Dispatch №4

Billionaires are outnumbered nearly 10-to-1 by a fast-growing group of ultra-high-net-worth movers boasting $100 million or more in assets. Growing class of super-rich tech titans, financiers, multinational CEOs and heirs are not only traversing the globe to ski and fly-fish, but also to establish residency or citizenship in multiple countries. Centi-millionaires are the new global citizens — and multinational living is now key to their wealth management strategies. And keep in mind the shift in influence and control over the largest share of U.S. personal wealth — $84 trillion is expected to pass primarily from the baby boomers to Gen X and millennials through 2045. That could have significant implications for families, wealth managers, charitable organizations and financial markets.

Topic of the week:
Wealthy Americans and Global Centi-Millionaires

Bank of America released the 2022 Bank of America Private Bank Study of Wealthy Americans, which found significant generational differences in approaches to investing, giving and wealth planning. The findings show that the shift in influence and control over the largest share of U.S. personal wealth — $84 trillion is expected to pass primarily from the baby boomers to Gen X and millennials through 2045 — could have significant implications for families, wealth managers, charitable organizations and financial markets going forward.

Younger generations engaging in new investment strategies: 75% of investors between the ages of 21 and 42, compared to 32% of investors over age 43, do not think it’s possible to achieve above-average returns solely with traditional stocks and bonds.

Eighty percent of young investors are looking to alternative investments, such as private equity, commodities, real estate, and other tangible assets. They allocate three times more of their investment portfolios to alternative strategies (16%) and half as much to stocks (25%) than older investors (5% and 55%, respectively).
Whereas investors over the age of 43 maintain that U.S. equities offer the best opportunity for growth in the future, young investors think the greatest growth opportunities lie somewhere in the transformative digital asset space. Nearly half (47%) have cryptocurrency holdings.
Ownership of sustainable investments have doubled since 2018, from 12% to 26% of wealthy people. Nearly three-quarters (73%) of millennials compared to 21% of older respondents use sustainable investments, which 72% of all survey respondents agree can make a positive impact in the world.

The family wealth talk is happening but starts late and doesn’t equate to financial preparedness: 68% of parents surveyed say they have talked with their children about their family’s wealth, including how much money the next generation stands to inherit.

On average, parents don’t initiate conversations about family wealth and the transfer of wealth until their children are at least 27 years old.
Only 51% of parents think their children are well prepared to handle family money or any inheritance they stand to receive.
Fifty-eight percent of respondents have limited or no understanding of trusts. Among those without a trust, the younger generation is more inclined to consider using them in their estate plans (91%) than older generations (56%).

Different paths to a better world: 82% of parents who are philanthropically engaged believe that they and their children share the same philanthropic vision and goals. However, just 41% of older generations think the next generation’s philanthropic efforts will be equally effective as their own. The younger generation is more optimistic about their ability to achieve philanthropic goals – 87% believe their giving will be more effective than earlier generations.

When making charitable giving decisions, 76% of respondents, including 88% of women, prefer to establish their own philanthropic identity apart from their family.
Just half (51%) of all donors support the same causes as their parents.
Younger generations are far more likely to gift through a structured vehicle, including a donor-advised fund (30%), charitable trust (51%), and/or family foundation (14%) than older generations do (15%, 14%, and 4%, respectively).

Art as an asset: While most art owners collect for the aesthetic value (63%) and only a small number plan to sell it quickly for profit (9%), art is a dynamic market:

Sixty percent of art collectors have purchased a piece in the past 12 months.
A near equal number (58%) plan to sell a valuable work in the next 12 months.

A larger role for wealth advisors to meet people’s needs: While satisfaction with wealth advisors is high — 97% of survey respondents are satisfied, including 74% who are very satisfied with their advisor relationship — the survey found gaps between the topics people want to discuss with their advisor and the conversations taking place. The three topics high net worth people most want to discuss with their advisor today are:

Tax planning (88%)
Estate planning (81%)
Investing in an inflationary environment and best use of funds amidst rising-interest rate (both 80%)

And while billionaires may grab most of the news headlines, but a new landmark report from investment advisory firm Henley & Partners with the exclusive data and insights from global wealth intelligence firm New World Wealth reveals that they’re outnumbered nearly 10-to-1 by a fast-growing group of ultra-high-net-worth movers boasting $100 million or more in assets. The first global study of the world’s 25,490 centi-millionaires pulls back the curtain on a growing class of super-rich tech titans, financiers, multinational CEOs and heirs who are not only traversing the globe to ski and fly-fish, but also to establish residency or citizenship in multiple countries. Centi-millionaires are the new global citizens—and multinational living is now key to their wealth management strategies.

Where can you find the world’s centi-millionaires?

The USA is home to an astonishing 38% (9,730) of global centi-millionaires, despite constituting only 4% of the world’s total human population. The big emerging markets of China and India follow in 2nd and 3rd place, with populations of 2,021 and 1,132 centi-millionaires, respectively. They rank significantly higher than the main European markets by this measure, with the UK in 4th place (with 968 centi-millionaires) followed very closely by Germany in 5th place (with 966).

Punching above its weight, Switzerland ranks 6^th on the list with 808 inhabitants worth over USD 100 million despite its small size and population. Japan (765), Canada (541), Australia (463), and finally Russia (435) make up the rest of the top 10 countries for centi-millionaires. Other major economies such as France and Italy just miss out, with 380 and 298 centi-millionaires, respectively, while South Africa is the top-ranked country on the African continent, with 92 resident centi-millionaires, holding 27th position globally.

Andrew Amoils, Head of Research at New World Wealth, says the centi-millionaires are arguably the most important and relevant top-end global wealth band currently:

“In many emerging markets and smaller countries, there are relatively few billionaires, which makes the billionaire wealth band largely irrelevant. However, many of these same countries have large numbers of centi-millionaires. For instance, Kenya has no billionaires, but it has 14 centi-millionaires. Malta has only 2 billionaires but 26 centi-millionaires. The centi-millionaire wealth band is therefore a far more accurate reflection of the ‘super-wealthy’ community in these countries.”

Who are the centi-millionaires, and how did they make their money?

According to The Centi-Millionaire Report, there appears to be no set path to attaining centi-millionaire status; some inherited their wealth while others worked their way up to the USD 100 million mark. However, the report does point out some notable generational differences. While a growing number of younger entrepreneurs who founded successful tech companies are newcomers to the club, Baby Boomers still tend to dominate the centi-millionaire circle despite many now cashing in their stock options and selling their businesses.

Misha Glenny, financial journalist, author, and contributor to the report, points out, unsurprisingly, that white males over the age of 55 from the US and Europe make up the majority of the cohort, but these demographics are shifting:

“At around 57%, the growth of centi-millionaires in Asia will be twice that of Europe and the US over the next decade. Concentrated primarily in China and India, the centi-millionaires in these countries are set to eclipse their European and American peers.”

Booming markets for centi-millionaires

The fastest growing market for centi-millionaires over the next decade is forecast to be Vietnam, with an astonishing 95% growth rate predicted for this emerging Asian manufacturing hub, with strong growth expected in the real estate, technology, and financial services sectors. India is next in line with an anticipated 80% growth rate in individuals worth over USD 100 million by 2032. Mauritius has recently emerged as a hot spot for migrating centi-millionaires, with growth of 75% predicted for this safe, business-friendly African island nation. Three other countries on the continent make it into the top league of fastest growing centi-millionaire markets – in the next decade — Rwanda (70%), Uganda (65%), and Kenya (55%) — with New Zealand (72%) and Australia (60%) also forecast to enjoy exceptional growth.

Author, financial writer, and global investment expert Jeff Opdyke says that ultimately, centi-millionaires face the same issue as all investors — they just have more wealth to protect:

“A basic tenet of wealth preservation in the 21^st century, regardless of wallet size, is diversifying away from the risk of having most or all of one’s assets exposed to a single currency, a single government, and a single legal, taxation, and financial system.” He adds that “in an era where currencies are burdened by the debts and economic weaknesses of the countries they represent, it doesn’t take much to undermine the status quo. Just look at the British pound. In the span of less than two months, it lost nearly 30% of its value relative to the dollar. That’s a major Western currency. The same can easily happen to the dollar.”

Centi-millionaires seeking global citizenship

Henley & Partners has seen a significant spike in interest from wealthy US nationals, with Americans now forming the largest client base when it comes to residence and citizenship by investment program enquiries and applications.

Dominic Volek, Group Head of Private Clients at Henley & Partners, says the firm is opening three new offices in Los Angeles, Miami, and New York to meet the growing demand:

“The super-rich are increasingly pursuing a domicile diversification strategy to broaden their investment opportunities and business operations and achieve location fluidity to safeguard against risks ranging from currency fluctuations to geopolitical conflict, climate change, and viral outbreaks. They want to create a portfolio of complementary residences and citizenships that unlocks the world by providing them with personal access rights to a range of different cities, countries, and jurisdictions.”

Summaries

Goldman Sachs is merging its asset management and private wealth businesses

Who: Goldman Sachs Group Inc.

What: The bank will combine trading and investment banking into one unit; asset management, wealth management and consumer businesses into another; and its digital offerings in a third. As part of the reorganization, Goldman’s retail banking platform, Marcus, will be divided into two groups. The platform’s consumer-focused operations will fall under Goldman’s asset- and wealth-management unit. A subset of Marcus’ business that deals with corporate clients will become a stand-alone entity called Platform Solutions.

Where: USA

When: 17^th of October

Why:

Though it has been a reliable trading powerhouse for decades, Goldman has struggled to keep up with peers’ moves in attracting new money from wealthy individual clients, and Marcus has not won the customer base that its creators expected when it was opened in 2016.
Cost overruns and missed profitability goals have set off a rising tide of discontent inside the firm, questions from regulators (Bank’s consumer products are under regulatory scrutiny from the Federal Reserve and the Consumer Financial Protection Bureau (CFPB)) and the dismay of shareholders, leading up to a reorienting of those operations and the latest group revamp.
The latest changes come after the asset management arm’s revenues dropped 71% in the year to date.

David Solomon, the bank’s chief executive, has been blunt: remaking Goldman’s culture and practices into something more streamlined and better oriented toward a future in which technology is likely to sap big banks’ ability to make money as intermediaries.
The reshuffle comes as the Wall Street titan seeks to boost its income from fee-based businesses.
Mr. Solomon said the restructuring would help Goldman achieve three goals: increasing management fees, enlarging the share of Wall Street business it captures from rivals and expanding its digital platform offerings to serve the largest clients with the most complex needs.
Managing wealthy people’s money and overseeing funds for pensions and other deep-pocketed institutions is more profitable than other financial services, and it usually doesn’t put the firm’s balance sheet at risk. And many investors view traditional consumer banking — taking deposits and making loans — as more predictable.
Goldman has invested heavily in building its own consumer bank, and folding the unit into its asset- and wealth-management arm should create more opportunities to offer banking services to wealthy individuals. Earlier this year, the bank said it aimed to bring in $10bn in asset and wealth-management fees by 2024.
This is also a way for Goldman Sachs to keep its management team on its toes and to reinforce the intensity that defines Goldman.

HSBC Expands Private Banking Business to Tap Wealthy UAE and Chengdu & Hangzhou Clients

Who: HSBC Private Banking

What: HSBC Bank Middle East Global Private Banking will be focused on clients in UAE with investable assets of over $2 million.

Where: UAE and Chengdu & Hangzhou (Western China)

When: UAE – 19^th of October, Chengdu & Hangzhou – 10^th of October

Why:

HSBC is expanding its number of international private wealth centers. HSBC network includes centers in Switzerland, Singapore, the UK, Luxembourg, Guernsey, Hong Kong and the US.
The UAE will attract the biggest share of private wealth globally this year with a net inflow of 4,000 millionaires, according to the immigration consultancy Henley & Partners. Foreign residents make up more than 80% of the population of the oil-rich UAE. A report from Knight Frank revealed that the number of HNW individuals with over $1m investable asset in the UAE is expected to grow by 39% by 2026 to over 228,000 people from 163,000 last year. UAE’s ultra-high net worth population having assets over $30m is estimated to increase by 21% during the same period.
Earlier in May 2022, HSBC Global Private Banking announced its expansion plan in mainland China, comprehensively scaling up its presence in the country. HSBC China continues to invest in its digital platform and is the first international bank in mainland China to enable wealth and investment services via mobile banking app for private banking clients.
HSBC China head of global private banking Jackie Mau said: “We see huge growth potential for the wealth management market in mainland China, driven both by the economically active coastal areas and the fast-developing inland areas, which are fundamental to the long-term development of our wealth business. As the provincial capital of Sichuan, Chengdu is an important central city and international gateway hub in Western China. The accumulation of personal wealth in the city has driven robust demand for diversified asset allocation and international wealth management. As a new class of HNW and UHNW individuals emerges from the vigorous development of Hangzhou’s digital economy, demand for international wealth management has also grown significantly. By setting up our private banking business in Chengdu and Hangzhou, we will be able to serve our local clients more closely and enhance HSBC’s wealth management footprint outside the four major cities of Beijing, Shanghai, Guangzhou and Shenzhen, adding momentum to further business growth.”

Singapore’s Endowus is expanding its wealth management business

Who: Endowus, the Singapore-based digital wealth advisory platform, and Carret Private Investments Limited, a Hong Kong-based wealth manager and multi-family office that serves ultra-high-net-worth individuals, families, trusts and charitable organisations.

What: Endowus has completed its acquisition of a majority stake in Carret Private Investments Limited. The combined Endowus Group client assets surpassed $4 billion as of end-first half of 2022. Both firms will continue to be operated under the individual Endowus and Carret Private brands. The group’s expertise in technology, talent, systematic wealth advice, and institutional investing across the public and private markets, as well as alternatives are complementary to each other.

Where: Singapore, Hong Kong

When: 17^th of October

Why:

Acquisition comes at the perfect time as the region experiences a substantial growth in independent wealth management.
Endowus intends to serve the needs of Hong Kong investors and demonstrates its greater ambition to serve the regional wealth markets.
With this acquisition, the Endowus group of companies will now vertically integrate to serve the needs of different client segments, and to provide superior investment and advisory solutions as one of Asia’s largest independent wealth advisors across both digital and offline players.
The Endowus Group, through Carret Private’s minority shareholding, will also have a strategic partnership with Singapore-based Lumen Capital Investors (Lumen), a Monetary Authority of Singapore (MAS)-licensed, Singapore-based wealth advisor and multi-family office.
The combination of Endowus, Carret Private and the partnership with Lumen will allow Endowus to scale and grow faster as Carret Private has built very broad client base in Asia.

Links to consider

Infographics

Quotes

Books that caught our attention this week

Money: The True Story of a Made-Up Thing

by Jacob Goldstein

At the heart of the story are the fringe thinkers and world leaders who reimagined money. Kublai Khan, the Mongol emperor, created paper money backed by nothing, centuries before it appeared in the west. John Law, a professional gambler and convicted murderer, brought modern money to France (and destroyed the country’s economy). The cypherpunks, a group of radical libertarian computer programmers, paved the way for bitcoin. One thing they all realized: what counts as money (and what doesn’t) is the result of choices we make, and those choices have a profound effect on who gets more stuff and who gets less, who gets to take risks when times are good, and who gets screwed when things go bad.

Publisher: ‎Hachette Books (October 4, 2022)

Language: ‎English

Paperback: ‎272 pages

Amazon

The Art of Money: An Ultimate Guide To Pursuing A More Prosperous And Happier Life

by Mike Feng Zheng

Money-investing, personal finance, and lifestyle choices — is typically taught as math-based knowledge, with data and formulas guiding us. People do not make financial decisions on spreadsheets in the real world. They make them on the spur of the moment or in Starbucks, where personal beliefs, your unique worldview, ego, vanity, personality, and motivations are all scrambled together. Author Mike Feng Zheng shares numerous stories, examples, and illustrations in The Art of Money that explore lifestyles influencing people’s money management decisions. Mike also explains how everyone can be their financial advisor and fund manager and why we should all take complete control of our investments rather than relying on others. Please visit www.mikefengzheng.net to read more of Mike’s blogs.

Publisher: ‎Independently published (September 2, 2022)

Language: ‎English

Hardcover: ‎204 pages

Amazon

Photos

Rolls-Royce has unveiled its first all-electric car, the Spectre coupe, that comes at the starting price tag of $413,000, as the luxury brand promises to go fully electric by 2030.

According to Rolls-Royce, Spectre is its first car to be conceived and engineered from the beginning as an electric vehicle, and signals that electric technology has reached the stage where it is powerful enough for its luxury vehicles.

Rolls-Royce CEO Torsten Müller-Ötvös described the two-door coupe as being “the most perfect product that Rolls-Royce has ever produced.”

“Spectre possesses all the qualities that have secured the Rolls-Royce legend,” said Müller-Ötvös. “It is perfectly in tune with the sensibilities of our time. It states the direction for the future of our marque and perfectly answers a call from the most discerning individuals in the world to elevate the electric motor car experience.”

Set to ship to customers starting in the fourth quarter of 2023, Spectre is said to be a “spiritual successor” to Rolls-Royce’s current Phantom coupe, particularly in its “indulgent proportions” and headlight layout.

Its exterior is partially inspired by modern yachts in its lines, tapering forms and its use of reflection to bring the surrounding environment into the design and add to a sense of fluid motion when the car is on the road.

The design of the interior is focused on illuminated surfaces that draw inspiration from the night sky. The options for customers include Rolls Royce’s Starlight Doors, which incorporate 5,876 softly illuminated “stars”, and Illuminated Fascia, which similarly light up the passenger side of the dashboard.

The car’s functions are managed via a digital dashboard that Rolls-Royce calls Spirit, while an app called Whispers allows users to interact with car remotely.

The carmaker says the final power, acceleration and range figures are still being refined but preliminary data shows a range of 520 kilometres and acceleration of 0 to 60 miles per hour in 4.4 seconds (0-100km/h in 4.5 seconds) from its 430-kilowatt-hour powertrain.

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