clients since the crisis so their focus

can center on justifyin that faith with a resonant, responsive and flexible proposition. For many, that will necessitate

an enterprise response, one that rallies capabilities beyond wealth manaementfrom investment and corporate

bankin for instanceto make sure HNWIs complex post-crisis needs can be fully met in a way that delivers value

to the client and the Firm.

It is a pleasure to provide you with our findins, and we hope you find continued value in the WWRs insihts.

World Wealth Report

John W. Thiel

Head, U.S. Wealth Management andthe Private Banking and Investment Group

Merrill Lynch Global Wealth Management

Jean Lassignardie

Global Head of Sales and MarketingGlobal Financial Services

Capgemini


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2011 WoRld WEAlTH REpoRT4

Worlds Population of HNWIs and Their

Wealth Continued to Expand in 2010

1 HNWIs are defined as those having investable assets of US$1 million or more, excluding primary residence, collectibles, consumables, and consumer dura bles.2 Ultra-HNWIs are defined as those having investable assets of US$30 million or more, excluding primary residence, collectibles, consumables, and consumer d urables.

HNW SEGMENT RETURNED TO

MODERATE GROWTH AFTER

TWO TURBULENT YEARS

HNW Segment Grew at a More ModeratePace Than in 2009

The worlds population of HNWIs rew 8.3% in2010 (see Fiure 1), moderatin to a moresustainable pace than the 17.1% increase seen in2009. The rowth in HNWIs financial wealthalso slowed to 9.7% (see Fiure 2). This was still ahealthy rate, but was less than the 18.9% jump in2009 when there was a sharp rebound from thehefty crisis-related losses of 2008. The 2010increase was still enouh to push lobal HNWIfinancial wealth up to US$42.7 trillion, beyondthe pre-crisis hih of US$40.7 trillion in 2007.

Asia-Pacific aain posted a robust rate of

HNWI population rowth. As a result, whilethe size of its HNWI wealth had alreadyovertaken Europe in 2009, Asia-Pacific hasnow surpassed Europe in terms of HNWIpopulation too.

The worlds population of high net worth individuals(HNWIs1) expanded in 2010, as did their wealth, but thegrowth was more moderate than in 2009 when manymarkets ricocheted back from the significant crisis-related losses of 2008.

Globally, HNWIs financial wealth grew 9.7% in 2010to reach US$42.7 trillion, surpassing the 2007 pre-crisis

peak. The global population of HNWIs grew 8.3% to10.9 million. Regionally:

The population of HNWIs in Asia-Pacific, at 3.3million individuals, is now the second-largest in the

world behind North America, and ahead of Europe for

the first time. The combined wealth of Asia-Pacific

HNWIs had already topped Europes in 2009, and that

gap widened in 2010.

Europes HNWI wealth totaled US$10.2 trillion aftergrowing 7.2% in 2010, while Asia-Pacific HNWI wealth

was US$10.8 trillion, up 12.1%.

North American HNWI wealth hit US$11.6 trillion in2010, up 9.1%.

Latin America saw another modest gain (6.2%) in itsHNWI population in 2010 and HNWI wealth rose 9.2%.

The Latin America HNWI segment has proved relatively

resilient and stable in recent years (the number of HNWIs

shrank just 0.7% in 2008) and HNWI wealth is now up

18.1% from 2007.

Indias HNWI population entered the Top 12 for the

first time and Australia edged up another notch toNo. 9. Over time, the HNWI population is very graduallybecoming more fragmented across the globe, but its

geographic distribution in 2010 was much the sameoverall as it has been, and 53.0% of the worlds HNWIswere still concentrated in the U.S., Japan, and Germany.

Ultra-HNWIs2 posted slightly stronger-than-average

gains in their numbers and wealth. The globalpopulation of Ultra-HNWIs grew by 10.2% in 2010 andits wealth by 11.5%. As a result, Ultra-HNWIs accountedfor 36.1% of global HNWI wealth, up from 35.5%, whilerepresenting only 0.9% of the global HNWI population.


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2011 WoRld WEAlTH REpoRT 5

WoRlds populATion of HnWis And THEiR WEAlTH ConTinuEd To ExpAnd in 2010

FIgURE 1. HNWI Population, 2007 2010 (by Region)

(in Million)

2010200920082007

0

2

4

6

8

10

12

North America

Asia-Pacic

Europe

Latin America

Middle East

Africa

6.3%

9.7%

8.6%

6.2%

11.1%

10.4%

% Change Total HNWI Population

2009-2010

10.1 8.6 10.0 10.9

CAGR 2007-2009 -0.2% Annual Growth 2009-2010 8.3%

Number of

HNWIs

Worldwide

(in Million)

3.3

3.1

2.8

2.7

2.6

2.4

3.1

3.0

3.0

3.4

3.3

3.1

0.40.40.1

0.40.4

0.50.40.1 0.5

0.40.1

0.1

Note: Chart numbers and quoted percentages may not add up due to roundingSource: Capgemini Lorenz curve analysis, 2011

FIgURE 2. HNWI Wealth Distribution, 2007 2010 (by Region)

(US$ Trillion)

0

10

20

30

40

50

2010200920082007

North America

Asia-Pacic

Europe

Latin America

Middle East

7.2%

12.1%

9.1%

9.2%

12.5%

Africa 13.6%

40.7 32.8 39.0 42.7

CAGR 2007-2009 -2.2% Annual Growth 2009-2010 9.7%

11.7

10.7

9.5

6.2

9.1

8.3

7.4

5.8

10.7

9.5

9.7

6.7

11.6

10.2

10.8

7.31.71.0

1.40.8

1.51.0 1.7

1.2

Global

HNWI

Wealth

(in US$Trillion)

% Change Total HNWI Wealth

2009-2010



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Other reion-specific findins include:

The Asia-Pacific HNWI population expanded 9.7% to3.3 million, while Europes rew 6.3% to 3.1 million.Asia-Pacific HNWIs wealth ained 12.1% to US$10.8trillion, exceedin the US$10.2 trillion held by HNWIsin Europe, where the wealth increase was 7.2% in 2010.Overall, HNWIs wealth in Asia-Pacific is now up14.1% since the end of 2007despite the sinificantcrisis-related losses incurred in the interim. NorthAmerica and Europe have yet to fully recoup thoselosses so have neative rowth over the same period.

The population of HNWIs in North America rose8.6% in 2010 to 3.4 million, after risin 16.6% in 2009.Their wealth rose 9.1% to US$11.6 trillion. The U.S. isstill home to the sinle larest HNW sement in theworld, with its 3.1 million HNWIs accountin for28.6% of the lobal HNWI population.

In Latin America, the eneral population of HNWIsis still small, numberin under 0.5 million. However,the prevalence of Ultra-HNWIs multiplies theareate level of HNWI wealth, which rew 9.2% toUS$7.3 trillion in 2010. The Latin American HNWsement was quite resilient at the heiht of the crisis(the number of HNWIs shrank just 0.7% in 2008) andthe HNWI population has rown modestly since,ainin 8.3% and 6.2% respectively in 2009 and 2010.The disproportionate number of Ultra-HNWIs hasalso contributed to the ains in HNWI wealth, whichis now up 18.1% since 2007.

In the Middle East, the size of the HNWI populationained 10.4% in 2010 to 0.4 million, while their wealthjumped 12.5% to US$1.7 trillion. This helped thereions HNW sement to compensate for a relativelypoor showin in 2009 when the rowth in the HNWIpopulation and its wealth laed all other reions.

HNWI Ranks, While Still Heavily Concentrated,Are Fragmenting Gradually Over Time

The lobal HNWI population is still dominated by theU.S., Japan, and germany, but the ranks are framentinradually over time. In 2010, those three countriesaccounted for 53.0% of the worlds HNWI population,down from 54.7% in 2006. Their share will continue toerode if the HNWI populations of emerin anddevelopin markets continue to row faster than thoseof developed markets.

At present, Asia-Pacific continues to contribute thereatest year-on-year additions to lobal HNWI ranks.In 2010, the HNWI populations increased sinificantlyin Hon Kon (by 33.3%), Vietnam (33.1%), Sri Lanka(27.1%), Indonesia (23.8%), Sinapore (21.3%) and India(20.8%). In eneral, the strenth of those HNW

sements reflected robust macroeconomic indicators suchas ross national income (gNI), and strenth in other keywealth drivers such as equity-market performance. Severalof these markets, most notably Hon Kon and India,had also been bi ainers in 2009 after fallinsinificantly in 2008.

Still, most of these HNWI populations remaincomparatively small and have yet to feature amon thelarest HNWI markets lobally. However, Indias HNWIpopulation (at 153k) became the worlds twelfth larest in2010 (see Fiure 3) as it switched places with Spain

(which dropped to fourteenth). Australia also ained anotch in 2010 as its HNWI population rose to 193k,bestin Italy for the No. 9 spot.


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FIgURE 3. HNWI Population by Country, 2010

(in Thousands)

0

1,000

2,000

3,000

4,000

IndiaBrazilItalyAustraliaSwitzerlandCanadaFranceUKChinaGermanyJapanUS

1 2 3 4 5 6 7 8 10 9 11 14

Number

of

HNWIs(in Thousands)

Position

in 2009

8.3% 5.4% 7.2% 12.0% 1.4% 3.4% 12.3% 9.7% 11.1% -4.7% 5.9% 20.8%

HNWI Growth

Rate (%)

2009-2010

20102009

53.0% of total worldwide

HNWI population

(53.5% in 2009)

862924

477535 448454 383396251282

147155 127153179170174193222

243

1,6501,739

2,866

3,104

India moved for the

rst time into the

Top 12


Ultra-HNW Segment Showed StrongGains in Population and Wealth for theSecond Straight Year

The lobal population of Ultra-HNWIs rew 10.2% to103k in 2010, and their wealth jumped by 11.5%, aftersurin 21.5% in 2009.

A disproportionate amount of wealth remainsconcentrated in the hands of Ultra-HNWIs. At the end of2010, Ultra-HNWIs represented only 0.9% of the lobalHNWI population, but accounted for 36.1% of lobalHNWI wealth. That was up slihtly from 35.5% in 2009.

North America still has the larest reional number ofUltra-HNWIs. At the end of 2010, the number ofUltra-HNWIs there totaled 40k, up from 36k in 2009(but remains down from 41k in 2007). Reionally, LatinAmerica still has the hihest percentae of Ultra-HNWIsrelative to the overall HNWI population2.4%,compared with the lobal averae of 0.9%.


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3 Unless otherwise spe cified, all macroeconomic data and p rojections are based on Economist Intelligence Unit Regional and Country Reports from Januar y, February and March 2011.4 International Monetary Fund, Shifting Gear s: Tackling Challenges on the Road to Fiscal Adjustment, Fiscal Monitor, April 2011.

THE FINANCIAL CRISIS HAS

ABATED BUT ITS LEGACY WAS

EVIDENT IN HOTSPOTS AND

FISCAL DEFICITS IN 2010

As Normalcy Began to Return, Crisis-RelatedHotspots Still Emerged across the Globe

The lobal effects of the financial crisis receded in2010, but aftershocks still materialized in many forms,includin the soverein debt crisis in Europe and therowin burden of a apin fiscal deficit in the U.S.These types of shocks showed the fraility of theeconomic recovery and could still pose an obstacle torowth in 2011.

In the Eurozone in 2010, soverein debt crisesculminated in the rescue of greece and Ireland bythe European Union/International Monetary Fund(EU/IMF). In early-2011, Portual was also on the

vere of bankruptcy and other economies remain atrisk, especially Spain. given the enormity of thecrisis, the EU has voted to establish a EuropeanStability Mechanism to eventually replace thetemporary bailout mechanism (the EuropeanFinancial Stability Facility). The soverein crisis andsubsequent bailouts have threatened the solidarityof the EU and still threaten the stability and healthof the financial markets.

In the U.S., the political and economic imperativeto tackle the countrys fiscal deficit (see next section)

is creatin an additional burden on already cash-strapped local overnments. This has led to concernsover the ability of states and municipalities toservice their debt.

Normalcy began to return in 2010, but legacies of

the crisis were evident in financial hotspots and

gaping fiscal deficits. Financial hotspots flared,such as the sovereign debt crisis in the Eurozone,and many governments grappled with how to pursueboth economic growth and fiscal consolidation. The2010 U.S. fiscal deficit was the largest amongadvanced economies at 10.6% of gross domestic

product (GDP).

4

Emerging economies remained the key drivers ofthe global economy in 2010 and global GDP

returned to growth. Real GDP expanded by 3.9%in 2010, after contracting 2.1% in 2009, largely due to8.3% GDP growth in Asia-Pacific excluding Japan,and 5.7% growth in Latin America. The U.S., Europe,and Central Asia experienced modest growth,rebounding from contraction in 2009.

Equity, commodity, and other markets performed

well in 2010. Global equity-market capitalizationrose by 18.0% in 2010 despite losses in certain

markets where hotspots flared, but that was a farsmaller gain than in 2009. Many commodity pricesended the year higher due to robust demand for rawmaterials from fast-developing economies andstrong buying interest from investors. Real estateprices rose, but unevenly. Prices in Asia-Pacificincreased enough to spark intervention by somegovernments fearing an asset bubble.

Looking ahead, the global economy faces

short-term risks and an uneven recovery. GlobalGDP growth is expected to slow to 3.2% in 2011 andstay there in 2012, due largely to capacity constraints

in fast-growing developing economies such as Chinaand India. However, risks to the global recoveryremain, including turmoil in the European and MiddleEast economies and the destabilizing impact of highcapital inflows into emerging markets.

2010 in Review3

gLOBAL ECONOMY RETURNED TO gROWTH

AND MARKETS PERFORMED SOLIDLY


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2010 in REviEW

FIgURE 4. Financial and Economic Hotspots around the World, 2010 and Q1 2011

EUROZONE SOVEREIGN DEBT CRISIS:

Huge sovereign debts in Greece, Ireland,

Portugal, Italy and Spain have tested EU resolve

and required certain country rescues by EU/IMF

U.S. STATE AND LOCAL

GOVERNMENT DEBT:

There has been growing investor

concern around the ability of

states to service debt amid

gaping scal and budget decits

NATURAL DISASTER IN JAPAN:

Japan faced its worst ever natural disaster

when a 9.0 magnitude earthquake struck

on March 11, 2011, causing a tsunami and

a nuclear crisis that have affected the local

economy and could have global effects

ASIA-PACIFIC RESILIENCE:

Asia-Pacic excluding Japan

displayed resilience withaggregate real GDP growth

of 8.3% in the region in

2010-11, including

fast-growing economies

such as China and India

LATIN AMERICA RESILIENCE:

Latin American countries

collectively grew at a rate of

5.7% in 2010

REAL ESTATE CRISIS AND POLITICAL

UNREST IN MIDDLE EAST:Real estate prices dropped by up to 50%

in Dubai in 2010 from their peak in 2008

In 2011, political unrest is growing in the

Middle East and North Africa, pushing up

oil prices

Source: Capgemini Analysis, 2011

The Middle East faced its own financial problems in 2010as Dubai struled to manae the effects of the late-2009failure of state-owned conlomerate Dubai World, whichhad been hit by slumpin real estate prices. Fears thatthe conlomerates demise could cause soverein-debtproblems initially tihtened credit conditions in

international financial markets, but the situation wasresolved to the markets satisfaction, with no lastin effecton investin conditions in the reion.

Many of these financial hotspots have their roots in thelobal financial crisis, but political turmoil and naturalcatastrophes in early-2011 offered other examples of howthe recovery of the lobal economy could still be slowed orderailed (see Fiure 4).

For one, political turmoil spread throuhout the MiddleEast. A popular uprisin bean in Tunisia in mid-

December 2010 and similar revolts have since occurred inmany nations in Northern Africa and the Middle East,includin Eypt, Syria, Libya, Bahrain, and Yemen. These

events have created widespread uncertainty about thereion amon lobal investors, and have pushed oil pricessharply hiher, threatenin both the reional economicrecovery and the health of oil-dependent economies.

And in March 2011, Japan suffered a 9.0 manitude

earthquake, the larest in the countrys history. The quakeand consequent tsunami also caused a nuclear emerencywhen a nuclear plant in the quake zone bean to leakradioactive as and water. The crisis in Japan initiallydisrupted supply chains and trade, as well as investmentactivity in the reion. The Bank of Japan reported inearly-April that the disaster has caused widespreadconcern about business conditions amon Japanesecompanies. However, it is not yet known what the broaderimpact miht be on lobal economic rowth.


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2010 in REviEW

5 International Monetary Fund, Shifting Gear s: Tackling Challenges on the Road to Fiscal Adjustment, Fiscal Monitor, April 2011.6 Ibid.

7 Ibid.

WORLD GDP RETURNED TO

EXPANSION, LED BY ASIA-PACIFIC

Domestic Demand in Developing EconomiesProvided Fuel for Global Growth in 2010

Despite onoin challenes, the world economy rew atan annual real rate of 3.9% in 2010, but developineconomies were the real enines of expansion. Thisdynamic was much the same as in 2009, when rowth indevelopin economies had limited the contraction inlobal gDP to 2.1%.

In 2010, every reion delivered positive economic rowth,includin those reions such as Europe, North America,and Japan that had suffered sizeable contractions in 2009(see Fiure 5). However, the drivin force was aainAsia-Pacific excludin Japan, where stron domestic

demand in markets such as China, India, and Sinaporehelped to boost gDP by 8.3%. Japan also posted a stronrecovery, rowin 4.0% in 2010 after a 5.2% contraction in2009. gDP rowth in North America and WesternEurope was far more moderate than in emerineconomies in 2010 at 2.9% and 2.0% respectively.

The recovery in Latin America was also considerable, withthe reion postin gDP rowth of 5.7% in 2010 after acontraction of 2.4% in 2009.

Globally, Private and Government Consumption

Rose SlightlyConsumer confidence eded back up lobally in 2010,promptin a sliht rise (3.1%) in personal consumption.But aain, Asia-Pacific excludin Japan saw the stronestpersonal-consumption recovery (up 10.0%), while thedeveloped reions of North America and Western Europesaw little or no chane.

In the U.S., personal consumption increased by 2.0% andconsumer confidence was little chaned as unemploymentremained hih and post-crisis stimulus measures wounddown. In Europe, private spendin was static amidonoin worries about the soverein debt crisis.

Post-Crisis Fiscal Deficits Also Remained aMajor Challenge in 2010

The financial crisis and economic downturn have alsoworsened fiscal deficits and public debt levels, especiallyin developed countries where economic activity has beenslower to recover. In 2010, public debt as a percentae ofgDP was close to 200% in Japan, topped 80.0% ingermany and France, and rose 12.9% in the U.K. to77.0%. In the U.S., that ratio jumped 16.4% in 2010 to62.3% and apin fiscal deficits at the federal and statelevel threaten to undermine the economic recovery.

For many economies, it became a sinificant challene in2010 to pursue both economic rowth and policies aimedat reducin overnment deficits and debt (fiscalconsolidation). In 2010 at least, developed economiestended to favor rowth over consolidation. The U.S. and

Japan, for instance, adopted new stimulus measures,further delayin fiscal consolidation. As a result, theirfiscal balances (tax revenues plus proceeds from asset sales,minus spendin) were in deficit by 10.6% and 9.5% ofgDP respectively in 2010.5 The 2010 U.S. fiscal deficitwas the larest amon advanced economies, and whiledown from 12.7% in 2009, the deficit is expected toexpand aain to 10.8% of gDP in 2011 due to theonoin effects of stimulus measures.6

In many emerin markets, however, overnments weresensitive in 2010 to sins of overheatin as capital flowed

in seekin returns, and sins of inflation rew. Manycentral banks raised interest rates, potentially reducinareate demand and slowin rowth, and providinovernments with fewer resources to cut deficits. Still, theaverae fiscal deficit across emerin nations in the g20was still less than the averae amon advanced economiesin the g20 (-3.6% of gDP vs. -8.2% of gDP).7


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2010 in REviEW

global overnment consumption expanded 2.2% in2010. That followed a 3.4% increase in 2009 andreflected the onoin efforts by many overnments touse stimulus measures to blunt the effects of thefinancial crisis. Mature economies still account for thelarest share of total spendin by overnments lobally.government consumption remains hihest in WesternEurope and North America (US$3.2 trillion andUS$2.8 trillion respectively in 2010), thouh the

economies of Asia-Pacific and Latin America alsoincreased public spendin sinificantly in 2009-10(by 9.1% and 25.0% respectively) to support theonoin economic recovery.

National Savings Increased but HouseholdSavings Declined

In 2010, national savins increased in all reions exceptSub-Saharan Africa. As a percentae of gDP, nationalsavins eded up to 22.2% lobally from 21.3% in 2009,but the rate remains hihest in Asia-Pacific excludinJapan (39.3%) and lowest in North America (10.9%).

Household savins as a percentae of disposable household

income dropped in most g7 economies in 2010 due toonoin problems such as hih unemployment, decreasedconsumer confidence, and onoin financial stresses in theEU reion. goin forward, household savins rates arelikely to rise aain if and when central banks start totihten monetary policy, which will lead to more attractiveinterest rates on deposits.

FIgURE 5. Real GDP Growth Rates, 2009 2010

(%)

-10

-5

0

5

10

15

MexicoBrazilJapanIndiaChinaSingaporePolandRussiaU.K.FranceGermanyU.S.Canada

-2.6 -2.4 -2.2 -2.0

-6.6

-0.2

-5.0 -5.0 -5.2

-7.9

5.0

7.5

4.0

9.1

10.3

14.8

3.84.0

1.31.5

3.52.92.9

1.7

8.7

6.8

NorthAmerica

Western Europe EasternEurope

Asia-Pacic LatinAmerica

Percent

Change

(%)

20102009

Source: Capgemini Analysis, 2011, Economist Intelligence Unit, March 2011 (Real GDP variation over previous year)


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2010 in REviEW

8 Capgemini analysis.9 Ibid.

10 London PM FIX prices, ww w.kitco.com.

FIgURE 6. Equity Market Capitalization, 2003 2010 (by Region)

(US$ Trillion)

0

20

40

60

80

20102009200820072006200520042003

31.3

15.7

6.3

9.3

37.3

11.5

7.5

18.2

42.2

13.0

9.3

19.9

16.6

12.0

22.7

19.3

17.9

24.3

61.5

31.8

9.4

8.5

13.9

46.5

13.0

14.6

18.9

15.3

17.4

22.2

54.9

CAGR

(03-07)

18.4%

GROWTH

(07-08)

-48.3%

GROWTH

(08-09)

46.3%

GROWTH

(09-10)

18.0%GROWTH (09-10)

EMEA 17.2%

APAC 19.2%

Americas 17.5%

Americas

Europe /Middle East /

Africa

Asia-Pacic

51.251.2

US$Trillion

Source: Capgemini Analysis, 2011, World Federation of Exchanges, January 2011

KEY MARKET AND OTHER DRIVERS

OF WEALTH CONTINUED TO RISE

IN 2010

The performance in many markets helped to contributeto the rowth in wealth in 2010. Equity and other assetclasses rose in value, thouh not at the exuberant pace of2009s bounce-back. Commodities and real estate endedthe year hiher as did many hede funds. Hiher interestrates in some developin economies attracted investorcapital from lower-rate developed economies.

The followin developments were notable amon thosemarkets that heavily impact lobal wealth:

Global equity market capitalization rose 18.0%8despite the weak lobal recovery and sporadiceconomic and political turmoil around the world.

Market capitalization ended the year at US$54.9trillion, which was still below the 2007 hih ofUS$61.5 trillion (see Fiure 6).9 Equity market pricesremained underpinned by onoin overnmentstimulus measures. The U.S., for instance,implemented a Treasury-purchase proram in order tokeep interest rates from risin, which made equitiesrelatively attractive as an investment. global equity-market volatility remained hiher than pre-crisislevels, and spiked mid-year as concerns about the EUsoverein debt crisis flared (see Fiure 7).

International debt markets grew in size in 2010 asinvestor confidence returned to financial markets,providin more demand and liquidity for financialinstitutions, corporations, and overnments lookin to issuedebt. Prices of over-the-counter (OTC) derivative contractsand credit default swaps (CDS) declined. However,

investors remained cautious about investin in those kindsof instruments iven their demise durin the crisis.

Interest rates in emerging markets rose, attractingdollars. Most developed economies kept interest rates lowin 2010 so risin rates in many emerin economies luredcapital inflows. In the process, the currencies of manyemerin markets rose. By the end of 2010, the U.S. dollarhad depreciated by 4.6% aainst the Brazilian real, 3.4%aainst the Indian rupee and 3.3% aainst the Chineseyuan. The U.S. dollar ained round, however, aainst theBritish pound (up 5.2%) and the euro (up 8.1%).

Commodity prices rallied broadly. Commodities were instron demand both as raw materials and as investments in2010 (see Fiure 8). Demand for aricultural products andmetals, especially from fast-developin nations such asChina and India, pushed prices of many commodities tonew hihs and further increases are likely in 2011. Investordemand for old and silver was evident from hede fundsand other institutional investors, individuals, and centralbanks. The Dow Jones-UBS gold Sub-Index jumped28.6% and silver outperformed most asset classes iventhat prices sured nearly 80.3%10.


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2010 in REviEW

11 Global Property Guide, January 2011.12 International Monetary Fund, Shifting Gear s: Tackling Challenges on the Road to Fiscal Adjustment, Fiscal Monitor, April 2011.

WORLD ECONOMY IS ON THE ROAD

TO RECOVERY BUT DOWNSIDE

RISKS REMAIN

global gDP rowth is expected to slow to 3.2% in 2011and stay there in 2012 as rapidly rowin developin

economies such as China and India face capacityconstraints and developed economies tackle fiscalimbalances. However, the path to lobal recovery willlikely be uneven and various risks remain. Amon them:

Many governments must still tackle their fiscaldeficits. Deficits and debt levels pose short-term risksand loner-term structural challenes for manyovernments and, in turn, for the lobal economy.Crisis-related overnment stimulus has boostedborrowin by many major economies and raisedovernment debt levels. Nevertheless, fiscal consolidationamon the advanced g20 nations is projected to be lessthan 0.25% of gDP in 2011, while the averae debt ratiois expected to rise to 107% of gDP.12

Many developed nations will need to deal with lon-termstructural issues such as entitlements (e.., pensions,medical care, education) as they seek to et a rip onfiscal deficitsand they will need to do that whileremainin supportive of economic rowth. The fiscaloutlook has worsened too for many fast-developinemerin markets, which have started to focus onrestrainin overheatin and inflation.

Inflation is rising in both mature and emerging

economies. Food and fuel prices are risin in bothdeveloped and emerin economies, but it is fast-rowinemerin markets that have experienced the fastestinflation pace because of capacity constraints (seeFiure 9). The Asian Development Bank estimates thatinflation averaed 4.4% in 2010 in Developin Asia(which includes China and India) and will rise to anaverae 5.3% in 2011. U.S. inflation, by contrast, averaedjust 1.5% in 2010. However, inflation pressure is clearlyrisin across the lobe, especially iven surin oil prices,and many emerin economies are already increasininterest rates to moderate the trend. The lobal approach

to manain inf lation pressure could, however, have animpact on the pace at which economic recovery proceeds.

Oil prices had increased significantly by the end of2010. Oil prices traded in a fairly narrow rane formuch of 2010, underpinned by stron demand fromfast-developin economies. By December, thouh,supply constraints had started to show, and the priceof crude oil rose to end the year at US$91.4 per barrel,

up from US$79.4 a year earlier. In mid-December2010, political unrest broke out in Tunisia andinstability spread in early-2011 to many other MiddleEast nations. The turmoil pushed oil prices evenhiher and further ains are possible.

Hedge funds rose in line with equities. The DowJones Credit Suisse Hede Fund Index finished 2010up 11.0% and above end-2007 levels. Hede funds hadexperienced hefty redemptions and sharp declines inasset values durin the crisis but net inflows started topick up sinificantly in the second half of 2010.Durin the year, equity strateies enerallyoutperformed fixed-income funds, but funds investedin mortae-related securities were amon thebest-performin of any cateory. The volatility ofhede fund performance also declined in 2010 asmarkets continued their recovery. However, oversihtof the industry has increased and any neativepublicity or chanes in reulations could undermineinvestor confidence.

Real-estate investment rose. global investment inreal estate rose as markets such as the U.S. stabilizedand others such as the U.K. bounced back quite

sharply. However, the near-term prospects for realestate investment are uncertain. In the U.S. and U.K.,overnment initiatives to support housin have larelyexpired so demand and prices could lanuish. InAsia-Pacific, real-estate prices have jumped in manymarkets and the policy focus in several countries isnow on restrainin a possible asset-price bubble. Realestate prices in Hon Kon jumped 19.5% in 201011amid stron economic rowth and heavy buyininterest from mainland China. The Dow Jones globalSelect REIT Index rose 18.6% in 2010 after ainin23.8% in 2009.


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2010 in REviEW

FIgURE 9. Rate of Inflation,a Select Mature and Emerging Economies, 2009 2010

(%)

-3

0

3

6

9

12

15

South AfricaChinaBrazilRussiaIndiaJapanU.S.GermanyFranceCanadaU.K.

20102009

Percentage

(%)

Mature Economies Emerging Economies

2.8

3.7

1.3

2.3

0.9 0.8

1.8

2.8

14.9

9.7

8.8 8.8

4.3

1.5

4.8

7.2

4.1

5.9

1.4

0.0

2.0

-1.4

a Inflation is measured as the percentage change in consumer price index (end-period), over previous yearSource: Capgemini Analysis, 2011, Economist Intelligence Unit, March 2011

Loose monetary policies are contributing tomacroeconomic volatility. Central banks in developedeconomies have kept interest rates low to supporteconomic recovery while many emerin economieshave started to push interest rates up to cool theireconomies down. This has led to a fliht of capital from

developed to developin economies in pursuit of hiherreturns. Lare forein capital inflows have caused thecurrencies of most of the developin economies toappreciate, underminin the competitiveness of theirexports and destabilizin their macroeconomic health.

High unemployment remains a concern. Thedeveloped economies of the U.S. and EU stil l face hihlevels of unemployment, even thouh jobless rates haveshown early sins of abatin. In 2010, headcount andwaes had yet to show sinificant rowth, and theInternational Labour Oranization reports lobalunemployment was essentially unchaned at 205.0million or 6.2% in 2010. The speed of the jobs recoverywill be a key factor in the strenth of personal-consumption rowth, especially as households in

developed economies are sti ll deleverain.(Household debt is more than 125.0% of disposableincome in the U.S., Canada and Japan and is hihestin the U.K. at 170.6%).

Conclusion

The macroeconomic imbalances between mature anddevelopin economies have increased since the financialcrisis, as evidenced by the reater-than-averae rowth inAsia-Pacific HNWI wealth. In the comin year or so, eachovernment will need to manae the country-specificeffects of these imbalances on economic rowth, includinemployment levels, interest rates, fiscal and trade deficits.At the same time, many are expected to wean theireconomies from crisis-related stimulus to reduce apinfiscal and current account deficits, and many will need tomanae inflation pressures. The resultant overnmentactions will affect the pace of lobal recovery, anddetermine the extent to which Asia-Pacific and otheremerin economies remain a taret for lobal investorsseekin hih-rowth returns.


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HnWis EquiTy AlloCATions RosE in 2010 And EmERging mARkETs pRovidEd pRofiT oppoRTuniTiEs

markets of these reions but is lanuishin in moredeveloped markets. In the U.S., commercial vacancy ratesneared historic hihs in 2010, averain around 10.9% forretail space and 17.6% for office space across the country.14Amon North American HNWIs, commercial propertyaccounted for just 20% of real estate holdins in 2010.

That compared with 30% amon HNWIs in Europe,where illiquid markets have made it difficult to offloadcommercial assets.

Overall, HNWIs REIT holdins rose to 15% of all realestate investments at the end of 2010 from 12% a yearbefore as the Dow Jones REIT index ained 24%. REITallocations were proportionally hiher in North Americaand Japan (24% and 23% respectively), larely becauseREIT vehicles are more readily available and more widelyaccepted amon investors in those markets.

By the end of 2012, HNWIs real estate holdins overallare expected to decline to 15% of all assets from 19% atthe end of 2010. Investment interest is expected to remainstron in certain real estate sements, and especially inemerin markets, but many HNWIs remainapprehensive about real estate iven the sectors enerallyslow recovery from hefty crisis-related losses.

Globally, HNWIs Real Estate Holdings WereLittle Changed but Allocations to REITs Rose

The lobal allocation of HNWIs to real estate was 19% bythe end of 2010 versus 18% a year earlier but declinincommercial property rates and hih residential inventorylevels created uncertainty in the real estate markets ofdeveloped markets.

HNWIs exposure to residential real estate dipped to 46% ofall real estate holdins from 48% in 2009. Residential wasstill the sinle larest sub-sement of real estate in 2010, butit clearly felt the effects of declinin prices and theuncertain economic and housin outlooks. Overall, HNWIsexposure to commercial real estate was little chaned at 26%of all real estate holdins in 2010 versus 27% in 2009.

Holdins of residential real estate were proportionallyreatest amon HNWIs from Asia-Pacific excludinJapan, but their residential assets still declined to 51% of allreal estate holdins from 60%.

The commercial share of real estate holdins rose amonHNWIs in Asia-Pacific excludin Japan to 37% from 24%and in the Middle East to 34% from 29%. Commercial realestate is still perceived as an opportunity in the emerin

FIgURE 10. Breakdown of HNWI Financial Assets, 2006 2012F

(%)

0

25

50

75

100

2012F20102009200820072006

31%

21%

24%

14%

10%

33%

27%

14%

17%

9%

25%

29%

18%

21%

7%

29%

31%

18%

17%

6%

33%

29%

19%

14%

5%

38%

29%

15%

11%

8%

%

Equities

Fixed Income

Real Estateb

Cash / Deposits

Alternative Investmentsa

a Includes structured products, hedge funds, derivatives, foreign currency, commodities, private equity, venture capital.b Comprises commercial real estate, real estate investment trusts (REITs), residential real estate (excluding primary residence), undeveloped property, farmland and other.Note: Percentages may not add up to 100% due to roundingSource: Capgemini/Merrill Lynch Global Wealth Management Advisor Surveys 2007, 2008, 2009, 2010, 2011

14

Reis, Inc. analysis.


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15

Includes structured products, hedge funds, derivatives, foreign currency, commodities,private equity, venture capital.

Among Alternative Investments, Many HNWIsFavored Foreign Currency and Commodities

globally, the allocation of HNWI assets to alternativeinvestments15 dipped to 5% of all holdins at the end of2010 from 6% a year earlier, but various shifts occurredamon component cateories:

Commodityinvestments accounted for 22% of allalternative investments in 2010, up from 16% in 2009.Prices of many commodities rose to all-time hihsdurin the year as rapidly rowin economies such asChina and India spurred demand for raw materialssuch as base metals, platinum and palladium (used incar parts) and crude oil, and investors flocked to oldamid volatility in both the dollar and the euro.

Foreign currencyholdins increased to 15% of allalternative investments in 2010 from 13% as investorsbouht into currencies where country interest rateswere hiher than in the developed markets of theU.S. and Europe.

Hedge-fund holdins declined proportionally to 24%from 27%. The Dow Jones Credit Suisse Hede FundIndex rose 11.0% in 2010 and the Hede FundResearch, Inc. (HFRI) Fund Weihted CompositeIndex ained 10.5%. However, HFRI noted most ofthe ains were posted at the end of the year, and itwas only late in the year that inflows picked uppushin total industry assets to US$1.9 trillion, nearthe historical peak set in the second quarter of 2008.

Alternative investment preferences also varied by reion.HNWIs from North America and Latin America heldmore commodities than averae (30% and 26%respectively). HNWIs in Japan allocated 34% to foreincurrency versus the 13% lobal averae and 26% tostructured products, which was more than HNWIs inany other reion. HNWIs in Asia-Pacific excludinJapan allocated 22% of alternative investments tostructured products compared with the lobal averae of17%. Hede funds were still an important vehicle forHNWIs in Latin America, where they accounted for

35% of all alternative investments but that portion wasdown substantially from 49% a year earlier.

goin forward, HNWIs allocations to commoditiesand forein currency are expected to keep risin,underpinned by the demands of fast-developineconomies. Hede-fund interest could be underminedby onoin reulatory scrutiny of funds. Neativeheadlines or new oversiht measures could lead HNWIsto allocate less to such funds.

ASIA-PACIFIC IS KEY IN REGIONAL

DISTRIBUTION OF HNWI ASSETS

Around the world, HNWIs invest foremost in their homereions and then North America. (North American HNWIsinvest first at home and then in Europe.) However, the

reional distribution of assets shifts as HNWIs seek abalance between the search for yield and the need todiversify. This dynamic was evident durin 2010 and isexpected to continue to drive reional asset re-distributionby HNWIs in the comin year or so.

On areate, the reional distribution of HNWI assets wasvery similar at the end of 2010 to the year before. Forexample, 39% of lobal HNWI assets were held in the formof North American investments, up from 38%, while 21%was in European assets, down from 23%. The proportionsheld in Asia-Pacific (22%), Latin America (13%), and the

Middle East (3%) were all the same as the year before.However, that apparent stability belies some importantintra-year shifts.

Durin the first 11 months of 2010, investors poured arecord US$80 billion into emerin-market stock funds andUS$34 billion into emerin-market bond funds accordinto EPFR estimates. The returns on many of those assetssured and surpassed pre-crisis hihs durin that time. TheMSCI Emerin Market Index, for example, was up 104%since 2008 while the MSCI Developed Market Index wasup 39%. By the end of the year, however, many investors

took profits on emerin-market assets, especially as theopportunity in other markets started to improve.

For one, U.S. investments became relatively more attractiveas 2010 wore on. The Federal Reserve initiated a concertedmonetary easin in September, which nuded investors intohiher-yieldin investments such as equities. In December,the U.S. overnment unveiled new fiscal stimulus, whichboosted investor confidence, and more sins emered thatconsumer spendin was pickin up. In just three weeks inDecember, investors re-allocated US$22 billion into U.S.stock funds, accordin to EPFR estimates.

Asset-Distribution Strategies Also Differ byHNWIs Home-Region

At the end of 2010, North America HNWIs had 76% oftheir assets in home-reion investments, unchaned from ayear earlier (see Fiure 11), but that fiure is expected todrop to 68% by the end of 2012 as North AmericanHNWIs re-distributed assets toward emerin markets tocapture hiher returns and toward alternative developedmarkets to diversify their risks.


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Latin-America HNWIs investment allocations were littlechaned in 2010, but sinificant shifts are expected in 2012,when home-reion allocations are expected to drop whileinvestment in North America rises.

Despite these shifts, the lobal distribution of HNWI assets

will likely look much the same at the end of 2012 as it doesnow as investors wait for the lobal economy to work morethorouhly throuh its post-crisis recovery phase.

There is likely to be a reater proportion of HNWI assetsheld in Asia-Pacific in 2012 (24% versus 22%), but the extentof the shift toward emerin markets in eneral will dependin part on whether those markets can push to new hihs whiletheir economies are bein weaned of overnment stimulus.HNWIs North American holdins are expected to dip to38% while the proportions held in other reions stay the same.

This trend is already evident amon European HNWIs,where home-reion allocations in 2010 dropped to 56%from 59% while North American holdins rose to 23%from 21% and the emerin-market share also eded up.By 2012, European HNWIs home-reion allocation isexpected to slide another seven percentae points to

49% while North American and emerin-market assetsbecome even more prominent.

Amon Asia-Pacific HNWIs, home-reion allocationsalso dropped in 2010, to 57% from 64%, as NorthAmerican investments bounced back from 19% to 25%,near pre-crisis levels. Those home-reion allocations areexpected to be much the same in 2012, but NorthAmerican investments are likely to dip proportionally asAsia-Pacific HNWIs seek opportunities in otheremerin markets.

FIgURE 11. Breakdown of HNWI Geographic Asset Allocation, 2007 2012F

(%)

0

20

40

60

80

100

2012F2010200920082007

0

20

40

60

80

100

2012F2010200920082007

0

20

40

60

80

100

2012F2010200920082007

0

20

40

60

80

100

2012F2010200920082007

North America

Europe

Asia-Pacic

Latin America

Middle East

Africa

Asia-Pacific HNWIs Europe HNWIs

Latin America HNWIs North America HNWIs

26%17% 19%

9%

64%

6%

25%

7%

57%

8%

22%

8%

57%

10%

10%

68%

12%

53%

6%2%

3%2%1%

2%1%

1%1%

1%1%1%

24%18% 21%

59%

11%

5%

23%

56%

12%

6%

25%

49%

14%

8%

65%

10%

4%

56%

11%

6%2% 2% 3%

1% 1%2%1%

2%2%2%

38%32% 32%

12%

8%

47%

29%

13%

8%

47%

35%

14%

11%

38%

15%

7%

45%

18%

10%

31%

2% 1% 1%1%

2% 2%1%

76%

8%

76%

9%

7%

6%

76%

10%

9%

5%

68%

12%

11%

7%

81%

6%3%

11%

8%

4%1%

1%1%

1%1%

1%1%

1%1%

% %

% %

Note: Percentages may not add up to 100% due to rounding; Data for the Middle East is not depictedbut showed the same trend toward increased investment outside of the home region

Source: Capgemini/Merrill Lynch Global Wealth Management Advisor Surveys 2008, 2009, 2010, 2011


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16 Capgemini/Merrill Lynch Global Wealth Management Financial Advisor Sur vey 2011.17 http://www.nytimes.com/2010/04/07/business/global/07auction.html.

DEMAND FOR ALL TYPES OF INVESTMENTS

OF PASSION GREW IN 2010

Individual preferences play a lare part in HNWIs decisions to commit toinvestments of passion, especially iven emotive variables such as aesthetic value andlifestyle/status appeal. But HNWIs also view many investments of passion asalternative vehicles for preservin and appreciatin their capital over time,diversifyin their portfolio exposure or even capturin short-term speculative ains.

As wealth levels rebounded in 2010, interest in all forms of investments of passionalso revived. HNWIs relative allocations to those investments chaned very littlefrom 2009, but new and rowin demand was discernible from emerin markets.

The followin were amon the developments in major cateories of investments ofpassion in 2010:

Luxury Collectibles (e.., luxury automobiles, boats, jets) remained the larestsinle sement (29%) of investments of passion. Demand for luxury cars reboundedbroadly in 2010, but especially from emerin economies in Asia-Pacific, Russia,and the Middle East. Mercedes-Benz, for example, said its worldwide sales rose15% in 2010, while sales in China includin Hon Kon jumped 112% and sales inother emerin markets includin India, Brazil, and Russia also rose sharply.Ferrari reported China sales in 2010 were up nearly 50% from 2009, its best everyear. Ferrari added that the greater China Area (includin Hon Kon andTaiwan) is now one of its top five international markets.

Art accounted for 22% of investments of passion overall, but that share washiher amon European HNWIs (27%) and hihest amon Latin AmericanHNWIs (28%). Art is also most likely to be seen as a form of financialinvestment. In fact, 42% of Advisors say they believe their HNW clients invest inArt primarily for its potential to ain value.16

While it is hard to eneralize about Art values, auctions in early 2010 certainlyenerated headlines when two world records were broken for artworks sold atauctionfirst a giacometti paintin sold for US$104.3 million in February, then

a Picasso sold for US$106.5 million in May. Later auctions were less ebullient,but auction houses report demand remains stron for hih-quality pieces.

Newly wealthy Chinese buyers are widely reported to be keen bidders and buyersat alleries and auction houses, especially to acquire the fast-diminishin supply ofworks from native artists. In April 2010, Briht Road by Liu Ye, a contemporaryChinese artist, was auctioned for US$2.45 million, almost three times the pre-auction estimate. That sale was part of a Sothebys auction of contemporary Asianart, which yielded US$18.7 million, toppin the pre-auction estimate by aboutUS$2.5 million.17 Chinese demand is also reported to be stron for European artand Fine Arts, and Chinese collectors were said to be aressive bidders on many

HNWIs appetite for

investments of passion

increased in 2010 asthe global economyrebounded and HNWIwealth levels grew again(after the strong growthof 2009). The value of

many categories ofinvestments of passionrose and HNWIs madeacquisitions for theaesthetic and emotionalappeal and theirpotential to return value.Collectibles such as Art,which are deemed tohave a low or negativecorrelation withmainstream financialinvestments, continued

to have portfolio-diversification appeal.

Growing wealth from

emerging economies

helped to spur a revival

in markets for

investments of

passion. Theexponential growth inthe number of emerging-market HNWIs and theirlevel of wealth is

expanding the globalmarket for investmentsof passion, and broaddemand from Chinesebuyers is widelyreported for all sorts ofinvestments.

HNWI Demand for Investments of Passion

Rebounded as Wealth grew in 2010


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HnWi dEmAnd foR invEsTmEnTs of pAssion REboundEd As WEAlTH gREW in 2010

18 Ibid19 Koncept Analytics, Global Gem and Jewelr y Market Report 2010.

lots at the late-2010 sales at major New York auctionhouses. Estimates put the total sales of Chinese arts atjust over $4 billion between 2000 and 2009.18

Jewelry, Gems and Watches also accounted for 22% ofall investments of passion in 2010. Middle EastHNWIs had the hihest share at 29% but that wasdown from 35% in 2009. Record prices for diamonds atinternational auctions in 2010 exemplified the rowintrend amon the worlds HNWIs to see lare diamondsas a safe and hih-rowth investment alternative.Current demand at the hihest end of the marketappears to be larely from Russia and the Middle East,but demand from Chinese and other Asia-Pacif icinvestors is also rowin fast.19 Demand for fine andrare watches is also evident, with ChristiesInternational postin a record US$91.2 million in suchauction sales in 2010 and reportin exponential rowth

in buyer participation from Asian markets, led primarilyby China and Hon Kon.

Other Collectibles (e.., wine, antiques, coins,memorabilia) accounted for 15% of all investments ofpassion in 2010. Risin old prices helped to buoydemand for rare coins in 2010, with many pieces inauctions such as the Spink Ancient, Enlish and ForeinCoins and Commemorative Medals sale arnerin farmore than pre-sales estimates. Sales of fine wine alsosured in 2010. For example, Sothebys sold US$88.3

million in wine at lobal sales, more than double the2009 total, and the hihest in the companys 40 years ofwine auctions. Sales from its Hon Kon wine auctionwere up 268%.

Sports Investments accounted for 8% of HNWIs

investments of passion overall but that number was hiheramon Middle East HNWIs (13%) and those fromAsia-Pacific excludin Japan (10%) and Latin America(10%). In recent years, numerous soccer franchise dealshave been made by HNWIs from emerin reions,includin Russia, India, and the Middle East. Notableamon sports investments by HNWIs durin 2010 wasthe purchase by U.S. entrepreneur Stan Kroenke of St.Louis Rams American football team. Kroenkes othersports holdins include stakes in U.S. basketball, soccer, icehockey, and lacrosse teams and a U.K. soccer team. U.S.basketball icon Michael Jordan also bouht a controllin

interest in the Charlotte Bobcats basketball team in 2010.

HNWIs are clearly motivated to acquire investments ofpassion by more than financial considerations, and theamount of money flowin into this cateory tends to riseand fall with overall levels of wealth. However, manyinvestments of passion are also solid financial investmentsand will continue to play a role in HNW portfolios,especially for HNWIs seekin investments with a lowcorrelation to lobal financial markets.

FIgURE 12. HNWI Allocations to Investments of Passion, 2008 2010

(%)

201020092008

Luxury Collectiblesd

Art

Jewelry, Gems, & Watches

Other Collectiblesc

Sports Investmentsb

Miscellaneous

27% 30%

22%

23%

14%

8%

29%

22%

22%

15%

8%

5%

25%

22%

12%

7%

7%3%

0

20

40

60

80

100

%

a Miscellaneous includes club memberships, travel, guns, musical instruments, etc.b Sports Investments includes sports teams, sailing, race horses, etc.c Other Collectibles includes coins, wine, antiques, etc.d Luxury Collectibles includes automobiles, boats, jets, etc.Note: Percentages may not add up to 100% due to roundingSource: Capgemini/Merrill Lynch Global Wealth Management Advisor Surveys 2009, 2010, 2011


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FIRMS COULD LOSE AUM IF THEY FAIL TO

MEET THE NEEDS OF EMERGING HNWI

DEMOGRAPHICS

There may be no such thin as an averae HNWI, but in 2010, 83% ofall the worlds HNWIs were over 45 years of ae (and 59% were over55) and 73% of all HNWIs were male. While older men may be in themajority today, the HNWI population is radually becomin more

diverse as lobal demoraphic, cultural, and business shifts challene anybroad eneralizations about who HNWIs are and how they acquire,manae and utilize their wealth.

Demoraphic diversification is naturally radual so it does not requirethe same kind of urent response or fundamental transformation thatcould be needed to address post-crisis chanes in HNWI priorities andbehaviors (see Spotliht on Enterprise Value). However, a look at justtwo key shiftin demoraphic trendsfemale and youner HNWIsillustrates how Firms may need to fine-tune their service models overtime to accommodate specific needs.

Notably, this stratey is consistent with the empathetic approach Firmsand Advisors have had to assume since the financial crisis. Firms andAdvisors have already seen their HNW clients become moreconservative as they focus first on fulfillin life oals rather than chasinshort-term returns as many were keen to do before the crisis. HNWIschanin post-crisis demands have required many Firms and Advisorsto hone their propositions, and demoraphic shifts will require a similarand lon-term focus on individual needs.

Of All HNWIs, Fewer than One in Five Is 45 or Younger butThose Numbers Vary by Region

HNWIs aed 45 and under represented just 17% of all HNWIs in2010, but that was up from 13% just two years earlier. Of all HNWIs,41% were 55 or under, up from 37%. However, the numbers vary byreion (see Fiure 13), reflectin a variety of factorsfrom themake-up of the broader population and economy to household size andformation and differences in wealth-transfer practices. For example:

In Asia-Pacific excludin Japan, where fast economic rowth hascreated a whole new breed of entrepreneurs, 41% of HNWIsare 45 or youner.

The HNWI demographic is

gradually becoming more

diverse over time. For example,younger HNWIs (aged 45 oryounger) made up only 17% of thepopulation in 2010, but that was upfrom 13% just two years earlier.Similarly, women made up 27% of

the global HNWI population in2010, up from 24% in 2008.

Emerging demographics may

have different needs than

long-standing HNW clients. Firmsand Advisors cannot assume theirexisting value propositions willcontinue to resonate asdemographics change, and theymust be careful to avoidgeneralizing about the needs ofgrowing demographic segments

based on the historical demands ofthe majority.

Demographic shifts are gradual

and require firms to make

balanced adjustments rather

than a full-scale, instant

transformation. These shifts indemography have been small inabsolute size so far, but over timecould result in a very differentindustry landscape. Being aware ofthe potential impact of these trends

can help Firms to utilize initiatives,such as blended team-basedapproaches and education ofpotential clientele, to help themremain responsive as these shiftsevolve over time.

Demoraphic Profile of HNWIs Shows SlihtShift but the Impact Will Likely Be gradual


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dEmogRApHiC pRofilE of HnWis sHoWs sligHT sHifT buT THE impACT Will likEly bE gRAduAl

In the Middle East, more than 50% of the totalpopulation is estimated to be below 25 and the HNWIpopulation is also youner than averae: 21% are 45 orunder and 56% are 55 or under.

In Japan, which has one of the fastest aeinpopulations in the world, 80% of HNWIs are over 55and only 8% are 45 or under.

In North America, where the population is alsoainas it is in most post-industrializedeconomies68% of HNWIs are over 55.

While the number of youn HNWIs is unlikely to riseprecipitously, the trends show that Firms and Advisorscannot afford to inore the youner demoraphic, whetherthe youner element represents existin HNWIs orrecipients of wealth transferred from older enerations.

Currently, Advisors lose an estimated 49% of assets undermanaement (AuM) durin enerational wealth transfer.The financial crisis may have made it even touher to retainthose assetsand to attract newly minted HNWIsbecause the youner demoraphic is more likely to focuson the difficulties of the crisis years and to be unsure that

partnerin with an Advisor is in their best interests.

As a result, next-eneration HNW clients may need amore lobal and holistic approach from their Firms andAdvisorsone that includes a broad array of advice onoverall finances (includin taxes), investment opportunitiesin faster-rowin international markets, and partnershipswith wealth-transfer attorneys and accountants. YounerHNWIs may also be more demandin of their Firms andAdvisors in terms of transparency, efficiency, technoloyand convenience in everyday interactions, as many favorpredominantly real-time diital media for communications

and transactions.

FIgURE 13. Age Breakdown of HNWI Population, 2010 (by Region)

(%)

0

20

40

60

80

100

North AmericaMiddle EastLatin AmericaEuropeJapanAsia-Pacic

ex. Japan

Global

Average 2010

Global

Average 2008

Under 31

31-45

46-55

56-65

66-75

Over 75

Age in Years

11%

24%

32%

22%

9%

15%

24%

30%

20%

9%

38%

28%

16%

8%

7%

7%

33%

13%

32%

15%

2% 2%

15%

28%

31%

18%

5%

2%15%

28%

34%

17%

4%

2%

19%

35%

29%

11%

5%

2% 8%

22%

32%

23%

13%

2%3% 1%

%

Note: Percentages may not add up to 100% due to roundingSource: Capgemini/Merrill Lynch Global Wealth Management Advisor Surveys 2009, 2011


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dEmogRApHiC pRofilE of HnWis sHoWs sligHT sHifT buT THE impACT Will likEly bE gRAduAl

bequestsbut they live loner on averae. It is importantfor Advisors to understand a female HNWIs economicpriorities, risk appetites, and other investment oals asthey may differ sinificantly from the averae male HNWclient when, for example, she has outlived a spouse or atrust has already been established for heirs.

Advisors will also need to comprehend fully thenetwork of influence on which their female HNWclients rely in makin such financial decisions. Firmscould, for example, leverae team-based approaches tocombine complementary strenths and differentperspectives to iterate their response to the complexneeds of female HNWIs.

Conclusion

Demoraphic chanes do not happen overniht, but they

do represent an inexorable move away from the status quo.As such, these chanes need to be on the radar as Firmsand Advisors continue to rebalance their HNW valuepropositions over time. Most critical will be the need tostay relevant to individual HNW clients, usin tools andtechniques that resonatewith emerin sements,includin (but not limited to) the female and younerdemoraphics as well as to existin HNW clients.

More than One in Four HNWIs Is Female

Women accounted for 27% of the lobal HNWIpopulation in 2010, up from 24% in 2008 (see Fiure 14).Aain there are differences by reion, most often reflectincultural and business trends, but the number of femaleHNWIs is quite likely to rise as the number of femaleentrepreneurs and hih earners continues to expand.

In North America, where women are well-established inthe business world, women already account for 37% of thetotal HNWI population. In the Middle East, 86% ofHNWIs are men, but Sharia law protects womens assets,creatin a specialized need for wealth-manaementservices for female HNWIs.

Aain, Firms and Advisors will need to consider whetherthe value proposition they offer to female HNWIs is apt

to retain and attract AuM. At present, for example, Firmsinitially retain a seeminly impressive 66% of all assetstransferred to a woman from a man, but the question iswhether they can retain that AuM for the loner term.

Women need to plan for the same wide variety of possiblelife events as menfrom the sale of a business to a jobloss, marriae, divorce, lon-term care, and enerational

FIgURE 14. Gender Breakdown of HNWI Population, 2010 (by Region)

(%)

0

20

40

60

80

100Female HNWIs as a

% of Total HNWIs

Male HNWIs as a

% of Total HNWIs

Middle EastLatin AmericaEuropeAsia-Pacic

ex. Japan

JapanNorth AmericaGlobal

Average 2010

Global

Average 2008

76%

24%

73%

27%

63%

37%

69%

31%

76%

24%

82%

18%

82%

18%

86%

14%

%

Note: Percentages may not add up to 100% due to roundingSource: Capgemini/Merrill Lynch Global Wealth Management Advisor Surveys 2009, 2011


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20 Enterprise Value: The ability to leverage capabilities from across different business units in order to differentiate in meeting client needs.

HNWIS HAVE REGAINED

TRUST IN ADVISORS AND

FIRMS BUT ARE MORE

CONSERVATIVE AND MORE

VIGILANT POST-CRISIS

HNWIs Faith in Advisors and

Wealth Management Firms HasSlowly Been Restored

In 2010, as financial markets and economiesrebounded across the lobe, 98% of HNWclients are believed to have trust and confidencein their wealth manaement Advisors and 88%in their wealth manaement firms (Firms).This endorsement stood in stark contrast to2008, when nearly 50% of HNW clients werelosin trust in their Advisors and Firms (seeFiure 15, p. 26). Trust and confidence inreulatory bodies and institutions is far

from restored, however. Only 44% of HNWclients had faith in oversiht bodies in 2010and nearly one-third still actively distrustedthese institutions.

This mixture of trust and misivins reflects alon and sometimes painful journey for HNWIsin which they have rethouht their investmentoals and weihed heavily the amount of riskthey are willin to assume to reach those oals.The process has also caused HNW investors tobe newly demandin of their Firms and

Advisors. This presents a sinificant opportunityfor leadin Firms that are able to address thebreadth and complexity of client needs,particularly if they can leverae aainst theirbroader enterprise capabilities.

Wealth management firms and Advisors have

overwhelmingly regained the trust and confidence

of HNW clients since the financial crisis, so theimperative for Firms and Advisors is to help HNW clientsmanage the complex mix of goals, concerns, andpriorities they now face. The task is complicated by thefact that HNW clients still lack trust in regulators and, toa lesser extent, financial markets.

Firms could drive significant HNW client satisfactionby leveraging Enterprise Value to deliver an

integrated response to HNWIs complex post-crisis

needs. The highest priority will be to deliver a relevantenterprise proposition in areas where HNWIs seesubstantial value but are less than satisfied to date. Keyexamples of sought-after cross-enterprise capabilities(or value levers) are: Cross-enterprise expert adviceteams; unique investment opportunities through theinvestment bank; preferred financing for entrepreneurs;and advice/expertise from the private bank and theinvestment bank during the wealth-creation process.

Todays post-crisis, client-driven Enterprise Valueparadigm is very different from yesterdays Firm-

driven search for synergies. Many financial servicesfirms have tried to capture and leverage Enterprise Valuebefore, typically seeking the benefits of synergies, butthose attempts have often fallen short. Now, forward-thinking Firms need to build Enterprise Value strategiesand investment programs from a client-benefitperspective. This will still mean facing up to thesignificant challenges that exist in doing so, fromensuring strategic commitment to managing incentivesand establishing support mechanisms.

The Enterprise Value approach could be an

especially important differentiator for Firms thatneed to be more responsive in todays highlycompetitive market. It could also help Firms to positionthemselves better to respond to longer-term shifts in thedemographics of the HNW segment. At the same time,there is still potential for Firms to capture financialbenefits. Enterprise Value is a long-term evolution andcommitment, however, not a short-term fix.

SpotlihtWealth Manaement Firms Can Leverae Enterprise Value

20

to Better Address HNWIs Complex Post-Crisis Needs


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spoTligHT 2011

HNW clients are heavily focused on attainin specificlife-oal benchmarks, not just arbitrary investment oals.As a result, many are committed first and foremost topreservin capital built to fund their life oals.

HNW investors are not easily convinced that alternativeor emerin opportunities are worth the riskor atleast not as easily convinced as durin the bull-marketyears when all investments seemed to return some typeof positive yield.

In this post-crisis environment, Firms and Advisors mustremain mindful of client concerns but cannot disreardtheir fiduciary responsibilities. In 2011, for example,Advisors could soon need to discuss with HNW clientswhether they are bein overly conservative, especially asrisin inflation eats into already low returns on certainasset classes. This conversation will be necessary whetherclients are lookin to preserve capital or capture hiheryields, and it will require Advisors to have a sophisticatedunderstandin of their clients so as to deliver a viablestratey that resonates.

HNWI Asset Allocations Are Still MoreConservative than before the Crisis, Partly due toDiminished Trust in Markets and Regulators

Asset allocations at the end of 2010 showed a continuedeasin of crisis-related concerns and a cautious search for

returns by HNWIs, but HNWIs still held US$18.6 trillionor 43.5% of all their assets in conservative instruments(fixed-income and cash/equivalents)even thouh lobalequity-market capitalization had risen 18.0% in 2010 and46.3% in 2009.

The fact that HNWIs still hold a sinificant portion oftheir assets in low-yieldin instruments clearlydemonstrates the effects of the crisis on the investor psyche:

HNWIs remain uncertain that markets will remainstable and that the financial crisis is over, and they fearthat new and unforeseen systemic shocks could emere.

HNWIs are conizant that lobal politics and economicsare converin in decisions about interest rates and manyother policies, which could affect future market returns.

FIgURE 15. HNW Client Trust Levels, 2008 2010

(%)

Strongly Disagree Disagree Somewhat Disagree

Financial

Advisor

Wealth

Management

Firm

Financial

Markets

Regulatory

Bodies and

Institutions

Strongly AgreeAgreeSomewhat Agree

Financial

Advisor

Wealth

Management

Firm

Financial

Markets

Regulatory

Bodies and

Institutions

Financial

Advisor

Wealth

Management

Firm

Financial

Markets

Regulatory

Bodies and

Institutions

Agreement that HNW Clients are

Losing Trust and Confidence in

the Following Entities, 2008

Agreement that HNW Clients are

Regaining Trust and Confidence

in the Following Entities, 2009

Agreement that HNW Clients

Have Trust and Confidence in

the Following Entities, 2010

32% 16%

17% 5%

0%

23%

32%

36%

71%

18%

32%29%

14%

25%

7% 7%

8%

6%

8%

4%

6%5% 2%

1%

3%

18%

19%

1%

5%

10%

3%4%

10%

4%8%

5% 7%

4%

5%

2%4%

8%

17% 15%

23%

23% 25% 20% 68%

16% 28% 40% 84%

17%

47% 23% 43%

28%

36%

25% 17%

19%

47% 13%

49% 98%

88%

57%

44%

11% 6%

2%

2%9%

8%

6%

25% 59%

25% 25%

30% 17%

56%

47%

17%

48%29% 17%

23%

11%

11%

Note: Questions asked each year were slightly different, but the message remains clear Firms and Advisors are well-trusted by clients globally but regulators and markets are less soSource: Capgemini/Merrill Lynch Global Wealth Management Advisor Surveys 2009, 2010, 2011


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spoTligHT 2011

FIgURE 16. Major Concerns of HNW Clients, 2010

(%)

Strongly AgreeAgreeSomewhat Agree

Rising Education Costs

Rising Healthcare Costs

Retirement Lifestyle Affordability

Real Estate Market

Income Lagging Ination

Ensuring Assets Last their Lifetime

Next Generation Not Adequately

Managing Inheritance

Possible Tax Increases

Impact of Economy on Goals 22% 40% 24% 86%

81%

69%

69%

69%

67%

65%

56%

43%

13% 37% 32%

28% 30% 11%

24% 31% 15%

27% 28% 15%

25% 27% 15%

20% 30% 14%

17% 21% 18%

20% 16% 7%

CRITICAL

MEDIUM

LOW

HIGH

Note: Percentages may not add up to totals due to rounding; Question asked: Please indicate to what extent you agree or disagreewith the following statements about which concerns your HNW and UHNW clients are most worried aboutSource: Capgemini/Merrill Lynch Global Wealth Management Advisor Survey 2011

HNWIs Are Sensitive to the Effects of MacroTrends and Taxes on Investment Performanceand Goals

Client conversations will obviously depend on individualneeds, but it is clear the crisis has enerally made HNW

investors more sensitive to the potential for macro trendsto undermine the performance of their own portfolios andtheir ability to meet specific investment and life oals.

The financial crisis resulted in an economic downturn indeveloped economies that has played out very publiclyas have the efforts by overnments around the lobe tooffset the effects and put their economies on a balanced-rowth trajectory. This has left HNWIs with a wholeswath of new concerns (see Fiure 16). Most critical arethe eneral unease about the impact of the economy onfinancial oals and fears that tax rates will be hiked,

reducin income and net portfolio returns and potentiallymakin the movement of assets across jurisdictions moreinefficient and costly.

HNWIs other major concerns include worries that assetswill not last their lifetime, that the next eneration will notbe able to properly manae their inheritance, and thatincome will not keep up with inflation.

HNW clients have lived in recent years throuh both

bull-market run-ups and staerin losses, so thebreadth and depth of their concerns is hardly surprisin.Still, it will be a challene for Firms and Advisors todevelop a proposition that resonates in thisenvironmentwhere HNWIs have clear life andinvestment oals but may be fearful of riskin capital toenerate returns to fund those oals.


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spoTligHT 2011

FIRMS FACE A NEW

INDUSTRY REALITY

As Firms and Advisors work to respond effectively to theevolvin needs of HNWIs, it is important to note they alsoface chanin economics and operatin demands in their

own industry. These dynamics mean Firms cannot afford todo more of the same to satisfy HNW clients oin forward.

Wealth Management Profit Margins, WhileResilient, Have Been Gradually Declining

Within diversified financial services firms, wealthmanaement profit marins have been more stable thanthose of the broader financial services oranization. Amona select roup of major financial services institutions (FSIs)that report wealth manaement profits separately, theareate pre-tax profit marin from wealth-manaement

units dropped more than 300 basis points from 2006 to2009. But that compares with a massive decline durin thatperiod of more than 3,000 basis points for the FSIenterprises overall. That slump was due larely to losses ininvestment bankin and asset manaement.

However, despite their relative resilience, wealthmanaement marins have been steadily erodin each yearsince 2006, and dropped 320 basis points in 2010. Thisdecline occurred as Firms absorbed increased costs fromcompensation (recruitin and retention) and reulations(new burdens in processin, IT and trainin) while

investors remained heavily invested in conservativeinstruments that enerate limited fees.

HNWIs Want to Preserve Capital,Demand Expertise

After the rollercoaster ride of recent years, nearly allHNWIs (97%) say capital preservation is important tothem and a lare number (42%) say it is extremelyimportant (see Fiure 17). Similarly, effective portfoliomanaement is deemed important by 94% of HNWIsand extremely important by 30%. The crisis has not onlymade these needs more acute, it has raised or created thepriority for newer issues, includin specialized advice(important to 93%) and transparency on statements andfees (93%).

As HNWIs look to attain life oals, they are also evenmore enaed in their financial affairs than in times past.This enaement itself creates new demands. Forexample, many HNWIs (84%) say more frequent /

innovative communication is now important to them.And while the frequency of advisor contact is likely tobolster investor satisfaction, HNWIs also expect choicein the means of communication, includin tools such asdiital media and mobile applications. The underlyinimperative, thouh, is to make sure HNW clients feeltheir Firms and Advisors are fully accessible to themwhether the client wants to be proactively involved inmanain their assets or simply wants to check in.

Many HNWIs (82%) also say succession-plannincapabilities are important to themanother indicator

that HNWIs do not want to jeopardize their leacy inthe search for investment returns.

FIgURE 17. Top Six Priorities of HNW Clients, 2010

(%)

Independent Investment Advice

Global Asset Allocation of Portfolios

Transparency on Statements and Fees

Specialized Advice

Effective Portfolio Management

Capital Preservation

Extremely ImportantImportantSomewhat Important

8% 46% 42% 97%

15% 49% 30% 94%

19% 48% 25% 93%

16% 42% 34% 93%

26% 43% 19% 88%

24% 42% 21% 88%

Note: Percentages may not add up to totals due to rounding; Question asked: How important are the following to your clients?Source: Capgemini/Merrill Lynch Global Wealth Management Advisor Survey 2011


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FIgURE 18. Advisor Perceptions of Which Firms Are Well-Positioned to Address HNW Client Priorities, 2010

(%)

Succession Planning Capability

More Frequent/Innovative

Communication

Leverage of Enterprise Value

Independent Investment Advice

Global Asset Allocation

of Portfolios

Transparency on Statements

and Fees

Specialized Advice

Effective Portfolio Management

Capital Preservation

Independent Asset Managers

Pure Play Wealth Managers

Full Service Firms

84.4%

61.3%

59.1%

84.5%

70.4%

63.6%

86.0%

67.9%

65.9%

76.6%

59.3%

55.0%

88.7%

68.5%

60.1%

73.2%

65.1%

73.7%

82.7%58.5%

48.3%

78.3%

65.5%

64.8%

79.1%

59.0%

55.6%

TOP

SIX

CLIENTPR

IORITIES

OTHER

CLIENTPRIORITIES

Note: Question asked: Please rate to what extent you feel the following firm types are well positioned to meet new client demandsSource: Capgemini/Merrill Lynch Global Wealth Management Advisor Survey 2011

These dynamics illustrate the added pressure on Firmsto demonstrate a value proposition for which HNWclients are willin to pay. Developin such a propositionwill be critical to the sustainable rowth of Firms oinforward and will require a move beyond more of thesame into innovations such as true Enterprise Value

(versus basic synery seekin).

Wealth manaement certainly remains an importantand fairly stable cash-revenue stream for FSIs, whichmay face new reulatory limits on other revenueenerators such as proprietary tradin. At the parent-firm level, FSIs must also set aside more capital inreserves than in the past, restrictin the amount ofcapital on which they can enerate returns.

FULL-SERVICE FIRMS ARE LIKELY TO

BE BETTER POSITIONED TO WEATHER

CLIENT AND INDUSTRY SHIFTS

Well-capitalized, experienced, full-service Firms are likely tobe well-positioned to address many of the new industry and

client realities discussed (see Fiure 18), and may have thescale to adapt.

More specifically, full-service Firms are perceived to be farbetter positioned than pure-play wealth manaement firmsor independent asset manaement (IAM) firms to meetcurrent HNW client priorities such as capital preservationand effective portfolio manaement, specialized advice, andmore frequent/innovative communication. Not surprisinly,


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Firms Should Think about Enterprise Valuefrom the Client Perspective

Previous attempts by Firms to leverae Enterprise Valuehave yielded some strateic and bottom-line benefits,primarily cost syneries and easier access for one businessunit into the client base of another (thouh that was oftenviewed from a short-term return on investment (ROI)perspective). Firms can still arner those benefits today.They can, for example, tap into the realm of HNWIs whohave created their wealth throuh investment bankin andacquire them as wealth-manaement clients. But despitethe Firm benefits, the Enterprise Value concept today linksdirectly to the rowin complexity of HNWI demands.

From the perspective of HNW clients, Enterprise Valuecould help deliver some important benefits, includin:

A more lobal overview of wealth, which could be

especially important to HNWIs with extensive businessinterests who miht need corporate or investmentbankin services.

Potential access to investment opportunities oncereserved for institutional clients.

A more harmonized and consistent service offerin.

Access to a wider rane of resources and complexcapabilities throuh one point of contact.

If Firms can deliver such benefits, their HNW clients arelikely to perceive more value in the relationship. It is

hardly surprisin then that the potential of EnterpriseValue has already started to pique the interest of HNWIsand Advisors. In fact, 89% of surveyed Advisors saidbetter leverain the full value of interation acrossinvestment and corporate bankin, asset and wealthmanaement is an important part of their Firmsapproach/stratey for HNW and UHNW clients.However, only 57% areed that their Firm was able toleverae Enterprise Value for client benefit.

The key for Firms is to focus on the specific linkaes thatcreate value for HNW clients. This requires a kind of

flexibility and responsiveness that represents a sinificantshift for many Firms. But it could also be a reatopportunity for astute Firms to demonstrate theircommitment and value to HNW clients, and to draw avisible distinction between their post-crisis propositionand the pre-crisis years.

iven their lobal scale and broad capabilities, they arealso perceived to be in a better position to leveraeEnterprise Value and provide lobal asset allocation needs.

IAMs, a nascent industry sement that rew durin thelow-trust crisis years, are enerally felt to be least

positioned to manae the complex needs of HNWIstoday. Independent advice is one area in which IAMs arewell-positioned by definition. However, IAMs must beable to demonstrate to HNW clients the value of payinextra to outsource asset manaement. They must alsomanae risin industry costswhich all participants facebut IAMs must absorb across a smaller-scale enterprise.

For full-service Firms to make the most of their naturalstrenths, however, they may need to offer a fullyinterated response that leveraes the value of thebroader enterprise to meet HNWI needs. Enterprise

Value could be even more relevant to Firms servin ortryin to enter certain sements, includin Ultra-HNWIs and entrepreneurs.

ENTERPRISE VALUE COULD BE KEY

FOR FIRMS AND HNWIS IN THE

POST-CRISIS PARADIGM

The challene for the industry then is how to adapt andtaret a relevant post-crisis value proposition for HNWIswhile marin pressure is rowin. One critical

differentiator could be the ability of Firms to rallyadditional capabilities from other business units such asinvestment and corporate bankini.e., leveraeEnterprise Value.

Visions of Enterprise Value are not new, but the iterationdiscussed hereand scantly practiced so faris a directresp

Documents

MERRILL LYNCH INFORME SOBRE LA RIQUEZA AÑO 2011