US Millionaire and Affluent Numbers Rise Again

Stephen Harris

29 September 2005

The number of US households with more than one million dollars in net worth, excluding primary residence, has risen, for the third consecutive year, according to new research released by market information providers TNS Financial Services. Based on the latest Affluent Market Research Program, TNS' annual survey of wealthy US households, the number of millionaires increased 8 per cent over last year to 8.9 million as of May 2005. The influx of new millionaires represents long-term wealth accumulation, rather than new wealth creation. "These households did not become rich overnight," said Jeanette Luhr, manager of the research study. "They have, however, benefited from economic changes in the past several years, and taken advantage of them." Debt has decreased substantially from last year. In 2004 the average household debt was $179,000. This year that number fell to $165,000, an 8 per cent decrease. "The growth we've seen this year is largely due to measured planning and active reinvestment. Though we've seen some product shifts, overall the asset allocation of these households has not changed significantly," Ms Luhr said. "When asked about their investment approach over the past year, 61 per cent of millionaires said their approach has changed very little, indicating they have a strategy and they are sticking to it." Real estate is not a driving force behind the increase in the number of millionaires. Ownership in investment real estate is down from 2004 when 50 per cent of millionaires owned some kind of investment real estate, including second or vacation homes. This compares 44 with in 2005. Though real estate continues to be a staple in their investment portfolios, these households are not becoming wealthy solely based on their real estate investments. Unlike 2004, year to date stock market growth did not fuel the increase in millionaire households. The Standard & Poors 500 and NASDAQ posted no significant gains during the time period measured, and the Dow Jones Industrial Average posted only a 4 per cent gain. In fact, while ownership of stocks and bonds is up (72 per cent of millionaires own individually held stocks and bonds, up from 63 per cent in 2003), the average balance invested is down. Ownership of mutual funds is flat and the average balance also fell, dropping about 20 per cent (mean among mutual fund owners in 2005 was $283,000 versus $355,000 in 2004.) Emerging affluent households, those with $100,000- $500,000 net worth, excluding primary residence, have also increased in the past year, from 23.9 million in 2004, to 24.5 million in 2005, according to the survey.