Mass affluent turn to savings
Russia is home to almost a million so-called "mass affluent" people. Long characterized as big-time spenders, banks are now focusing their attention on increasing their saving patterns.
Shiny cars, fancy houses outside of the city, designer clothes. When it comes to Russia's wealthy, it's hard to ignore their obvious big-time spending.
Indian Businessman Sammy Kotwani, President of The Imperial Tailoring Company, makes suits for Moscow's well-to-do. His flagship shop – just steps away from Red Square – has been open for 7 years – a milestone he is celebrating with a new line of menswear and a Ritz Carlton birthday bash later this month.
“The rich are smart…they know what and when to buy…and what and when not to buy. Tastes have changed throughout the years. Even global warming has affected sales. My clients buy suits made of lighter material now that Moscow winters are getting less harsh.”
The "mass affluent" is a term used for Russian citizens with available currency assets of $42,000 to $425,000 in cash, deposited in banks, and invested in securities and mutual funds. That category makes up 0.7% of the country's population. The sum of their cash assets is equivalent to 9% of Russia's GDP.
Before the crisis, the popular attitude in Russia was to spend. Now a bit of a life lesson has been learned – saving is becoming more common. And it's not just keeping cash in bank deposits – but managing investments, according to Elina Ribakova, Chief Economist, at Citi Russia and CIS.
“There's definitely been a recovery in real incomes. Domestic demand has picked up somewhat. However, what I think is the most important change in trend over the last year and a half because of the crisis has been the increased savings ratio of Russians. And I think that applies to the affluent segment as well as the average consumer.”
Now more than ever, demand for wealth management is making its way to Russia. And as the rich deposit their cash into the country's banking system, they could just provide the liquidity that will lead to new products and investment opportunities.