Distribution of Wealth – Wealth Segment Sizes and Trends

Euromonitor International has been working on the upcoming Income/Wealth Tool, and in this article, we introduce some preliminary findings from the research, with an overview of sizes and trends across six wealth segments in the main geographic regions. One of the major trends over 2013-2020 will be developments in India and China, which are mapped separately in the charts. Information on wealth segment trends can be useful in decisions on price positioning of consumer products such as value and premium product forecasts.

Figure 1: Wealth Distribution by Geographic Region, 2013-2020

Source: Euromonitor International

Note:  37 countries covered, representing 57% of the global population and 76% of global GDP measured at PPP in 2013. Total number of adults displayed above – 3,063,317 (3,196,039 in 2020). Current 2013 prices. Countries included in each region: North America: Canada, US; Eastern Europe: Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Russia, Slovakia, Slovenia; Western Europe: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Ireland, Norway, Netherlands, Portugal, Spain, Sweden, Switzerland, UK; Asia Pacific: Australia, Indonesia, Japan, Taiwan, South Korea.

Regional wealth distribution

Net wealth is defined as the sum of all financial and nonfinancial assets minus all liabilities. While meaningful boundaries for each wealth segment are somewhat arbitrary and may vary depending on the purpose of the study, in this article we relied on common practices from wealth surveys of Merrill Lynch, Capgemini, Credit Suisse (see reference 1). One of the areas where our study adds additional insight is that we look across the entire spectrum of wealth data, while majority of studies focus predominantly on the High Net Worth Individuals (HNWIs), disregarding the bottom and the middle parts of wealth distribution. These segments are also the largest, representing more than 2.7 billion adults and $US30 trillion of net-assets (among 37 countries).

The six wealth segments covered in this article are the following:

  • Indebted (< 0)
  • Poor (US$0-US$10,000)
  • Middle (US$10,000-US$100,000)
  • Affluent (US$100,000- US$1 million)
  • HNWIs (US$1 million+)
  • Ultra-HNWIs (US$50 million+)

One of the largest changes to watch over 2013 – 2020 will be the rise of the middle class in China. The middle wealth segment’s global forecast is set to grow by 250 million adults over this time period, and 90% of that growth will be in China. Other segments that are forecast to grow significantly are the High Net Worth Individuals (HNWIs) and Ultra-HNWIs, with growth of 50% and 76%, respectively.

Indebted – mostly in developed countries

Because of wider availability of credit and more developed financial markets, the largest proportion of the population with negative net wealth is in North America and Western Europe. Almost every tenth adult in North America and Western Europe has negative net wealth, with Denmark leading in this list, where more than 20% of individuals have debts larger than their gross assets.

Among developed countries, there were more than 90 million indebted individuals pressed down by their mortgages, car loans or credit-card obligations. In India and China the segment is relatively small compared to the overall population. China in particular is known for having one of the largest savings rates in the world, partially explained by the country’s largely absent social security net, which encourages individuals to save more.

Poor – divergent roles of India and China 

Poor is the largest global segment, constituting 56% of the adults (1.7 billion individuals) in the 37 countries analysed. China and India represented 81% of the Net Wealth Poor segment in 2013, but the largest change in the segment is expected to happen during the forecast period.

The share of Chinese population in the global poor segment is expected to drop from 60% in 2013 to 40% in 2020, which in actual terms means that close to 250 million adults will move from Poor to Middle. India, however, with 90% of the population in the Poor segment, is not expected to emerge from the poverty problem, and this is likely not going to change significantly throughout forecast horizon until 2020.

Figure 2: Net Wealth Poor Segment as % of Total Population

Source: Euromonitor International (Income Wealth Tool)

Eastern European countries are also relatively over-represented in this segment, but a large size of the shadow economy in many Eastern European countries is likely to have an affect on the weighting, and a large portion of the wealth in the region may be underrepresented.

Middle – all eyes on China

Middle is the second largest segment, after Poor, with about 26% of the population globally. During the last decade Chinese made a significant shift towards the middle section of global wealth distribution, and there are now more than 400 million adults with $US10,000+ in net assets. Until 2020, we expect China to halve its representation in the poor segment and therefore make a significant contribution to the global middle class, reaching 600 million adults. Though the relative size of the middle class in India will remain rather small, the country is going to double its representation in this segment, from 37 to 68 million adults by 2020, overtaking Eastern Europe.

Figure 3: Net Wealth in China: 2013/2020

Source: Euromonitor International

Middle is also the largest wealth segment in North America and Western Europe, with approximately 34% and 40% of adults, respectively. There were 92 million adults in Middle segment in North America (expected to drop 86 million by 2020), and 133 million adults in Western Europe (expected to drop to 118 million by 2020).

Affluent – mainly in developed countries

Developed countries accounted for more than 90% of the membership of the Affluent group in 2013. Western Europe, where wealth distribution is generally more equally spread than in North America, was overrepresented in this segment, with more than 130 million adults from Western Europe (or 40% of population). North America was second, with 88 million adults (or 32% of the population).

While developed countries will continue to dominate in the top part of wealth distribution, the number of Affluent individuals in the majority of emerging economies is expected to double before 2020. In particular, India and China are expected to increase their representation by 2.3 and 25.5 million adults, and therefore should present significant potential for premium products.

Figure 4: Distribution of Affluent Adults by Country, 2013

Source: Euromonitor International

HNWIs and ultra-HNWIs

HNWIs and ultra-HNWIs segments are naturally considered the main focus segments for luxury goods. In 2013, there were almost 30 million individuals with net assets of over US$1 million, or 1% of the population. The largest proportion of millionaires lived in North America (45% of the world’s millionaires or 13.4 million individuals), followed by Western Europe and Asia Pacific (mainly Japan).

Figure 5: HNWIs and ultra-HNWIs Distribution by Region

Source: Euromonitor International

By 2020, HNWIs should represent 1.4% of the world’s population. In terms of millionaires, China and India are increasing their shares in the global segment, but the biggest rise in actual terms is still expected in North America and Western Europe, where the number of HNWIs is set to increase by 50% and 45%, respectively. Additionally, China and India together are expected to contribute 1.4 million new millionaires over 2013-2020.

Moving further to the pinnacle of wealth distribution, ie Ultra-HNWIs – defined as adults with net wealth exceeding US$50 million, the role of the US becomes more important. Out of 83,000 Ultra-HNWIs globally, 48,000, or almost 60% are in the US. However, by 2020, we expect China to register one of the largest increases in this segment, becoming the second largest country for ultra-HNWIs second only to US, with 11,000 Ultra-HNWIs individuals.

Figure 4: Number of Ultra-HNWIs, 2005/2013/2020

Source: Euromonitor International

Overall, the HNWIs and Ultra-HNWIs segments are rather small in terms of share of population, however, collectively they account one third of global net assets.

Use of wealth data to asses potential market sizes for consumer goods industries 

Wealth information by segment can be used to monitor the potential market for many consumer products, in particular those in the luxury segment, and can help to position products alongside value/premium offering. The upcoming joint income-wealth distribution tool will provide an easy to use format to measure and size income/wealth trends across many countries.

 

References

World Wealth Report (2004-2014) by Capgemini and Merrill Lynch Wealth Management

Global Wealth Report (2011-2013) by Credit Suisse Research Institute

The Wealth Report (2014) by Knight Frank

Global Wealth Report (2012-2014) by Allianz Economic Research & Corporate Development