The current economic climate is creating uncertainty for the wealthy that are cutting back on luxuries and seem unsure about how they should invest or spend their money.
Indeed, it appears that many high net worth individuals are erring on the side of caution.
Spending on luxuries is becoming more focussed with many choosing to buy items that will have long term value, such as property and art, rather than expensive consumables.
This is underlined by the Affluent Luxury Living Index, which is compiled by wealth management firm Stonehage to assess the changing cost of a luxury lifestyle. They say the price of luxury consumables like Beluga Caviar and Cohiba Siglo V Cigars, fell by 14.5%, while the cost of property rose by 4.4% earlier this year.
This rise is leading to increasing demand for luxury property in some countries. International investors in the USA boosted sales by 24% to $82.4 billion this year.
Finances are a worry
Other wealthy investors are looking for to invest somewhere sheltered from the turmoil in the Eurozone which has seen luxury property sales boom in Germany (up 60%) and London (up 51%) in the past three years.
Estate agents Savills say the main reason is around half of buyers ‘driven by Eurozone fears, and seeking sanctuary for their money.’
Underlining that the wealthy are becoming more cautious with their money is the Schroder’s European Wealth Index, which disclosed 91% of Italians say financial issues in the coming year are a concern for them.
British and Spanish investors were close behind that sentiment on 88%.
One of the most reliable pointers to how the wealthy are is feeling is to look at the demand for safe deposit boxes in Switzerland.
Hoarding gold and currency
A recent report from news agency Reuters says that demand for such boxes is on the rise for hoarding gold bars, bank notes and valuables.
So what should wealthy investors be doing?
Market researchers Spectrem says ultra high net worth investors are becoming more prudent and that they are looking for diversification (91%) but they are also looking at hedging against low interest rates by choosing risk (95%) as an important element of their investment portfolios.
Though research by Barclays Wealth shows that most wealthy investors believe that a country’s economic failure would be a stepping-stone to future success. Indeed, 71% of the USA’s richest individuals believe that failure would be essential for their economy to grow.
Perhaps the Ledbury´s Client Landscape report points to what HNW investors are doing in reality as they found that 37% invested their wealth in property, 18% in cash and only 17% put money in stocks in 2012.
