The population of ultra-high-net-worth individuals dipped 3 percent from 193,100 in 2014 to 187,500 last year and leading wealth advisors and private bankers from around the world expect their clients’ wealth to increase at a slower rate over the next 10 years than the past decade, claims residential and commercial property consultancy Knight Frank.
The latest 2016 edition of The Wealth Report was released yesterday and chronicles a decade of wealth trends, as well as forecasting shifts and movements in the spending capacity and behaviour of the world’s Ultra High Net Worth Individuals (UNHWIs) – defined as someone with a net worth of more than US$30 million.
This year’s survey was made in collaboration with ultra-wealth intelligence consultancy Wealth-X and is based on the views of around 400 of the world’s leading private bankers and wealth advisors who, between them, manage assets for about 45,000 ultra-high-net-worth individuals (UHNWIs) with a combined wealth of over half a trillion US dollars.
According to the report, a number of interesting trends have emerged over the past decade:
Paying attention: Not only do 87 percent of those polled believe that their clients are taking a more active role in the management of their wealth, but 92 percent agree that the wealth industry has to work harder to earn the trust of its clientele.
Family matters: It’s added that advisors may also need to refocus how they engage with clients. On average almost 80 percent of respondents said women were taking a more significant role in managing family wealth, while 64 percent said clients were involving their children in their businesses at an earlier age.
“Having served the parents does not provide us a birthright to serve their next generation. We have to earn it,” says Money K, who heads Citi Private Bank’s Next Generation programme. “They prefer online delivery for market intelligence and execution of transactions.”
Success and succession: These issues are the biggest worry for UHNWIs around the world with recent research suggesting that it is the second generation, rather than the oft-quoted third, that is most likely to squander the family fortune. When asked why their clients were so concerned about handing their wealth to the next generation, 62% of respondents said they didn’t feel their children would be encouraged to make their own wealth, while almost half said they wouldn’t know how to handle the investments.
Philanthropy: While protecting wealth is important for UHNWIs, giving much of it away is also important. Facebook founder Mark Zuckerberg and his wife Priscilla Chan hit the headlines last year when they pledged to give away 99 percent of their shares in the social media giant – currently worth $45 billion. A sense of personal fulfilment was cited as the main motivator, although in the Middle East religious beliefs were considered almost as important.
“This is indicative of a wider trend that we have seen across our client base,” says Tom Hall, Head of Philanthropy Services (UK) at UBS. “Not only is philanthropy increasing, so too is the desire to ensure that it is truly effective and actually solving the social and environmental problems of our time. Philanthropists are becoming increasingly sophisticated in how they structure their giving and investing, with social impact emerging as a key third dimension along with risk and return in every investment decision.”
Property: Residential real estate accounts for a quarter of the average UHNWI’s investable wealth, according to the survey, while commercial property investments make up 11 percent. Over the past 10 years, 54% of respondents said their clients had increased their allocation to residential property. Just over 40% expected it to increase further over the next 10 years, with 30% of clients likely to consider a residential purchase in 2016.
Getting around: Sales of superyachts (longer than 24 metres) rocketed 40 percent last year, with the ultra wealthy travelling even further, including to the Antarctic and outposts in Asia, as well as
traditional ports of call in the Mediterranean and the Caribbean. Meanwhile, classic cars increased by 17 percent in value last year, while coins went up 13 percent and Knight Frank’s overall luxury investment index rose 7 percent.
This article has taken various excerpts from The Wealth Report by Knight Frank. To download a copy of the full report, click here.