salli | stonehage affluent london living index - Cubitt Consulting

SALLI | STONEHAGE AFFLUENT LONDON LIVING INDEX
ALWAYS THERE

CONTENTS
1. EXECUTIVE SUMMARY 3
2. INTRODUCING SALLI 4
3. METHODOLOGY 4
4. INDEX RESULTS AND ANALYSIS 6
5. CONCLUSION 14
APPENDICES: INDEX COMPONENTS 15
ABOUT STONEHAGE 19
ACKNOWLEDGEMENTS
We would like to thank Pirathaapan Suntharalingam from Cambridge University and Desiree Maghoo
from Cubitt Consulting. We would also like to thank Professor Geoffrey Wood, Professor of Economics
at CASS Business School for reviewing and verifying SALLI and the index’s underlying methodology.
2 SALLI | STONEHAGE AFFLUENT LONDON LIVING INDEX

1. EXECUTIVE SUMMARY
SALLI, The Stonehage Affluent London Living Index measures
the inflation experienced by High Net Worth (HNW) and Ultra
High Net Worth (UHNW) individuals and families living in
London. Wealth managers have traditionally used CPI (the
Consumer Price Index) as a measure of inflation when wealth
planning for their clients. At 6%, SALLI is nearly three times
higher than the CPI and the gap between SALLI and the CPI
is widening. Using CPI when wealth planning could therefore
lead to an erosion of wealth as CPI does not account for
luxury goods and services and the real inflation experienced
by HNWs and UHNWs. Using a combination of SALLI and
CPI, wealth managers can arrive at a more realistic inflation
number experienced by their clients.
An analysis of SALLI vs. CPI confirmed the following:
• CPI, the inflation measure currently used by
wealth managers in wealth planning is too low and
needs to be adjusted upwards to mitigate against
the erosion of wealth from under-estimating
rising costs of living in London.
• In the last twelve months, SALLI climbed 6.0%
compared to CPI which rose by just 2.3%. Since
2002, SALLI has climbed 13.7%, compared to
CPI which has risen by 7.2%.
• There is an increasing gap between the inflation
of luxury goods and services as illustrated by
SALLI compared to the inflation of general consumer
goods and services as measured by the CPI.
• The cost of renting a prime property in Central London
rose by 25.0% from 2002 to 2007, whereas the purchase
price of a similar property rose by 150% during the same
period 1 . This highlights the extraordinary cost of
purchasing property in Central London, as well as its
outstanding performance as an investment asset class.
During the same period, the cost of renting a similar
property in Manhattan rose by 49.7%, whereas the
purchase price rose by 74.0% 2 .
1
The SALLI index includes rental cost rather than the purchase price of property
2
Source: Prudential Douglas Elliman; Savills
The study confirms that CPI is too conservative a measure of
inflation to use when advising High and Ultra High Net Worth
families on wealth management, their investments and longterm
wealth planning. Using a combination of SALLI and
other indices including CPI, wealth advisors should increase
the inflation number used in forecasts to reflect a more
realistic rate of inflation experienced by UHNW clients in
order to safeguard clients’ wealth goals.
SALLI is an index comprising a basket of luxury goods and
services determined by the Stonehage Group, based on the
firm’s knowledge and experience of the spending patterns
of London-based UHNW families. Prices in the index are the
recommended retail prices (inc. VAT) and SALLI accounts for
the frequency of purchase of each item over one year. Prices
were compared between 2002, 2006 and 2007, keeping
the frequency of purchases of each item consistent for
each year.
Prices for SALLI were collected at the end of July 2007. The
study compares SALLI to the CPI at the end of July 2007.
The Stonehage Group provides specialist private client
advisory and fiduciary services to HNW individuals and
families around the world, with assets under administration
of $24 billion.
3

2. INTRODUCING SALLI
The Stonehage Affluent London Lifestyle Index (SALLI)
intends to provide an indication of the trends in the cost
of living for HNW and UHNWs. This is important because
financial objectives of HNWs are likely to be based on
real returns on capital, in which inflation is a fundamental
input. For example, a family’s wealth objective might be
to double real wealth (after inflation and living costs) over
a 25 year period. Therefore, monitoring actual inflation
experienced by HNWs is essential in wealth planning, to
ensure that financial objectives are met.
SALLI tracks the prices of luxury items from 2002 to 2007,
enabling the calculation of luxury inflation. SALLI will
therefore allow Stonehage to more accurately assess the
costs that HNWs face and arrive at a more appropriate
inflation figure, so that recommended investment
strategies are based on more realistic spending patterns.
SALLI is the first Sterling based luxury index of this type
and it consists of luxury goods and services purchased by
London-based UHNW families of four including two children,
over the period of a year.
The paper also compares SALLI to the CPI, UK’s current
headline measure of inflation and also with the RPI and
RPIX (the previous target inflation measure) to establish
whether luxury inflation, as expressed by SALLI, is
substantially higher than inflation experienced by the
average consumer, as measured by CPI, RPI, RPIX 3 .
Stonehage was established in 1976 and is a leading private
client wealth management and fiduciary services group.
Stonehage is headquartered in Jersey and has offices in
the United Kingdom, Switzerland, Israel and South Africa.
The group provides specialist private client advisory and
fiduciary services to HNW individuals and families around
the world. Stonehage is also active in global private
client and institutional asset management via its wholly
owned subsidiary, TriAlpha, which has offices in Jersey,
London and South Africa.
3. METHODOLOGY
4 SALLI | STONEHAGE AFFLUENT LONDON LIVING INDEX
A basket of luxury goods and services was determined
by Stonehage, based on their knowledge and experience
of the spending patterns of London 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 by the frequency
of purchase in a year. The frequency of purchase in each
year was then kept constant so that any change in the
index was due to changes in the price not quantites 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. Changing the frequency of purchases
between the years would measure changes in price and
quantity, as opposed to just prices. In essence, the sole
aim is to monitor price variations, which requires us to
keep the frequency of purchase constant and hence the
adoption of a Laspeyres index.
In order to calculate a value for the percentage rise in
the cost of living for HNW individuals over the past 5
years, the formula below was applied to the prices and
frequency of purchased items.
Laspeyres Index
P L = (P i,2007.Qi)
(P i,2002.Qi)
3
A detailed outline and comparison of the CPI, RPI and RPIX can be found in section 4.1
Pi,2007 / Pi,2002 = Price of item ‘i’ in 2007/2002
Qi = yearly purchase frequency

A Laspeyres index of this type can overstate HNW 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. Hence, since the assumed frequency of
purchase remains unchanged in SALLI, these items receive a
greater weighting than is appropriate, overstating the value
of inflation. Nevertheless, since HNW individuals may be less
price sensitive than the average consumer, any exaggeration
is likely to be small. Whilst individuals might pay more
for a small improvement to an item, it does not mean
that they will be insensitive to a change in the price of an
unchanged item, since this will be affected by the availability
of substitutes. However, with luxury goods and services,
one is often buying the brand which makes substituting
goods more difficult than with less heavily branded goods
and services.
In addition to looking at how prices have changed in the
last year (2006-2007), prices of luxury goods and services
were also collected for 2002, to determine how prices have
changed in the last five years.
SALLI (2006-2007) will serve as a proxy for luxury inflation
for next year (2006-2007) and will allow Stonehage to tailor
more appropriate investment recommendations based on
more realistic increases in the cost of living experienced by
HNW individuals.
P L = (P i,2007.Qi)
(P i,2006.Qi)
Unlike the CPI which represents inflation of goods and
services purchased by the average consumer, SALLI does
not include every single item that a typical HNW individual
would purchase. An arithmetic mean of the inflation for
each item was also calculated to provide an overview of the
price trends that luxury goods and services experience on
a single item basis. In effect, this uses the notion of single
purchase, where the frequency of purchase per year of each
item is one.
Prices were mostly obtained from the respective marketing
or PR departments of the goods and services that comprise
SALLI. These are all recommended retail prices including VAT,
except in cases where company advisors have provided an
average of the tariffs charged for each year. The latter was
more appropriate in cases where consumers would regularly
face different rates (i.e. the Royal Opera House where the
tariff would depend on the opera).
Furthermore, a number of the goods and services in the
luxury basket were upgraded or possibly discontinued over
the years. In these cases we have used an equivalent item
for each year as advised by the respective retail or marketing
team for each item. Since the index seeks to provide an
overview of the trends in the cost of living for HNW
individuals, changes have been allowed in the quality and
specifications of the item in some cases. For example, we
compared the price of a highest specification Range Rover
for 2002, 2006 and 2007; our assumption being that a
HNW individuals would not want to purchase a Range Rover
similar to the highest end model in 2002 in the year 2007.
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 – e.g. opera performances, which
of course fluctuate in quality! In addition, luxury goods and
services which are the most costly can also have the effect
of increasing demand.
A few of the goods and services in the luxury basket were
priced in either Dollars or Euros. These prices were converted
to their Sterling equivalents using an average exchange rate
for the year in question, as opposed to today’s exchange
rate, in order to reflect more accurately the cost at the time
of purchase.
5

4. INDEX RESULTS AND ANALYSIS
4.1 SALLI VS. CPI/RPIX/RPI
To monitor SALLI against inflation for the average consumer
we have compared SALLI to the Consumer Price Index (CPI),
the Retail Price Index (RPI) and the Retail Price Index minus
mortgage interest repayments (RPIX). The most appropriate
measure of inflation is very much dependent on the nature
of the analysis at hand.
CPI is the official UK price index used by the Bank of
England to measure inflation. The CPI consists of a basket
of goods, weighted by frequency of purchase over one year,
using Laspeyres. Every few years, the frequency of purchase
and items are updated. Its use of the Laspeyres method
makes this index particularly appropriate for comparison
with SALLI.
How the baskets compare
4
Harmonised Index of Consumer Prices, the European equivalent of the CPI
6 SALLI | STONEHAGE AFFLUENT LONDON LIVING INDEX
There are numerous differences between the CPI, the RPI and
the RPIX. The CPI is the UK equivalent of the HICP 4 , which
is the European Union’s official price index. CPI excludes
a number of elements mainly related to housing that are
present in both the RPI and the RPIX. These elements include
council tax and various owner-occupier housing costs such
as estate agents’ conveyancing fees and buildings insurance.
In addition, the CPI also excludes trade union subscriptions
and vehicle excise duty.

The CPI includes a number of items that are overlooked
by both the RPI and RPIX. These include unit trust and
stockbroker fees, university accommodation fees, foreign
students’ university tuition fees and foreign exchange
commission for purchases of Sterling by overseas
visitors. The RPIX is simply the RPI with mortgage interest
repayments excluded.
The Office for National Statistics (ONS) emphasises that the
CPI is not designed as a cost of living indicator but is a
“macroeconomic” measure since certain areas that contribute
significantly to living costs, such as housing, are overlooked
by the index. The RPI and RPIX are more comprehensive,
although they exclude expenditure by the highest 4.0% of
Table 1: Changes in the indices from 2002-2007
Year
5 ONS RPI department
earners, which further advances the claim for the need of a
specific price index tailored to HNW individuals. Furthermore,
the RPI is a more appropriate measure of the costs of
living than the RPIX, since the latter excludes mortgage
interest payments, which account for approximately 5.5%
of living costs 5 .
It is interesting to note that from 2002-07, whilst the CPI
increased by 7.2%, the RPI by 12.4% and the RPIX by 10.6%,
SALLI rose by 13.7%. This highlights how the significant
differences between changes in lifestyle costs of HNW
individuals compare to the average consumer and confirms
that CPI vastly underestimates inflation experienced by
HNW individuals.
Percentage Increase In
CPI RPI RPIX SALLI
2002-06 4.82 8.97 7.48 7.31
2002-07 7.23 12.40 10.62 13.79
2006-07 2.30 3.18 2.92 6.04
7

Table 2: Changes in the ratio of SALLI to the other indices
Year
Percentage Increase In Ratios
CPI RPI RPIX SALLI SALLI/CPI SALLI/RPI SALLI/RPIX
2002-06 4.82 8.97 7.48 7.31 1.52 0.81 0.98
2006-07 2.30 3.20 2.90 6.04 2.63 1.89 2.08
Table 2 shows the changes occurring to the ratio of SALLI to
the rate of inflation for the average consumer from 2002-06
and from 2006-07 using the CPI, RPI and RPIX.
The ratio of SALLI to the CPI has risen from 1.5 (2002-06) to
2.6 (2006-07). Similarly, the ratios of SALLI to the RPI and
RPIX have risen from 0.8 (2002-06) to 1.9 (2006-07) and
0.9 (2002-06) to 2.0 (2006-07) respectively, implying that
the difference of price inflation for luxury versus non luxury
goods is widening i.e. prices for luxury items are increasing
faster than prices for normal consumer goods and services.
4.2 SALLI VERSUS CHANGE IN THE
ARITHMETIC MEAN OF PRICES OF
SINGLE PURCHASE GOODS AND
SERVICES
SALLI, which measures how the cost of “a basket” of
luxury goods and services changes over time, showed an
increase of 13.7% from 2002-2007. Because the basket
does not represent every luxury item purchased by HNWs,
we calculated the arithmetic mean of single unit prices in
2002, 2006 and 2007 to consider by how much the average
product and service has risen. The average increase of the
8 SALLI | STONEHAGE AFFLUENT LONDON LIVING INDEX
basket was 38.4%, this finding confirms that luxury goods
and services are subject to high inflation as SALLI suggests.
In addition, SALLI showed a lower price increase than the
arithmetic mean of unit prices, which suggests that SALLI
is weighted in favour of goods and services that have
generated less price inflation per unit. We can therefore infer
that those items which experienced relatively smaller price
increases were more heavily purchased by HNW individuals.
In addition, taking the arithmetic average of the price rises
experienced for each item would be inaccurate and would
vastly overstate high net worth inflation.
The average price rose 23.5% over four years from 2002-06
and 10.0% from 2006-07. As with SALLI, demand and supply
side pressures have intensified in the last year, causing price
inflation to accelerate for luxury goods and services.
4.2.1 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 and 4 consider the average price
of the items in each category.

Table 3: Price level increases per category
Category Price level increase 2002-07 (%) Price level increase 2006-07 (%)
Home 18.84 4.97
Transport 13.03 2.32
Food and Drink 78.57 19.30
Children 34.66 13.80
Investments of Passion 52.19 12.43
Leisure (Travel, Hobbies,
Entertainment)
37.15 11.59
Luxury Goods and Services 21.34 3.11
All Items 38.46 10.04
This segmentation suggests that Food and Drink and Investments of Passion are the categories that have experienced the largest
increase in price from 2002-07. However, this is based on arithmetic mean prices and does not account for quantities of goods/
services purchased.
Table 4: Change in expenditure by category from 2002 to 2007 (using frequency to weight expenditure)
Category % Expenditure 2002 % Expenditure 2006 % Expenditure 2007
Home 21.07 22.43 23.21
Transport 49.57 43.53 39.68
Food and Drink 1.45 2.23 3.53
Children 3.60 4.33 4.36
Investments of Passion 0.57 0.65 0.67
Leisure (Travel, Hobbies,
Entertainment)
17.76 20.57 22.15
Luxury Goods and Services 5.97 6.26 6.41
Further analysis (Table 4) of the share of total expenditure accounted for by each category of spending reflects the trend that the
share of spending on all of the categories has been increasing slightly, at the expense of transport, which experienced a dramatic fall
in the share of expenditure from 49.5% (2002) to 39.6%(2007). This is likely to be due to increased competition within the sector
and increasing supply as opposed to diminishing demand.
9

4.2.2 NOTAbLE PRICE TRENDS
Price trends vary across the different items in SALLI, for
example, the price of a case of Lafite Rothschild 2000 has
risen by more than a factor of three from 2002-2007, now
standing at £9,250. Supply is constrained given that only an
estimated 15,000-20,000 cases were produced.
The main factor contributing to the remarkable increase
in price has been surging demand, due to increases in
wealth creation around the world. This is highlighted by the
substantial increase in the number of HNW individuals rising
from 7.3 million at the end of 2002 to 9.5 million by 2007 6 .
Other factors might include the growth of interest in wine
as an investment class. A number of indices have recently
launched such as the Liv-ex index 7 , which tracks the prices
of a large number of expensive wines and highlights wine
as an investment opportunity as well as investment funds
specialising in wine (Fine Wine Fund, Wine Investment Fund).
In addition, Lafite 2000 is in limited supply.
Table 5: Goods and services that have come down in price
Item
NetJets entry
level aircraft
Virginian Yacht
Charter
(1 week)
Hotel Villa del
Sol, Mexico
(2 weeks)
Price ($)
2002
Price ($)
2006
Price ($)
2007
10 SALLI | STONEHAGE AFFLUENT LONDON LIVING INDEX
Although, one could argue that most of the Lafite 2000 is
yet to be consumed, the ‘effective supply’ is likely to be low
since many individuals who have bought cases are storing
their supply to either sell or drink at some point in the
future. Another possibility is that some wine may be tied up
in the form of investment funds. In this case both increased
demand and restricted supply have put upward pressure
on its price.
Similarly, booming demand and restricted supply has driven
the enormous increase in price for Dom Perignon 1990. For
the purposes of the index, we chose to use the same wine
and champagne for 2002, 2006 and 2007, since substituting
wines would introduce further subjectivity.
The only three items to experience a price fall from 2002-
2007 were the NetJets entry level aircraft, Edmiston’s Virginian
yacht charter for one week and two weeks at Hotel Villa del
Sol, Mexico.
Price (£) 2002 Price (£) 2006 Price (£) 2007
375,000 400,000 400,000 248,508.95 215,517.24 201,511.34
262,500 290,000 294,000 173,956.26 156,250.00 148,110.83
16,380 19,600 21,000 10,854.87 10,560.34 10,579.35
6 Data obtained from Merrill Lynch Global Wealth Reports
7 The Liv-ex 100 Index is the fine wine benchmark index. It is priced off the mid-price as quoted on the Liv-ex platform and supply and scarcity
weighted. The Liv-ex 100 – Fine Wine Index “the wine world’s version of the S&P 500.” (Financial Times, Jun 07).The Liv-ex 100 index has gone up
from 94.96 in Jan 02 to 174.69 in Jan 07, representing an 84.0% (2sf) increase in five years.

However, in terms of the American Dollar, the price of each
rose by $25,000, $31,500 and $4,620 respectively. Thus,
the main reason for the fall in the price of each of these
items was the substantial appreciation of the Pound Sterling
against the American Dollar, which completely offset the
increase in price in Dollar terms.
Table 6: Items which experienced the smallest increase in price 2002 to 2006
Rank Item
Percentage change
in price (2002-06)
Average yearly
percentage change
in price
48 A box of Cohiba Siglo V’s 7.92 1.92
49 Virgin Upper Class flight to New York 7.25 1.77
50 Partners Desk, Dutch Connection 1.76 0.44
51 Child Rush Seat Chair from Dragons 0.00 0.00
51 Purdey Shotgun 0.00 0.00
51 Burberry Women’s Trench Coat 0.00 0.00
51 Annual membership of the Walbrook Club 0.00 0.00
55 2 weeks at Hotel Villa del Sol, Mexico -2.71 -0.67
56 Virginian Yacht Charter for one week -10.18 -2.45
57 NetJets entry level aircraft -13.28 -3.17
8 These exchange rates are an average for each year, with data from www.statistics.gov.uk
The exchange rate stood at $1.51 = £1 in 2002, rising to
$1.87 = £1 in 2006, reaching $1.99 = £1 in 2007 8 .
Increased competition may also have impacted the Dollar
price of these three items. For example, improvements in
the first class service of commercial airlines may have put
pressure on private jet companies to lower prices.
11

Table 7: Items which experienced the smallest increase in price 2006 to 2007
Rank Item
12 SALLI | STONEHAGE AFFLUENT LONDON LIVING INDEX
Percentage change
in price (2006-07)
42 Hamley’s 1920’s Classic Steiff Bear 0.00
42 The Ivy 0.00
42 Zafferano 0.00
42 Partners Desk, Dutch Connection 0.00
42 2 Business Premier Eurostar return tickets to Paris 0.00
42 Housekeeper, Beauchamp 0.00
42 Woman’s haircut, Senior Stylist at Michael John, 25 Albemarle Street 0.00
42 Burberry Women’s Trench Coat 0.00
42 Annual Quintessentially Membership 0.00
42 Clive Christian ‘X’ Perfume 0.00
42 Annual membership of the Walbrook Club 0.00
42 Fortnum and Mason Christmas Hamper 0.00
42 Chauffeur First Class, Brunel (S Class Mercedes) 0.00
55 Virginian Yacht Charter for one week -5.21
56 NetJets entry level aircraft -6.50
57 Breast Enhancement Surgery, 111 Harley Street -10.00
Tables 6 and 7 list items that experienced the smallest price increases. These goods and services tend to be those where supply is
plentiful and competition is more intense.

On the other hand, the two tables below indicate that those
items that experienced the largest price increases tend to
be those where restricted supply creates exclusivity, such
as caviar, luxury housing and fine wines/champagnes. This
is in contrast to items in tables 6 and 7 where the good or
Table 8: Goods and services demonstrating the highest price increase 2002 to 2006
Rank Item
Table 9: Goods and services demonstrating the highest price increase 2002 to 2007
Rank Item
service in question is more easily reproduced. This confirms
a close correlation i.e. goods that experienced high inflation
over the last year are likely to experience high inflation next
year - with the exception of the same – housing if there is a
surge in interest rates for example.
Percentage change in price
(2002-06)
Average yearly percentage
change in price
1 Case of Lafite Rothschild 2000 103 19.36
2 1 kg Beluga Caviar 100 18.92
3 Case of Dom Perignon 1990 72.93 14.67
4 Art Index 52.84 11.19
5 Annual Quintessentially Membership 50 10.67
6 Annual Membership of Soho House 50 10.67
7 Gordon Ramsay, 68 Hospital Road 43.94 9.53
8 Hakkasan 41.67 9.10
9 Maintenance of 4 Polo Ponies 39.67 8.71
10
Chauffeur First Class, Brunel
(S Class Mercedes)
37.50 8.29
Percentage change in price
(2006-07)
1 Case of Lafite Rothschild 2000 116.98
2 Annual Membership of Soho House 50.00
3 Child Rush Seat Chair from Dragons 41.17
4 Case of Dom Perignon 1990 39.13
5 1 kg Beluga Caviar 27.78
6 Limited Edition Patek Phillippe Calatrava 26.67
7 Season Executive Box hire at Chelsea Football Club 25.00
8 3500 sq ft house in Belgravia 21.50
9 Annual Membership of Dorchester Gym and Spa 20.00
13

5. CONCLUSION
The study confirms that CPI is too conservative a measure of
inflation to use when advising High and Ultra High Net Worth
families on wealth management, their investments and longterm
wealth planning.
Using SALLI, Stonehage will increase the inflation number used
in forecasts to reflect a more realistic rate of inflation experienced
by UHNW clients, thereby safeguarding clients’ wealth goals.
A CASE STUDY 9
A typical investment objective for a wealthy family may be to
double their real (i.e. after expenditure and inflation) capital
base every 25 years.
Using CPI at an annual average rate of 1.4% over the last
five years and assuming an annual spending rate of 4%, the
required investment growth rate to meet this wealth objective
is 8.4% per annum.
Using SALLI at 2.6% annualised over the last five years, the required
investment growth rate required to meet the families’ wealth
objective is 9.6% per annum to prevent wealth erosion.
Pounds Sterling (millions)
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14 SALLI | STONEHAGE AFFLUENT LONDON LIVING INDEX
The margin of error, i.e. the potential shortfall if the CPI is used
rather than SALLI by the end of year 25 is high. For a family
with £50 million of initial capital, the potential shortfall is £46
million. Similarly, for a family with £10 million of initial capital,
the potential shortfall is £9 million.
Because of the nature of compounding, small changes in
inflation rates can lead to large changes in spending power over
time. Since inflation experienced by HNWs is higher than CPI,
both families will experience a large and unexpected erosion of
buying power unless they base their targeted annual returns on
a higher, more appropriate level of inflation.
Luxury inflation as measured by SALLI has increased over
the last year to 6%. Using this inflation figure, the required
investment growth rate for next year is 13.2% to achieve these
wealth goals.
In conclusion, since HNWs also purchase goods and services
tracked by CPI, wealth managers should use a combination of
SALLI and CPI to reflect the real inflation experienced by HNWs.
In general, the higher the level of investable wealth, the higher
the SALLI component should be of the inflation number used.
CAPITAL VALUE AFTER EXPENDITURE AND INVESTMENT GROWTH
9 All numbers in the case study are to 1 decimal place
End of Year
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SALLI Target
(based on 6%)
SALLI Target
(based on 2.6%)
CPI Target
Rate of Return
13.2%
9.6%
8.4%

APPENDIX 1
COMPONENT ITEMS OF SALLI INDEX
Items Notes 2002 (£) 2006 (£) 2007 (£)
Flowers, Orlando
Hamilton
12 Turnbull and Asser
two-fold 200 shirt
Season Executive Box
hire at Chelsea Football
Club
Annual Membership of
Soho House
Aston Martin Vanquish
S V12
For a 5 bedroom house (average
estimate)
Prices per season are inclusive of VAT
and prices start at each of those shown
Annual price of membership for access to
all houses - number of houses has risen
from 2002 to 2007
The Vanquish S V12 was only released in
2004 - the price for 2002 is for a Vanquish
V12 in September 2002. Prices for all three
years are for a brand new car
Frequency
(purchased
per year)
200.00 250.00 275.00 52
2,340.00 3,000.00 3,120.00 1
70,500.00 94,000.00 117,500.00 1
400.00 600.00 900.00 1
159,995.00 185,000.00 188,000.00 1/3
Purdey shotgun 12-bore side by side gun 54,640.00 54,640.00 57,340.00 1/3
A box of Cohiba
Siglo V’s
From Hunters and Frankou; a box of 25 467.00 504.00 521.00 6
Panerai Luminor
Submersible
Limited Edition Patek
Phillippe Calatrava
Case of Lafite
Rothschild 2000
Case of Dom Perignon
1990
1882 £1 stamp
4 Lion King Musical
Tickets
Hamley’s 1920’s classic
Steiff bear
Annual Wentworth Golf
Club Membership
Automatic mechanical, exclusive Paneri
OPIII Calibre movement
4,300.00 4,900.00 5,400.00 1/3
Stainless Steel Finish 12,000.00 15,000.00 19,000.00 1/3
Case of 12 2,100.00 4,263.00 9,250.00 3
Case of 12 665.00 1,150.00 1,600.00 3
Brown-lilac white paper stamp, near mint
condition and mounted
Price for 2 adults, 2 children in basket
(no concession for children). Price for
Saturday matinee, highest tariff seats
18,000.00 22,000.00 24,000.00 1/3
170.00 220.00 236.00 1
Non-limited edition 1920’s classic 95.00 115.00 115.00 1
For one person; includes access to golf
facilities, clubhouse, bar, restaurant and
spa
3,912.00 5,016.00 5,268.00 1
Nobu London, 19 Old
Park Lane
The Ivy
Prices for an average meal from the
Zagat 2002, 2006 and 2007 surveys,
including one drink and service as a
56.00
44.00
67.00
53.00
71.00
53.00
10
10
Gordon Ramsay, 68
Hospital Road
benchmark. Hakkasan in 2002 was
relatively new so price was said to be
66.00 95.00 98.00 10
Hakkasan over £36 in Zagat survey - taken to be 36.00 51.00 56.00 10
Le Caprice
Zafferano
Tamarind
£36. Frequencies assume that individuals
are present in London for 9 months of
the year and go out to eat twice a week
45.00
47.00
39.00
53.00
56.00
47.00
54.00
56.00
49.00
10
10
10
15

APPENDIX 1 (CONTINUED)
COMPONENT ITEMS OF SALLI INDEX
Items Notes 2002 (£) 2006 (£) 2007 (£)
Partners Desk, Dutch
Connection
Child Rush Seat Chair
from Dragons
Annual Queen’s Tennis
Club Membership
Gold Sovereign Coin
2 Business Premier
Eurostar return tickets
to Paris
Range Rover, top of the
range
Woman’s haircut
Royal Opera House Box
for a full length opera
Breast Enhancement
Surgery, 111 Harley
Street
Burberry Women’s
Trench Coat
Rental price for a
3500 sq ft house in
Kensington and Chelsea
NetJets entry level
aircraft
Virginian Yacht Charter
for one week
16 SALLI | STONEHAGE AFFLUENT LONDON LIVING INDEX
Frequency
(purchased
per year)
Large desk, polished and leathered 1,135.00 1,155.00 1,155.00 1/5
Child Rush Seat Chair - one of most
popular items from the past few years
Club was purchased by members 22 May
2007 so to join, at least one share must
be bought (approx £11000). Prices are
for full membership
For each year prices are for the
sovereign released that year
Tickets are fully flexible and exclude
cab journeys. The price for 2002 is the
business premier equivalent
Top of the range Vogue SE has changed
from ‘ 02 to’ 07 from a 6 cylinder to an
8 cylinder engine as well as changes to
the interior and features. For each year,
the price is for a brand new car
Senior Stylist at Michael John, 25
Albemarle Street
Prices are an average for each year and
are for a Grand Tier box to seat 4 people
99.88 99.88 141.00 1/3
1,100.00 1,300.00 1,560.00 1
85.00 110.00 120.00 1/5
405.00 450.00 450.00 2
51,810.00 62,510.00 74,900.00 1/3
90.00 110.00 110.00 10
560.00 640.00 660.00 4
4,500.00 5,000.00 4,500.00 1/3
London collection, classic trench coat 695.00 695.00 695.00 1
Data from Knight Frank negotiator -
average price per week
Fractional ownership programme and
price is for 50 hours. Aircraft for 2002
was a Citation Bravo whereas for 2006/7
this was changed to a Hawker 400XP.
Converted using exchange rates at
the time and operational costs were
excluded
Edmiston Yacht Company, prices for high
season. Note that refurbishment work
may have been carried out on yachts
over the years. Currency conversion
using exchange rate at the time -
Sterling has appreciated strongly since
absolute prices in dollars have been
rising
4,000.00 4,550.00 5,000.00 52
248,508.95 215,517.24 201,511.34 1
173,956.26 156,250.00 148,110.83 1

APPENDIX 1 (CONTINUED)
COMPONENT ITEMS OF SALLI INDEX
Items Notes 2002 (£) 2006 (£) 2007 (£)
A weekend in George
V, Paris
Annual Membership of
Dorchester Gym and
Spa
Art Index
Annual Quintessentially
Membership
One term of fees
for two seniors at
Westminister School
Bespoke Tailored
Tuxedo, Ozwald
Boateng
2 Wimbledon men’s
final debenture tickets
Clive Christian ‘X’
Perfume
Duplex Suite for 2, based on 2 floors
and covers 115 sq m. Prices for the first
week of June. For basket, prices for a
weekend - convert using exchange rate
at the time
Membership includes use of all club
facilities
Artprice Global Index - includes
global paintings, sculpture,
tapestry and drawings.
Values are indexed from Jan ‘02. Index
levels for 2006/07 are also for January
Membership has changed over the
past few years with 3 tariffs currently
available. The memberships for 2006/07
are of the variety most similar to the
service offered in 2002 (lowest tariff
offered)
2 children in the basket, boarding and 3
terms per year
Diamond duff 100% wool super 140
material - average estimate
Frequency
(purchased
per year)
943.20 1,261.33 1,282.31 1
1,200.00 1,500.00 1,800.00 1
100.00 152.84 182.06 1
500.00 750.00 750.00 1
12,576.00 16,210.00 17,304.00 3
5,500.00 6,500.00 7,000.00 1
Average trading rates, singles final 6,000.00 7,000.00 7,600.00 1
Women’s perfume 30ml 350.00 460.00 460.00 1
Boodles Ring
Raindance platinum ring with a triple
row of diamonds
5,500.00 6,000.00 6,500.00 1
Boodles Necklace Raindance double collar platinum ring 45,000.00 50,000.00 55,000.00 1
Annual membership of
the Walbrook Club
For one person 750.00 750.00 750.00 1
Virgin Upper Class flight
to New York
2 days’ Grouse Shooting
Fortnum and Mason
Christmas Hamper
Pheasant Shooting
Package
Virgin Atlantic restricted mid july flights
for each year; also mid-week travel.
Jim Gale Country Sports Agency - 12
brace per gun per day
This was the classic christmas hamper
in 2006/07 and the equivalent model in
2002 was the oxford hamper
Two day shooting package with one
night accommodation for 6 people. Note:
provider Dalhousie.
3,821.00 4,098.00 4,366.00 2
2,820.00 3,384.00 3,666.00 1
125.00 150.00 150.00 1
27,612.50 30,550.00 32,900.00 1
17

APPENDIX 1 (CONTINUED)
COMPONENT ITEMS OF SALLI INDEX
Items Notes 2002 (£) 2006 (£) 2007 (£)
Chauffeur First Class,
Brunel (S Class
Mercedes)
Maintenance of 4 Polo
Ponies
1 kg Beluga Caviar
Housekeeper,
Beauchamp
2 weeks at Hotel Villa
del Sol, Mexico
Half an hour Dental
checkup, Harley Street
1 hour GP’s
consultation, Dr.
Daniel’s Medical Centre,
Harley Street
Assumes individual requires a chauffeur
3 hours a day, 5 days per week and 9
months of the year
Maintenance includes Polo club
membership, Polo professional and
tournament entry, stable rental, winter
field livery, shavings, livery, teeth, biting,
vaccinations and shoeing
Kings Fine Food, prices for 2002 not
RRP since firm was not set up in 2002 -
approx from supplier
Assumes that a housekeeper is required
7 hours a day, 5 days a week and 12
months of the year
From Conde Nast Johansson; price reflect
the highest tariff for a suite in each year
(high season). Converted using exchange
rate at the time
Mr Phil Davies, 112 Harley Street -
frequency is based on a family of 4, with
each family member going to the dentist
every 6 months
Extended 1 hour consultation - frequency
is based on a family of 4, with each
family member going to the GP an
average of 1.5 times every year
18 SALLI | STONEHAGE AFFLUENT LONDON LIVING INDEX
Frequency
(purchased
per year)
40.00 55.00 55.00 540
34,970.00 48,844.00 51,582.00 1
900.00 1,800.00 2,300.00 1
9.00 10.00 10.00 1820
10,854.87 10,560.34 10,579.35 1
35.00 45.00 50.00 8
145.00 165.00 170.00 6

APPENDIX II
AbOUT STONEHAGE
Overview
The Stonehage Group provides international families with
wealth management and fiduciary services. The group has
over $24bn of assets under administration and has offices
in the United Kingdom, Switzerland, Jersey, Israel and South
Africa. Stonehage is owned by management and staff, is
independent and intensely relationship driven. Client
objectives are likely to focus on developing, maintaining
and effectively controlling family wealth across generations.
The Stonehage Group ensures that such governance and
legal structures exist as to best meet investment, tax and
wealth transfer objectives. The Group also advises families
on philanthropic arrangements.
Private Client and Trust Division: The core of the Stonehage
business, providing ultra high net worth individuals and
families with value added advice; including succession
planning, governance, trust legal and structuring advice and
administration services.
Advisory Division: Providing independent advice to ultra
high net worth individuals on investment/asset allocation
(Stonehage Investment Partners) and advising on property
investment (Stonehage Property Partners).
TriAlpha: Asset management division, offering range of
multi-manager funds and boutique funds. Assets under
management are currently in the region of $2bn.
Company History
Stonehage was established in 1976 in London to provide
wealthy clients with the means of ensuring security to
their capital. In 1997 Stonehage sold a majority stake in
the business to ABSA Bank. In 2005, the Group returned
to being management controlled. The group now employs
over 275 staff and manages the affairs of over 1,000 client
families.
SALLI Project - Key Executives
Giuseppe Ciucci, CEO
Giuseppe has been Chief Executive Officer of the Stonehage
Group since 1998. He joined Stonehage in 1991, having
previously worked at Deloitte & Touche. He is a qualified lawyer
and Chartered Accountant, holding a Bachelor of Commerce
and LLB degree from the University of Stellenbosch.
Robby Hilkowitz, Head of Group Marketing & Business
Development
Robby is an Executive Director of the Stonehage Group, where
he is Head of Group Marketing & Business Development.
Robby joined Stonehage in 1997 after gaining extensive
experience in world markets at a private forex and derivatives
trading house in Tel Aviv. Robby holds a degree in Finance
and Mathematics from the University of New South Wales in
Sydney, Australia.
David Sable, CEO, TriAlpha
David is the CEO of the TriAlpha Group. He is the portfolio
manager of the Anquiro Fund Limited, a hedge fund he
established in partnership with TriAlpha prior to joining
the group and is a member of the Advisory Committee of
the Stonehage Westcity Property Fund. David obtained an
MBA from Boston University, Massachusetts, a Bachelor of
Commerce (Honours) in Economics from the University of
Cape Town and a Bachelor of Commerce from the University
of the Witwatersrand.
Ronnie Armist, Executive Director
Ronnie is an Executive Director of the Stonehage Group where he
is the Head of the Advisory Unit which incorporates Stonehage
Investment Partners and Stonehage Property Partners. Ronnie
joined the Stonehage Group in 2006 after working at Lombard
Odier for nearly 20 years where he was Chief Executive of the
London office and co-head of the Group’s Institutional Client
Unit. More recently, Ronnie worked as a Director of IPGL Limited
controlled by Michael Spencer, CEO of the ICAP Group. Ronnie
studied Bachelor of Business Science (Hons) at the University
of Cape Town and also completed a BCom (Hons) degree. He
qualified as a Chartered Accountant in 1980. Ronnie is based
in our London Office.
Andrew Rodger, Director
Andrew is a Director in the Private Client Division. Andrew
joined the Stonehage Group in 2006 after working for
thirteen years as a practising Barrister in London. Andrew
qualified as a Barrister in 1993 after graduating with honours
from the School of Law, King’s College University of London.
Andrew was admitted to the New York Bar in 2003 and
accredited as a CEDR mediator in 2004. Andrew is based in
our London office.
19

OFFICES
London Zürich Neuchâtel
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London
W1S 2YZ
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Switzerland
T +41 44 217 9600
Rue du Puits-Godet 12
PO Box 763
2002 Neuchâtel
Switzerland
T +41 32 723 1000
Jersey Israel South Africa
Sir Walter Raleigh House
48/50 Esplanade
St Helier
Jersey JE1 4HH
Channel Islands
T +1534 823 000
Suite 205
Giron Centre
5 Jabotinsky Street
Ra’anana 43363
Israel
T +972 9 771 3335
Block A
7 West Quay
West Quay Road
Victoria & Alfred Waterfront
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8001 South Africa
T +27 21 446 2100
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