Crisis – what crisis? That is the question asked by Germanys millionaires (based on annual income) and top earners. The economic and financial crisis might have had some prominent victims in Germany, but on an international comparison it did not suffer destruction of assets on anything like the same scale. Germanys financial elite has suffered considerably less under the impact of the worlds worst global economic collapse because their attitude when making financial investment is similar in its avoidance of risk as is the average Germans. Even the affluent tend to take the safer option rather than get involved in iffy financial ventures with the promise of highest rates of return. As a result they have been for the most part untouched by the quakes shaking the financial markets.
Security comes before returnEven if people in the top socio-economic classes (1), those disposing over a net household income per month of Euro 6,000 plus might not qualify as millionaires, this target group, numbering no less than 1.27 million (Source: AWA First Class 2009), does allow definite analogies to be drawn as to just how conservative even Germanys more affluent groups are in their preference for secure private investments. Although 590,000 persons in this group own shares and 630,000 investment certificates, 27 % of them prefer fixed rate securities, 19 % savings bonds and 45 % fixed term deposits. 8 % consider gold bars and coins to be a worthwhile investment. But the lions share of top earners have invested in property: 88 % have an owner occupied property, 44 % have a property to let.
Against this backdrop of a highly rational approach to financial assets, and favoured by the upswing on the stock exchanges, it is not that surprising that the number of annual income millionaires in Germany today not only matches the level of 2008 but is actually way above it. Two years ago there were 810,000, the count is now 861,000: i.e. people with assets of more than one million US$. Based on the number of millionaires, Germany now ranks third behind USA and Japan in the first two places. China, holding position four, only has half as many millionaires as Germany, but that is a figure which is growing rapidly.
Germanys saving rate and financial assets hit record levelsAlthough the super-rich might be incredibly important for the finance industry, the market would not survive without savings made by average citizens. In this respect, the German market is particularly lucrative for the finance industry. With a savings quota of 11 % – compared with a figure of 4.6 % for the USA – Germans currently have financial assets of Euro 4.67 trillion. The statistical average per household is Euro 116,000, five thousand more than the year before.
According to observations by the German banks association, German savers displayed their mistrust in the markets by undertaking considerable portfolio restructuring during 2008: a great many shares were sold and the liquidity generated saved as either cash or in banks. While private German investors bought shares worth Euro 369 billion in 2007, in 2008 this had fallen to a low of Euro 169 billion.
Private investors are active again, but carefullyIn the meantime this lack of trust has been overcome and investment behaviour has normalised for the most part. Security is still highly valued, and will continue as such in the In future as well. The German bank association comes to very similar conclusions here as does ACTA. In 2009, 38 % of privately invested money landed in savings, sight and time deposits, 28 % was invested with insurance companies, 12 % with investment funds and 8 % in fixed income bonds. Only 4 % of German savings were in the form of shares at end 2009. This basic pattern is expected to be repeated in 2010 by the German association of investment and asset management. There is already a clear rise in demand for shares in public funds. By key date 30 April 2010, these funds had collected Euro 683 billion, 15 % more than in the previous year.
So how would a typical German describe a good solid investment: it should be low on risk, secure against insolvency and offer the option of investments in small amounts. Consequently, experts are hard at work trying to convince the German public to buy individual shares in specific companies. Whether the argument of high returns is actually successful remains to be seen. Either way, the industry will definitely have to redouble its communications efforts with potential investors. While advertising expenditure for shares, IPOs, emissions etc. was slashed by almost a third in 2009 compared with the previous year, a return of trust amongst private investors would be reason enough to herald the advantages of investments in securities and re-establish them in the public eye as a key component in a financial investment mix.
Author: Michael Spielmann,
Market analyst and strategic media planner, G+J International Media Sales
Hamburg, July 2010
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