UBS AG e PwC (PricewaterhouseCoopers) are launching 2015 today Billionaires Report, –entitled “Billionaires: Masters of Great Wealth and Lasting Legacies,” which examines the differences in the creation, preservation, and philanthropic practices of billionaires in the United States, Europe, and Asia. Conducted among 1.300 billionaires, the survey analyzes data covering the last 19 years (1995 to 2014) collected within the 14 major markets for billionaire presence, representing 75% of billionaire wealth globally. Additionally, UBS and PwC conducted face-to-face interviews with more than 30 billionaires.
THE CREATION OF WEALTH
From Europe to the United States to Asia, self-made billionaires are on the rise
In recent history, wealth creation has been the preserve of a few: the Billionaires Report found that 917 billionaires from nowhere have generated more than $3,6 trillion in global wealth. Many of them started their journey to riches at a young age, with 23% establishing their first business venture before the age of 30, while overall 68% did so before the age of 40.
“We live today in an age of opportunity, in which wealth creation has accelerated, much like the Golden Age of the late 19th and early 20th centuries, when entrepreneurship in the United States and Europe led to the first wave of innovation in modern history,” says Josef Stadler, Head of Global Ultra High Net Worth at UBS. “But wealth generation is cyclical, and we've benefited from being on the top end of the wave in recent decades.”
While members of the billionaire population typically display some similar traits—a smart take on risk, an obsessive focus on business, and a strong work ethic—they have built their fortunes in different ways.
In the United States, for example, the financial services sector was the top creator of billionaires out of thin air, accounting for 30%. The net worth for each billionaire within the industry is close to an average of $4,5 billion. By contrast, the self-made billionaires in the last two decades in Europe (49,5%) and Asia (20%) are a product of the consumer industry. With an average wealth of $5,7 billion, European entrepreneurs are significantly richer than Asians ($3,2 billion).
However, the group of Asian self-made billionaires is unique because the region's accumulation of wealth is more recent than in other parts of the world. Asian billionaires are generally younger than others, with an average age of 57, which is 10 years younger than Americans and Europeans. In addition, 25% of them grew up in poverty, a significant percentage compared to 8% of Americans and 6% of Europeans. As a result of these factors, UBS and PwC expect Asia to be the center of new billionaire wealth creation in the future.
THE PRESERVATION OF WEALTH
Keep the business within the family, or capitalize and move on?
More than two-thirds of global billionaires are over 60 and have more than one child. This makes matters relating to the preservation and transfer of assets and bequests a priority. Wealth dilutes over time, especially as families grow, and as billionaires get older they face the daunting decision of what to do with the businesses that made them rich: keep them, or sell them in their entirety or for individual pieces.
“Billion dollar wealth creation over the last two decades has been largely correlated to financial markets, which have the ability to slow down, or worse, turn upside down, in an instant. This is why strategic planning is essential to maintaining wealth, whether through family offices, personal investments or other means,” said Michael Spellacy, Global Wealth Leader at PwC US.
The Billionaire Report found that among self-made billionaires in the US and Europe, the majority choose to keep the activities that made them rich (60%), a third of them (30%) sell shares of the company via public listing or a market sale, while 10% sell their entire company. Most self-made billionaires who decide to sell their entire company become financial investor, acting independently, seeking specific risk/return objectives, and/or delegating investments to a family office or a financial advisor. In Europe and Asia, billionaires are very likely to create an economic dynasty, with 57% of European and 56% of Asian billionaire families taking over the family business when the patriarch/founder retires. This scenario is far less common in the US (36%).
LEGACY AND PHILANTHROPY
Philanthropic donations are on the rise, equated with bequests
Today's billionaires demonstrate a growing interest in philanthropy, in support of education, health and humanitarian causes around the world. In particular, they tend to focus on initiatives that offer tangible and measurable results: knowing how many lives have been affected by their donations, seeing health or living conditions improve, or funding different causes through micro-credit.
In the United States, it is very popular “visible philanthropy”, with donations made through institutions. For example, since 2010, the year it was launched, more than 100 US billionaires have joined Bill Gates' "The Giving Pledge" campaign, agreeing to donate more than 50% of their assets to charity. UBS and PwC expect The Giving Pledge and individual contributions to lead to an increase in philanthropy in all its forms over the next two decades.
Further information can be found here: www.ubs.com/billionaires
