More than a quarter of Russian millionaires’ assets are in cash, which is the highest rate in the world, twice the proportion in Europe and almost three times that in the U.S., Bloomberg reports citing data from real estate consultancy Knight Frank.
Olga Raykes, the co-founder of family office Confideri, says the reasons for the trend can be traced to Russia’s rough transition to capitalism, which was followed by a series of currency devaluations, most recently in 2014.
“There’s little trust in the state or risky financial products sold by banks and there’s an understanding at any moment a new crisis may erupt,” she said. “You always need liquid cash to continue running a decent lifestyle or to inject working capital to save a business.”
Many of Russia’s wealthy keep their money in deposit accounts, especially with concerns that global growth is slowing. Deposit rates have risen during the past two years after the U.S. central bank tightened policy, with customers able to earn 2.8 percent in U.S. dollars risk-free. Another benefit — the ruble has depreciated almost 50 percent against the dollar since 2014 when the U.S. first imposed sanctions on Russia.
“The dollar is seen as a safety asset that can secure savings,” said Alexey Novikov, a managing partner at Knight Frank.
High-net-worth individuals in Russia have also steered clear of certain financial products. “Rich Russians are scared of complicated financial products,” said Oleg Tsarkov, general director at Phoenix Advisors.
That’s changing as banks ratchet up marketing efforts and deposit rates in Russian banks start to decrease. The share of investment products in portfolios of wealthy clients in local private banks has grown from 15 to 20 percent during the last two years, according to research firm Frank RG.