Fewer Richies

Consulting firm CapGemini conducts an annual census of high-net-worth individuals, defined as people with at least $1 million in investable assets, excluding primary residences. “We’ve been doing this report for 13 years and haven’t seen this kind of loss of wealth since we started,” said Ileana van der Linde, principal at CapGemini’s wealth-management practice. North America saw an 18.5 percent decline in its high-net-worth population, from 3.02 million in 2007 to 2.46 million in 2008.

Even though they were more likely to be diversified in bonds and cash—instead of simply plowing money into stocks—the HNWIs’ collective net worth fell from $10.85 trillion in 2007 to $8.44 trillion in 2008, down 22.2 percent. The ultra-HNWIs—those with at least $30 million in assets—suffered even more. That segment of the population fell 25 percent.

CapGemini’s survey contains some interesting geographic wrinkles. High-tax areas like New York and California—places where politicians have been talking about potentially raising taxes on the rich to deal with budget crises—held up better than the national average. The New York region, which has the most HNWIs, at 561,000, lost only 13.6 percent of its rich population last year. Los Angeles and San Francisco lost 17.8 percent and 15.3 percent, respectively. As for Maryland, the Baltimore metro area had a 19 percent drop in high-net-worth population.

Comparative tax havens like Florida, Nevada, and Arizona didn’t see an influx of millionaires in 2008. Far from it. In 2008, Las Vegas lost 38 percent of its HNWIs, and Phoenix lost 34 percent. Florida, which has no state income tax and hasn’t been talking about one, was a killing field for the rich. The three major metro areas that lost more than 40 percent of millionaires in 2008 were all in no-income-tax Florida—Orlando (42 percent), Miami (42 percent), and Tampa (51 percent). The decline has nothing to do with taxes and everything to do with bursting asset bubbles. Florida, Vegas, and Phoenix are places whose economies were dominated by ultra-bubbly real estate markets and where lots of businesses owned by wealthy people are dependent on construction, tourism, and leisure—sectors that got seriously whacked in 2008.