Italy’s households are sitting on a stock of wealth, UniCredit-Pioneer study finds

Even if it is going through a particularly intense period of crisis, Italy remains a substantially rich nation, with a relevant stock of wealth held by Italian households compared to other countries, the first UniCredit – Pioneer Investments Savings Observatory report has found.

Even it has fallen overtime, Italy’s households gross saving rate remains in line with the major developed economies and they still hold a relevant volume of accumulated wealth.

The study found that saving rate has fallen from 21.9% in 1995 to 12% at the end of 2011, and is expected to drop further, to 11.3%, by the end of 2012.

“The main reason for the decline of the past 5 years seems to be the lack of growth and the resulting fall of disposable incomes, while unavoidable expenses have also increased,” UniCredit and Pioneer said.

Despite this change, the saving rate of Italian households remains comparable to other developed economies. At 16.7%, Germany is the country with the highest gross saving rate, while the United Kingdom has the lowest at 7.7%.

In Italy, decline in savings has affected both non-financial and financial segments.

According to the authors of the report, the road towards recovery will require improvements in terms of productivity and competitiveness of Italian firms.

“Policies to boost exports would help, not just to rebalance the foreign trade balance but also to kick-start economic growth. To encourage more people to start putting money aside, incentives could be put in place in order to develop a savings culture, perhaps through specific measures intended to make small-scale savings easier, more attractive and even automatic,” the study warned.

Meanwhile, compared to the largest European economies and the United States,

Italian households are still well-placed in terms of accumulated wealth.

The stock of wealth, net of financial liabilities, is €8,5tr: approximately €140,000 per capita, more than 7.8 times gross disposable income, and 5.4 times the GDP.

Looking at the composition of the stock of financial wealth, there is a very low level of managed asset products (20% of the portfolio), less than half the amount found in the US, UK, France and Germany.

“In particular, there are very few pension funds, which represent only 2% of the average portfolio, compared to 26% in the United States and 14% in Germany,” the study found.

In terms of average portfolio composition, Italy still has a long way to go, but according to the report help could come from the advisory services provided by financial experts and professionals.

“From this point of view banks and asset management firms must be ready to take up the challenge, and to renew their commitment to investors, which needs to be based on transparency and trust,” it said.

Portfolios of younger were significantly less diversified, and mostly invested in liquid assets.

For younger clients who do have more complex portfolios, the mutual fund is the most common product, providing a basis for gradual diversification, UniCredit and Pioneer found.

“Efforts should certainly be made to free up more resources to be allocated to developing human capital and promoting business start-ups by young people, both as an antidote to the current crisis, and as an investment for the future. A new generational pact could create more opportunities for growth for young people, and provide a welcome injection of fuel for the growth of Italy’s economy,” they said.

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