Help for the Super-Rich

The number of Ultra-High Net Worth (UHNW) individuals in the UK is set to rise by almost 60% between 2002 and 2007, according to a new study. However, according to authors Datamonitor, many of them lack capital to 'live on a day-to-day basis', offering opportunities for innovative financial service offerings.

A person of UHNW is defined as holding '£5m or more of onshore liquid/investible assets'. The most common source of wealth for UHNW individuals is property (almost 12% of individuals) with financial services second most common, followed by arts and entertainment.

Many of these individuals and families are poor in liquid assets despite their considerable wealth, or require capital or for further investment, says Datamonitor. Wealth managers are developing products that offer the opportunity to borrow money against existing, mainly non-financial assets such as land, property, art or substantial shareholdings in family or employer companies. 'These products are very innovative and respond to a pressing client need', according to Alan Shields, Financial Analyst at Datamonitor and author of the report.

Between 1998 and 2002, the average UHNW portfolio has fallen more than 20% from £11.1m to only £8.8m, balancing an increase in the number of UHNW individuals so that their total 'liquid wealth' has remained almost constant. Much of this is due to investors moving investment towards other asset classes such as property.

Datamonitor predicts that average portfolios will grow to £9.2m in 2007, as investment conditions improve but investors stay relatively cautious of direct investment.

There are few women among the super-rich - only 7% of the list - whereas among the next rank (High Net Worth, defined as more than £200,000+ in investible assets) they are a majority (53% are female).

Forecasts for 2007 are for 6,683 UK UHNW individuals with liquid assets worth £61.7bn (from £37.4bn in 2002 - equivalent to 10.6% CAGR).

'Going forward... structured products and alternative investments will be crucial to keeping clients interested and protected from certain negative investment scenarios' concludes Shields. Popular approaches are likely to include lending against assets, capital protection and co-investment opportunities, plus capital protected products or absolute return hedge funds that include products designed to perform in any market.

The report, UK Ultra High Net Worth Customers 2003 sizes the UK ultra high net worth market and segments it by source and size of wealth, forecasting the market to 2007. It analyses retention/acquisition strategies, ultra high net worth market environment and drivers, plus the state of wealth management.

Liquid assets in the report are defined as onshore only and retail, not institutional; they include cash, deposits, ordinary stocks and shares, government and other bonds, mutual funds and other collective investments.

More information is available at www.datamonitor.com

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.

• Datamonitor
• All news