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UK Millionaires Will Become Poor!

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A report just out by Coutts (the private wealth-management bank) has pointed the wagging finger at British rich and famous, the millionaire’s club for not protecting their wealth enough. The poor rich guys! Probably in a bid to gee up some extra business from the millionaires of the UK, the report states that the country’s wealth will be handed down to the next generation valued at about £1 trillion, but that people are not doing enough today to protect the money that they have. Shock! Horror! Are we to believe that their money is going to dwindle away and they will become poor? Very doubtful, but let’s hear the wealth management bank out to the very end.

The bank interviewed 270 millionaires in the UK (i.e. those who have liquid assets to the value of or over £1 million at the present time) and the findings show that 37% had trouble when it came to dividing money up between heirs, 50%said that they had no idea as to how to begin even dividing up their estates, while58% did not have a last will and testament that had been written and lodged with a solicitor. Sometimes, you see, it is better to be poor, to have no money whatsoever. Then the kids can only fight over t-towels and a few mugs that are left in the cupboard of the dingy kitchen when you pop your clogs. But, when you are pushing up daisies, six-foot under and you have bundles of dosh in the bank (i.e. Coutts), then it doesn’t beg imagining how the kids are going to get on dividing the millions, does it?

The strategy that Coutts recommends? Communication and strategy, discussing with the heirs the risks involved today (divorce or separation – only 42% suggest a pre-nuptial agreement before their children get married). That alone was the biggest risk to wealth, the breaking up of money into the pockets of various people that separate, get divorced and then remarry.

But, while Coutts is worrying over the poor rich millionaires in the UK, the US is seeing a greater number of people that are inheriting money from their parents. A third of people that are under 32 today in the US and who have assetsworth $1 million inherited that money from their parents.

Research carried out by Wealthinsight in London ranked Tokyo the place to be if you want a chance to become a millionaire.

  • Tokyo has the highest number of millionaires than any other city in the world today. There are 461, 000 of them.
  • Next is New York (or rather, more particularly Manhattan), which has 389, 000.
  • London is third, with 281, 000
  • Paris comes in fourth at 219, 000
  • Just ahead of Frankfurt with 217, 000.
  • But, remember that the USA has 5 million millionaires, whereas Japan only has 2 million.
  • But, in Tokyo, they are all concentrated in one place.
  • They are spread out all over the USA.
  • Japan looks as if it may also lose its second place in terms of total number of millionaires in the country, overtaken by China in about 2020.
  • The US would have by then about 7.7 million millionaires, while China would have 3.3 million.

Surprisingly (or perhaps not given the price of property in the UK), 10% of people in the UK are property millionaires, sitting comfortably on assets worth £1 million today. By comparison, 1% of the UK population has negative wealth of£3, 600, while 10% of the population has wealth of less than £12, 600. There is a growing wealth gap according to research (by the Office of National Statistics in the UK) between the top and the bottom ends of the scale. The top 10%own 850 times more than the bottom 10%. Median wealth in the UK is £232, 000 in terms of assets. One in five people in the UK at least are millionaires on paper (meaning that they are millionaires with regard to the assets they hold in savings, pensions, property and wealth). Booming property prices have a lot to answer for with regard to increases in the number of people that are millionaires on paper today, but the research also shows that after retirement that money soon dwindles away.

Just one example of soaring property prices in the UK show that the Crown Estate (owned by Queen Elizabeth) had a5.2% rise from March 2012 to March 2013 in profits, reaching £252.6 million ($389.12 million). But, she won’t be getting all of that. She gets 15% according to the law of 2012 and the rest is given back to the state.

Coutts is the bank of Queen Elizabeth II and also the private bank subsidiary of the Royal Bank of Scotland. RBS has been owned by the British government through UK Financial Investment Limited (since the financial crisis). UK Financial Investment Limited currently speaks for 82% of RBS and has done since March 31st 2012. Although, the voting rights stand at just 75% so that the RBS can still be listed on the London Stock Exchange. Today RBS is up 1.52%at 6:46 ET (up £5.1 to £340).

Coutts was founded in 1692 and it is headquartered in The Strand, London. The bank was involved in a money-laundering scandal in 2012 and was fined the hefty sum of £8.75 million (which would have been £12.5 million had they not agreed to settle earlier) for breeching regulations. It was shown to have had serious problems when dealing with the accounts of customers who had political links. The Financial Services Authority found that they had failed to adequately deal with people classified as PEPs (Politically-Exposed People), or someone who holds a prominent position or is linked to a prominent person in a country’s administration. Generally-speaking such a person is open to greater risk from bribery or corruption with regard to the position they hold and the exercising of their duties. Banks and financial services are therefore required to maintain greater checks on their accounts to verify that potential risks are avoided. Coutts failed to carry out initial due diligence and failed to perform enhanced monitoring in compliance with PEP regulations. The FSA stated at the time: “Coutts's failings were significant, widespread and unacceptable. Its conduct fell well below the standards we expect and the size of the financial penalty demonstrates how seriously we view its failures”. Seems like Coutts may have been in cahoots, complacently letting things slip and been slack on monitoring!

Originally posted: UK Millionaires Will Become Poor 

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