Muy interesante indice sobre la vida lujosa de los millonarios:
1. EXECUTIVE SUMMARY
The Stonehage Affluent Luxury Living Index (SALLI) was
launched in London in 2007 in order to measure the
inflation experienced by High Net Worth (HNW) and
Ultra High Net Worth (UHNW) individuals and families.
SALLI is an index comprising a basket of luxury
goods and services determined by the Stonehage
Group, based on our knowledge and experience of
the spending patterns of HNW and UHNW families.
Prices in the index are the recommended retail prices
(including VAT where applicable) and SALLI accounts
for the frequency of purchase of each item over one
year. Prices were compared between 2006, 2007 and
2008, keeping the frequency of purchase of each item
consistent for each year1.
Wealth managers have traditionally used the Consumer
Price Index (CPI) as a measure of inflation when wealth
planning for their clients. SALLI, however, provides a
more realistic measure of inflation since the basket
of goods and services is more relevant to HNW and
UHNW families. Following strong interest in the original
London SALLI from clients and families, Stonehage has
now launched SALLI Switzerland.
Source of CPI figures: Swiss Federal Statistical Office (Dates used: 8/06, 8/07,
8/08); figures rounded to one decimal place.
• Between 2006 and 2008 the annualised SALLI
Switzerland was 7.3%, more than four times higher
than the annualised CPI at only 1.7%2.
Source of CPI figures: Swiss Federal Statistical Office (Dates used: 8/06, 8/07,
8/08); figures rounded to one decimal place.
• In the 12 months to August 2008, the increase in
SALLI dropped from 9.9% to 4.9%. In the same
period, CPI increased from 0.5% to 2.9%.
• Price inflation for luxury goods and services as
illustrated by SALLI is tending closer to the level of
inflation of general consumer goods and services
as measured by the CPI.
This year’s lower increase in SALLI compared to 2007
may be a result of:
• UHNW families decreasing their discretionary
spending on luxury goods and services as a result
of the slowing global economy.
• Providers of luxury goods and services having
less pricing power and containing price increases in
anticipation of falling demand.
CPI, the Swiss Government’s official inflation measure
may be too conservative to use when advising
Swiss-based HNW and UHNW families. Given the
disparities between CPI and SALLI from year to year,
Stonehage recommends that wealth managers use a
combination of CPI and SALLI when advising HNW
and UHNW families on their investments and longterm
wealth planning in order to safeguard clients’
wealth goals.
The Stonehage Group provides international families
with family office, wealth management and fiduciary
services. Stonehage is an independent multi-family
office, owned by its management and staff with nine
offices around the world. The Group advises clients
on protecting, managing and administering family
wealth including family governance and arrangements
for inter-generational wealth transfer. Stonehage
uses its wide range of expertise to manage the
governance and legal structures that are required in
order to best meet our clients’ investment, tax and
wealth transfer objectives, in addition to providing
advice on philanthropic arrangements.
2. INTRODUCING SALLI switzerland
The Stonehage Affluent Luxury Living Index (SALLI)
provides an indication of the trends in the cost of living
for HNW and UHNWs in Switzerland. This is important
because financial objectives of UHNWs are likely to
be based on real returns on capital, in which inflation
is a fundamental input. Therefore, monitoring actual
inflation experienced by UHNWs is essential in wealth
planning, in order to ensure that financial objectives
are met.
SALLI Switzerland tracks the price changes of luxury
items from 2006 to 2008, enabling the calculation
of luxury inflation. SALLI allows Stonehage to assess
the costs that UHNWs face more accurately and to
arrive at a more appropriate inflation figure, so that
recommended investment strategies are based on
more realistic spending patterns.
SALLI is the first Swiss Franc based luxury index of
this type and it consists of luxury goods and services
purchased by Swiss based UHNW families. For the
purpose of this study we have assumed that the basket
comprises items purchased by an UHNW family of two
adults and two children. This research also compares
SALLI to the CPI, Switzerland’s current headline
measure of inflation, to better understand high net
worth inflation and underlying trends3.
The Stonehage Group has in-depth knowledge of the
country due to its presence in Switzerland since 1986
and its long-standing relationships with local authorities
and service providers. Stonehage is one of the largest
independent multi-family offices in Switzerland, located
in Zürich, Neuchâtel and soon Geneva.
SALLI Switzerland focuses on the two major Swiss
cities, Zürich and Geneva, where many UHNW
families choose to live4. The canton of Zürich has
the highest population with 1.3 million people whilst
Geneva, which is much smaller with only 437,000
inhabitants, also remains an exclusive and popular
city5. In constructing the basket of goods and
services, we also accounted for the preferences of
UHNW families living in other cantons.
Switzerland’s low general inflation rate makes the
investigation into SALLI more compelling, since the wider
the gap between SALLI and general inflation as expressed
by CPI, the greater the potential wealth erosion.
A basket of luxury goods and services was determined
by Stonehage, based on the Group’s experience of the
spending patterns of Swiss-based UHNWs. In order
to compare how prices of these goods and services
have changed, a Laspeyres index was constructed. This
weights every item in the luxury basket according to
the frequency of purchase in a year. This frequency was
kept constant so that any change in the index was due
to changes in the price not in the quantities of the item
or service purchased.
A Laspeyres index was used as opposed to a Paasche
index because the former assumes that the frequency
of purchase per year remains constant between the
years of comparison, whilst the latter does not.
In order to calculate a value for the percentage rise
in the cost of living for UHNW individuals over the
relevant years, the formula below was applied to the
prices and frequency of purchased items.
Laspeyres Index
Pi,2008 / Pi,2006 = Price of item ‘i’ in 2008/2006
Qi = yearly purchase frequency
A Laspeyres index of this type can overstate UHNW inflation
since most consumers typically respond to price changes by
altering the quantities that they purchase. More specifically, an
increase in the price of an item might encourage consumers
to purchase less of the item in question, substituting other
items in its place. Therefore, because the assumed frequency
of purchase remains unchanged in SALLI, these items receive
a greater weighting than may be appropriate, potentially
overstating the impact of the price increase. Nevertheless, since
UHNW individuals are considered to be less price sensitive than
the average consumer, any exaggeration is likely to be small.
In the case of luxury goods and services, UHNW consumers are
often buying the brand which makes substituting goods more
difficult than with less strongly branded goods and services.
SALLI is intended to serve as a proxy for luxury inflation and
will allow Stonehage to tailor more appropriate investment
recommendations based on a more realistic assessment of the
increases in the cost of living experienced by UHNW families.
3. METHODOLOGY
Unlike the CPI, which represents inflation of all goods
and services purchased by the average consumer,
SALLI does not include every single item that a
typical UHNW individual would purchase. Prices are
all recommended retail prices including VAT, except in
cases where suppliers have provided an average of the
tariffs charged for each year. This is more appropriate in
cases where consumers would regularly face different
rates (e.g. the Geneva Opera House, where the price
would depend on the particular opera).
Furthermore, a number of the goods and services in
the luxury basket have been upgraded or discontinued
over the years. In these cases we have used an
equivalent item for each year as advised by the
respective suppliers. Since the index seeks to provide
an overview of the trends in the cost of living for
UHNW individuals, changes have also been allowed
for in the quality and specifications of the item in
some cases. For example, we compared the price of
a highest specification Porsche Cayenne, the Cayenne
Turbo for each year on the assumption that an UHNW
individual would always want to purchase the highest
specification model available at the time.
We have not made any adjustment for quality change. A
higher price for an improved product does not necessarily
mean that the “true” price has increased. However, this will
only cause a small upward bias to SALLI, since the vast
majority of goods in this index do not display regular
improvement through time, for example opera performances,
which fluctuate in quality.
A few of the goods and services in the luxury basket are priced
in Dollars, Euros or Sterling. These prices were converted
to their Swiss Franc equivalents using the exchange rate in
August of each year.
The methodology used for SALLI Switzerland and SALLI
London is the same. There is however a slight difference
in the composition of the baskets and the frequency of
purchase to reflect the tastes and availability of products
and services in each country.
The cultural differences between Switzerland and London
affected the choice of goods and services used in SALLI.
Where possible, alternatives were kept consistent to retain
the original focus. For example, the yacht charter in the
London SALLI has been replaced by a small motorboat
purchase for use on the Swiss lakes.
4.1 SALLI versus CPI
To monitor SALLI against inflation for the average
consumer, we have compared SALLI to the Consumer
Price Index (CPI).
CPI is the official Swiss price index used by the Swiss
government to measure inflation. The CPI consists of a
basket of goods, weighted according to the frequency of
purchase over one year, using Laspeyres. From time to
time the frequency of purchase and constituent items are
updated. The use of the Laspeyres method makes this
index particularly appropriate for comparison with SALLI.
Switzerland has two official indices constructed by the
Swiss National Bank (SNB) to measure inflation, CPI
which includes food and Core CPI which excludes food.
As this research project contains food in the Consumables
category we have chosen to compare SALLI with the CPI
rather than the Core CPI.
Table 1 shows that the growth of SALLI has decreased
significantly from 9.9% in 2007 to 4.9% in 2008.
Between 2006 and 2008 the annualised SALLI is 7.3%,
which is nearly four times higher than the annualised
CPI at only 1.7%. Therefore using CPI as the only
measure of inflation in wealth planning for UHNWs
could lead to an erosion of wealth.
Table 2 shows the changes in the ratio of SALLI to the
rate of inflation for the average consumer from 2006 to
2008 using the CPI. The ratio of SALLI to the CPI has
decreased substantially in the last year. This suggests
that the difference in price inflation for luxury versus nonluxury
goods is narrowing dramatically.
4.2 SALLI versus the average
change in prices
SALLI, which measures how the cost of a basket of
luxury goods and services changes over time, showed an
annualised increase of 7.3% from 2006 to 2008. We have
calculated the average price of single unit prices in each
year to consider by how much the cost of the average
product and service has risen.
4.3 How prices have changed in
each spending category
Segmentation of SALLI provides greater insight into
the categories of items that are exerting upward and
downward pressure on SALLI. Table 3 considers the
average price increase of the items in each category.
Consumables have experienced the largest increases in
price from 2006 to 2008. This is based on average prices
and does not take into account the quantities and values
of items purchased.
4. INDEX RESULTS AND ANALYSIS
The research confirms that SALLI does not track the
behaviour of CPI and that the relative movement of
these two indices demonstrates the need to separately
monitor luxury goods inflation. Both CPI and UHNW
inflation need to be understood and considered when
advising families on wealth management, investments
and long-term wealth planning in order to safeguard
their wealth goals.
SALLI Switzerland and SALLI London show similar
development trends. In both Switzerland and London,
SALLI increased to over 6% up until 2007. In the year
2007-2008 SALLI Switzerland at 4.9% is more than one
and a half times higher than the Swiss CPI at 2.9%.
SALLI London in the same year is 3.3% compared to
the UK CPI at 3.0%.
Overview
The Stonehage Group provides international families with
family office, wealth management and fiduciary services.
Stonehage is an independent multi-family office, owned
by its management and staff with nine offices around the
world. The Group advises clients on protecting, managing
and administering family wealth including family
governance and arrangements for inter-generational
wealth transfer. Stonehage uses its wide range of expertise
to manage the governance and legal structures that are
required in order to best meet our clients’ investment, tax
and wealth transfer objectives, in addition to providing
advice on philanthropic arrangements.
Company History
Stonehage was established in 1976 in London to provide
international families with fiduciary services and capital
protection. In 1997 Stonehage sold a majority stake
in the business to ABSA Bank and in 2005 the Group
returned to being management controlled. The Group
now employs over 300 staff and manages the affairs of
over 1,100 clients.
Legal Disclaimer
This publication is intended to provide only general information and to highlight points of interest. It is not intended to be
comprehensive or sufficient for making decisions and should not be relied upon. Specific professional advice should be sought on
the facts of any matter before action is taken.
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