Measurements of wealth can be as varied as the company or agency doing the measuring. However, most advisors still expect to see at least $1 million in investible assets before they are comfortable defining a client as “wealthy.”

And that figure is widely accepted as the norm in the wealth-management industry, says Michael Angelico, manager of American strategic research for Capgemini U.S. in Boston. “There has not been significant debate on this topic,” he says. “It is important that this benchmark remain constant so that we can accurately track growth in the high net-worth population across multiple countries and regions.”

Adding up the components of that $1 million in investible assets also still involves a generally accepted formula — that is, tallying up the marketable securities, according to Prashant Patel, senior financial planning consultant at RBC Dominion Securities Inc. in Toronto. Outside of these basic assumptions however, other factors come into play that can change the concept of wealth.

As Patel notes, people have many types of assets, ranging from real estate and pensions to life insurance and, perhaps most important of all, businesses. Although these aren’t generally included in assessments of wealth that focus on marketable securities, wealth managers do give some weight to these sources of affluence when considering whether to work with a client — especially if it appears that the client is considering a sale or other transaction.

“Advisors do factor in other assets, such as real estate,” Patel says, “if there is going to be a liquidation event.”

These “events” may be more numerous in the near future. “There are going to be hundreds of thousands of people retiring in the next few years,” he says. “Many will be selling their businesses. Clearly, there is an opportunity there for the wealth-management industry.”

Patel cautions, however, that identifying such clients is probably a complex and time-consuming task; many of the affluent are not comfortable sharing general information about their finances with researchers. That makes it difficult to assess other factors relevant to the measurement of wealth, such as debt and the sources and stability of income streams.

As a result, detailed information about the wealth of Canadians and the form that wealth takes is not widely available. Some of the most precise data have been gathered by Statistics Canada in two reports, the 2005 Survey of Financial Security (based on surveys taken in 1984, 1999 and 2005), which was released this past September, and the Profile of High-Income Canadians, 1992 to 2004, released this past November.

The financial security survey puts Canadians’ total assets — including pension assets, stocks and bonds, and real estate — at more than $5.6 trillion.

Since 1999, the median net worth of the top fifth of families rose to $944,590 from $741,010. But at least one-third of that amount is accounted for by principal residences, typically the least liquid asset among a family’s holdings. Recent rapid increases in real estate prices are also driving total net worth; the study notes that the market value of real estate accounted for almost half the growth of total assets of Canadian families between 1999 and 2005.

It’s not surprising, then, that many Canadians have more of their wealth tied up in real estate. A significant change in the composition of assets between 1999 and 2005 was the growth in the amount invested in real estate such as cottages, time-shares, rental properties and other commercial properties, the financial security survey found. The aggregate amount in this type of real estate was roughly 1.8 times larger in 2005 than in 1999, growing to almost $481 billion from $266 billion, in constant 2005 dollars. This was, by far, the largest rate of growth of any single asset.

The report notes, however, that these numbers were derived from a survey of only 9,000 dwellings, 7,500 of which were chosen at random. To improve the input from high-income families, which represent a disproportionate share of total net worth in Canada, another 1,500 dwellings were selected from geographical areas in which a large proportion of family units had what StatsCan defines as “high income” — family income of at least $200,000 or investment income of at least $50,000. (The 1999 edition of the survey was based on a far larger sample of 23,000 dwellings. Budget cuts have been blamed for the reduced sample).

@page_break@After principal residences, the next single most important asset was employer pension plans, which represented almost 18.5% of all personal assets in 2005. Total assets held in private pension instruments, such as employer pension plans, RRSPs and registered retirement income funds, represented the second-largest contribution (after real estate) to the rate of asset growth. About 9.4-million family units, or 70.6% of the total, had some form of pension assets in 2005, whether they were employer pension plans, RRSPs or RRIFs.

Although these numbers indicate that the wealth of Canadians is increasing, it’s also likely that they fail to capture the full extent of that increase and may fall short by a wide margin. Mike Veall, a statistician specializing in income studies who chairs the department of economics at McMaster University in Hamilton, Ont., offers a tough assessment of the numbers on wealth. Given the small sample size for the financial security survey, he says, the probability that the address of a truly wealthy person will be selected by the surveyors is almost nil.

And even if a very high-income person does by chance receive a survey questionnaire, Veall says, it’s unlikely to be answered. “When Frank Stronach gets this thing, does he say, ‘Oh, sure’?” Veall asks.

Veall recommends that StatsCan start oversampling at the top end of the wealth spectrum in order to reach more people in this tier.

It’s somewhat easier to track income than net worth. The StatsCan high-income study drew on income-tax returns, including investment income from dividends, interest and capital gains, as well as results from the financial security survey. And while definitions of “high income” can vary widely, depending on which agency is gathering the information, it’s clear from this analysis that those in the highest income brackets are enjoying large income gains: the upper 0.01% saw increases that almost doubled between 1982 and 2004, to an average of $5.9 million from an average of $2.9 million.

But the authors also note that income is not a reliable predictor of net worth and that some low-income Canadians have relatively high net worth; many in that category are over 65 and have had more time to accumulate assets.

Indeed, the report says, cross-referencing federal income data with the data on net worth leads to the implication that “some low-income families have relatively high net worth, while some high-income families have relatively low net worth.” Veall agrees: “You can’t draw any conclusions on wealth, based on income.”

And even the people who earn their living managing wealthy people’s money admit that, beyond measuring the value of an individual’s marketable securities, tangible information on true wealth is hard to find.

“Different firms define ‘high net worth’ in different ways,” says Patel. “It’s just not something you can look up in the dictionary.” IE