The volatility of Great Wealth
The report shows that great wealth is very volatile, more than half of the billionaires of 1995 dropped out of the list over the last 20 years. But those who prevailed greatly increased their wealth. 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 1347 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 $11bn from $2.9bn in 1995, multiplying their assets by a factor of 3.8 and outperforming global GDP growth of just 2.5.
Three personality traits have been consistently identified as essential to entrepreneurial success for both genders – smart risk taking, ‘obsessive’ business focus and dogged determination.
Making wealth last
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.
Two-thirds of billionaires are over 60 years’ of age and face critical wealth transfer decisions. Over three quarters of current billionaires have two or more children. To avoid wealth dilution as the next generation and subsequent generations grow larger, a clear wealth preservation strategy is required to ensure the creation of long term lasting legacies.
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, topping their list of concerns over potential economic crises, and demonstrating the importance of robust tax and legal capabilities to manage these challenges.
As part of this, the report shows that clear governance structures are necessary to preserve and grow wealth through future generations. To ensure long-term success, managerial competence must override family ties; however, maintaining a strong identity has proven material to long-lasting billionaire family dynasties. This, together with establishing strong governance and a well-resourced family office, is a key factor in building lasting legacies.
