Wealth Trends Among the Superrich

Only one out of every 10,000 American families has an income in excess of $10.7MM. These people make up less than 15,000 total families in the U.S. According to the New York Times, "put together, they could all fit into a modest-size town. (We could call it Aspen or Nantucket.)"

These superrich are now getting an increasing slice of the pie:

• In 1980, the top 0.01% of the population had 0.87% of total income
• In 2006, the top 0.01% had 3.89% of the total income. (This is more than quadruple the 1980 share.)

Source: "The Wealth Trajectory: Rewards for the Few" The New York Times, April 20, 2008

Trends in Social Networking Among America's Affluent

The wealthy - defined as Americans with HHI $150K+ - exhibit the following online social networking behaviors:

• 60% belong to social networking sites - more than double the number who belonged a year ago

• Have an average of 110 connections/friends
  

• Belong to an average of 2.8 networks
  
  
• Top social networks they belong to:
• Yahoo Groups - 23%
• Classmates.com - 21%
• YouTube - 20%
• My Space - 16%
• LinkedIn - 13%
• Facebook - 11%
• Wikipedia - 10%
• MSN Groups - 9%
• Flickr - 6%

Source: Luxury Institute, 2008

How the Wealthy Rate Luxury Brands

The 2008 Luxury Brand Status Index Survey indicates that the wealthy rank these brands #1 in customer experience:

• Fractional Clubs:
  St. Regis Grand Residence Club (#1) and Ritz Carlton Club (#2)
  
  
• Alcoholic Beverages:
  Dom Perignon (#1 Champagne), Patron (#1 Tequila), Macallan (#1 Scotch), Far Niente (#1 Wine), Grey Goose (#1 Vodka), Bombay Sapphire (#1 Gin), Grand Marnier (#1 Cognac), 10 Cane (#1 Rum), Woodford Reserve (#1 Whiskey)
  
  
• Cruise Lines:
  Silversea (#1), Seabourn (#2), Lindland Expeditions (#3)
  
  
• Retailer:
  Bergdorf Goodman (#1), Nordstrom (#2), Barneys (#3)
  
  
• Audio:
  Bang and Olufsen (#1), Bose (#2), Bowers and Wilkins (#3)
  
  
• Fashion Brand:
  Gucci (#1), Louis Vuitton (#2), Faconable (#3)
  
  
• Automobile:
  Lexus (#1), Infiniti (#2), Acura (#3)
  
  
• Accounting Firms:
  PriceWaterhouseCoopers (#1), Deloitte & Touche (#2), Ernst & Young (#3)
  

During Economic Downturns, Affluent Consumers Spend More on Brands That Connect with Them on an Emotional Level

The Luxury Institute's 2008 Wealth Report found that wealthier consumers are more resilient in their spending on brands that connect with them on an emotional level for their quality, associated prestige, and outstanding customer service, even during challenging economic times.

Affluent Consumer Spending - Outlook for the Remainder of 2008

Spring 2008 Affluence Survey finds the following spending trends among America's affluent:

• Almost half (45%) said they have not and do not intend to reduce or defer expenditures in the next 12 months
  
  
• They report plans to increase spending during the next 12 months in more than half of the spending categories measured (specifics available at affluenceresearch.org)

Over the next twelve months they will buy an estimated:

• 2.2 million motor vehicles
  
• 2.4 million home remodeling projects
  
• 1.6 million cruise buyers (for 3.2 million total cruisers)
  
• 493,000 primary residences
  
• 470,000 vacation residences

Source: The American Affluence Research Center, Spring 2008

Where the Wealthy Reside

Top 25 Most Affluent Zip Codes

• Alpine, NJ - 07620
• Miami Beach - 33109
• Rancho Santa Fe, CA - 92067
• Glenbrook, NV - 89413
• Amagansett, NY - 11930 (Hamptons)
• Watermill, NY - 11976 (Hamptons)
• Santa Barbara, CA - 93108
• Purchase, NY - 10577
  
• Ross, CA - 94957
• Chilmark, MA - 02535
• Santa Monica, CA - 90402
• New York, NY - 10013
• Deal, NJ - 07723
• Bridgehampton, NY - 11932 (Hamptons)
• Newport Beach, CA - 92661
• Atherton, CA - 94027
• Diablo, CA - 94528
• Medina, WA - 98039
• Kenilworth, IL - 60043
• Old Westbury, NY - 11568
  
• Portola Valley, CA - 94028
• Corona del Mar, CA - 92625
• Los Gartos, CA - 95030
• Los Altos, CA - 94024

Source: Forbes.com, 2008

Spending Among the Wealthy

The wealthiest 20% of Americans account for:

• 39% of the nation's total consumer spending
  
• 49.6% of spending on new cars and trucks
• 58.7% of consumer spending on hotels, vacation homes and out-of-town lodging

Source: Wall Street Journal Wealth Report

Will a Recession Change the Spending Habits of the Wealthy?

It would take a pretty significant recession to make the wealthy change their spending habits:

• The wealthy will only change their spending habits if the value of their stock holdings dropped more than 19%
  
  
• Their real estate values would have to fall more than 17% for them to change their spending habits
  
  
• Fewer than 1 in 6 would cut back on their spending for destination clubs, private jet services, yachts and yacht charter services

Source: Wall Street Journal Wealth Report, March; The Luxury Institute, 2007.

Hard Work or Inheritance?

How do America's multi-millionaires make their money?

• 69% through hard work, business ownership or investments
  
• 25% through a combination of hard work and earnings
• 6% through inheritance

How does how you made you money affect your views?

• Recession: Heirs are less likely to worry about a recession (27% of heirs said it was a serious concern vs. 36% of earners)
• Risk: Earners have a higher tolerance to taking financial risks (29% are moderate to risky investors vs. 21% of heirs)

Source: Wall Street Journal Wealth Report, April 11, 2008

Gap Between the Rich and Poor Expands

• Families in the top 1/5 of the U.S. income distribution have seen their incomes increase 9.1% since the late 1990s
• Average incomes of the top 5% of families are 12x higher than average incomes of families in the bottom 20%
  
  
• Average incomes for the bottom 1/5 of the U.S. income distribution have declined 2.5%
• Incomes in the middle class have only grown 1.3% since the 1990s
  
  
• Since the late 1980s, income gaps have widened in 37 states and have not narrowed in any states - the trend towards inequality among rich and poor is expanding

Source: Center on Budget and Policy Priorities and Economic Policy Institute, 2008; Reuters, April 10, 2008

Snapshot of the Wealthiest 10% of U.S. Households

These wealthiest 10% of U.S. households have these characteristics:

• 112 million households
  
• Average annual income: $256,000
• Earn 36% of the income earned by ALL American households
• Control 70% of total net worth of all U.S. households
• Average value of financial assets: $1.3MM
• Hold 89% of the value of all publicly traded stock and stock mutual funds in U.S.
  

Source: Federal Reserve Board