World Wealth Report Finds High Net Worth Individuals Increasingly Earn Rather Than Inherit Wealth

11 July 2006

NEW YORK, July 11, 2006 — High-net-worth individuals (HNWIs), people with net financial assets of at least U.S. $1 million excluding their primary residence and consumables, are increasingly earning rather than inheriting their financial wealth, according to the 10th-anniversary edition of the World Wealth Report, which was released in June by Merrill Lynch (NYSE: MER) and Capgemini.

The Report found that while business ownership or the sale of a business is the primary source of wealth (37 percent) for the majority of the world’s HNWIs, income ranks second at 24 percent as the source of wealth, and inheritance rates third at 18 percent. In previous reports, inherited wealth accounted for more of HNWIs’ assets than it does today. In fact, as recently as 2001 inheritance represented 21 percent of the source of wealth of Americans and 37 percent of Europeans.

“Clearly, earned wealth has grown faster than wealth passed down from an earlier generation,” said Bertrand Lavayssière, managing director, Global Financial Services, Capgemini. “It’s also clear that, with just 10 percent of their wealth coming from investment performance, HNWIs are very good at creating new wealth and are not simply relying on global economic prosperity and market performance to expand their financial holdings.” The trend is likely to continue. The Report projects that the number of HNWIs will grow at a compounded annual rate of 6 percent.

Report findings show that in North America the largest share (32 percent) of HNWI wealth is from income versus business ownership (26 percent) and inheritance (16 percent). However, in Europe business ownership or the sale of a business was clearly the top source of wealth at 50 percent, while income ranked at only 13 percent. Meanwhile, Middle Eastern HNWIs derived the largest portion (32 percent) of their wealth through inheritance, while their counterparts in the Asia Pacific region became wealthy primarily through personal business and investment performance.

Cost of Living “the Good Life”
Even as today’s HNWIs are working hard to create and preserve the financial assets that enable them to enjoy what some would consider a privileged lifestyle, the cost of living became more affordable in 2005.

By analyzing the Forbes Cost of Living Extremely Well Index (CLEWI), which tracks price fluctuations between general consumer goods defined as the consumer price index (CPI) and luxury goods, the Report’s sponsors were able to assess HNWI’s purchasing power while weighting prices against individual wealth across regions. It clearly showed that wealthy individuals in Europe pay more to maintain their lifestyle than counterparts in North America and Asia Pacific.

In 2005, the price of the CLEWI “basket” of luxury goods increased 4.0 percent, while the CPI rose 3.6 percent. In recent years, the gap between the two growth rates has narrowed significantly, from a 5.5 percent differential in 2003 to a 0.4 percent difference in 2005 — a favorable trend for HNWIs should it continue.

About Merrill Lynch
Merrill Lynch is one of the world’s leading wealth management, capital markets and advisory companies, with offices in 36 countries and territories and total client assets of approximately $1.8 trillion. As an investment bank, it is a leading global trader and underwriter of securities and derivatives across a broad range of asset classes and serves as a strategic advisor to corporations, governments, institutions and individuals worldwide. Through Merrill Lynch Investment Managers, the company is one of the world’s largest managers of financial assets. Firmwide, assets under management total $581 billion. For more information on Merrill Lynch, please visit www.ml.com.

About Capgemini
Capgemini, one of the world’s foremost providers of Consulting, Technology and Outsourcing services, has a unique way of working with its clients, which it calls the Collaborative Business Experience. Through commitment to mutual success and the achievement of tangible value, Capgemini helps businesses implement growth strategies, leverage technology, and thrive through the power of collaboration. Capgemini employs approximately 61,000 people worldwide and reported 2005 global revenues of 6,954 million euros.

Capgemini’s wealth management practice is continuously working to help clients develop and operationalize innovative growth strategies and successfully implement customer relationship management solutions, wealth advisor workstations, Internet-based “self directed” and “full service” offerings, as well as front- and back-office systems. More information about individual service lines, offices and research is available at www.capgemini.com.

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