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Saturday, Jun 22, 2002

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How to join the millionaire club

D. Murali

WEALTH means means, riches, prosperity, affluence, assets, mammon, possession, and so on, according to Bill Gates' Word. But if you go by the World Wealth Report 2002 from Merrill Lynch and Cap Gemini E&Y, wealth means HNWIs. Or high net worth individuals — people with financial assets of at least $1million, excluding real-estate. That would be around Rs 5 crore, give or take a few thousands. .

Foremost among the discoveries in the report is that the well-heeled managed to keep their heads above water last year. And two lakh more joined their ranks despite volatility in the global financial markets and the economic downturn that tormented many countries. That is the first lesson to get rich and wealthy: Buck the cycle.

You don't need to have much wealth to read the Report, but it would help to know that there are about seven million wealthy people around the globe (including about a third of them in the US), and that their combined wealth rose about 3 per cent to an estimated $26.2 trillion. Ah, you gasp, but this has been the slowest wealth growth since 1997, they lament. For those who wonder how they did manage to grow in spite of the extremely difficult financial market conditions, the answer lies in "the underlying strength of this market segment". So, the second lesson: Keep running.

The sponsors explain in greater detail. That "many wealthy investors acted wisely in 2001, taking advice and appropriate measures to protect their capital". What made the difference was appropriate asset allocation coupled with sound professional financial advice. The third lesson, therefore, is: Be wise, take advice.

There is class-consciousness, even among the wealthy. Not all millionaires are equal. The ones with more than $30 million are special, and called UHNWIs, that is, ultra HNWIs, and they number just 57,000. Interestingly, their number and combined wealth have also been rising. Fourth point, please note: Choose your class, janata of `J'.

Money creates its own problems and, as global wealth continues to expand, "individuals with complex financial needs require innovative solutions". Since the wealthy are too busy making wealth, you would need wealth managers "to develop solutions that combine global resources with local expertise". Only, be sure they don't run away with your dough. And so, the fifth lesson: Remember to hire the right man.

Though there was carnage in the bourses, with large-cap stocks suffering spectacular losses, especially in the tech world, quite a few smaller-cap stocks fared relatively well. They were part of the `stealth bull market' and — oh, you missed the bus again — the HNWIs were among the first to recognise and benefit from this stealthy animal. Lesson six: Put on night-vision goggles.

There is more — that the wealthier ones spread the assets worldwide, they shop around, head to offshore jurisdictions, give charity, and don't bank much on inherited money, nor trust the tax collectors.

It is said that if you compute 10 per cent return on the $7 trillion investible wealth lying in Switzerland (about 30 per cent of the global total) it would be $700 billion per year — about the size of the UK's GDP.

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