Being a billionaire isn’t as easy as you think
A new report shows fleeting nature of wealth with only 44% of billionaires from 1995 still holding on to that kind of wealth in 2014.
Financial services companies UBS Group AG and PwC launched their joint deep dive report, “The changing faces of billionaires,” which explores the role of women in building lasting financial legacies and how wealth is preserved across multiple generations.
The survey of over 1,300 billionaires analyses data from the last 19 years across the 14 largest billionaire markets, accounting for 75% of global billionaire wealth.
The report noted the fleeting nature of great wealth, finding that only 126 billionaires or 44% of the class of 1995 are billionaires today. It underscores the strategies these prevailing billionaires have employed to build and preserve lasting legacies.
It also showed that the number of female billionaires is growing faster than the number of their male counterparts. Women have been controlling greater average wealth than men and becoming more influential in family businesses, philanthropic enterprises and governance.
Key Findings:
- The female billionaire population grew faster than their male billionaire peers, their number grew by a factor of 6.6 compared to a factor of 5.2 for men.
- Female billionaires are driving their families’ businesses. 57% in the US, 63% in Europe and 96% in Asia are active wealth creators.
- The report shows a high attrition rate of billionaires. Only 44% or 126 of 1995’s billionaires have prevailed over the last 20 years.
- The prevailing billionaires, grew their assets from an average of $2.9 billion to $11 billion, outperforming both equity markets and global GDP.
- Billionaires see regulation and tax as current key challenges to maintaining their legacy.
- Sticking to the initial family business, establishing strong governance and a clear family identity/culture are critical to building lasting legacies.
“The rise of female and Asian billionaires over the last two decades is creating an entirely new billionaire demographic, and I see no signs of slowing,” said Josef Stadler, Head Global Ultra High Net Worth, UBS.
“While there is no such thing as a typical billionaire, virtually all are focused on building a lasting legacy for future generations. Achieving this goal increasingly requires strategic thought and long-term planning.”
“The report suggests that we need to revisit the old saying ‘The first generation builds the business, the second makes it a success, and the third wrecks it’. Our findings reveal that it is in fact the second generation that all too often undermines the value of the business the first generation created. To prevent this, business decisions must move from the kitchen table to the board room,” said Michael Spellacy, Global Wealth Leader at PwC US.
Technology is a trend
Consumer& Retail, Technology and Financial Services are the dominant industries, making up for two-thirds of the total wealth of the lasting billionaires today.
The Technology sector in particular is home to the most enduring billionaires while Industrials, Real Estate and Health Industries are sectors where billionaire wealth is more fleeting.
In 1995, the report counted 289 billionaires. From this group of billionaires, only 126 remain today while the others have dropped off the billionaire list due to death, family dilution or business failures. Over the same period, 1,221 new billionaires were created bringing the total number to 1,347 billionaires in 2014.
The 126 prevailing billionaires have created US$1 trillion of wealth, approximately 21% of that produced by our entire global billionaire population over the period.
By 2014, the average wealth of the remaining billionaires had grown their average wealth to $11 billion from $2.9 billion in 1995, multiplying their assets by a factor of 3.8 and outperforming global GDP growth of just 2.5.
Our research and analysis consistently identified three personality traits as essential to entrepreneurial success for both genders – smart risk taking, ‘obsessive’ business focus and dogged determination.
Making wealth last
The report found that the majority of multi-generational billionaires created lasting legacies by keeping the initial business entirely or parts of it.
The industry sector often dictates the degree to which one keeps the original business. For instance, the best wealth preservation strategy for billionaires that made their fortune in the Consumer and Retail sector is to maintain control of the original business as a value driver.
Finance billionaires, on the other hand, are best served by a combination of retaining the original business and adopting a hybrid strategy.
Protecting billionaires’ legacies also requires coping with outside forces. Anti-wealth sentiment in politics, growing taxes and increasingly stringent global regulations pose the biggest threats to billionaires’ wealth.
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