The Changing Face of Wealth

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The number of seriously wealthy people globally continues to rise, but it’s become increasingly difficult to pigeon-hole them. Those creating and selling products and experiences to them need to understand the nuances of the market.

Spending on luxury categories such as travel, fashion, art and jewellery may be growing, but the priorities of today’s wealthy are constantly shifting. In today’s connected world — and one where the needs and desires of the wealthy are becoming much more nuanced — it’s also becoming increasingly difficult to segment the ultra-wealthy.

When we look at the world’s ultra wealthy, we are talking about 211,275 ultra high net worth individuals (UHNWIs) which Wealth-X defines as having more than US$30 million in net assets. But they represent just 0.004% of the world’s population.

While still making up just a tiny proportion of the globe, look back 20 years to 1995 and that figure was just 84,974, giving a growth of 150% since then. With the exceptions of the crisis in the early 2000s and the global financial crash of 2009, growth has been unabated.

During these past 20 years, the geographic axis of wealth creation has of course shifted dramatically. In 1995, if we were to imagine all of the world’s millionaires standing flat on a horizontal map like stacks of coins on a tray, the centre of gravity – or balancing point – would have been just off the coast of New York. This was due to the domination of Americans in the ranks of the wealthy with only a small proportion of Europeans and others providing any counter balance.

But between 1995 and 2005, the centre of gravity shifted at a glacial pace towards London, which became the hub of global wealth. However when the crisis of 2009 happened, these traditional Western wealth centres took a dramatic hit and instead it was the emerging economies of Asia and the Middle East that really began to outpace traditional wealth hubs in terms of wealth creation and in the number of ultra wealthy individuals.

Important events over the past 12 months and next 12 months — including plummeting oil prices, stock market woes, the refugee crisis in Europe, the US elections and a potential Brexit — have created a period of both macro and political uncertainty.

Although Wealth-X estimates that by 2020 there will be a 35% growth in the total number of global UHNWIs, year-on-year growth will slow. The fastest growth however will continue to come from Asia and the Middle East with a corresponding increase in the number of social and cultural events such as Art Basel Hong Kong, the Singapore Yacht Show and China Rendez-Vous, reflecting the continued increase in wealth within the region.

Who’s who?

Not so long ago, segmenting the wealthy appeared to be quite simplistic: old versus new.

“Old” meant individuals, very often from the West, who were either second or third generation inheritors who tended to be drawn to more discreet purchases and did not seek heavily branded or logoed items. Meanwhile, newly self-made multi-millionaires came from emerging markets, with “new” wealth often appearing to be concerned with obvious badges of luxury and wanting to show off status through extravagant purchases across luxury categories.

Today, due to the rapid rise in communications and innovations in technology, the lines between old and new are rapidly blurring; the face of wealth is becoming much more nuanced. Although spending in luxury categories is still growing, priorities of UHNWIs are changing.

We continue to see an increased desire for brands that are committed to philanthropy and social impact such as Sarah’s Bag, which works with local artisans to provide a means of rehabilitation and a craft to underprivileged women, and Brunello Cucinelli, whose cashmere sweaters can sell for US$3,000 but who has used his position to give back in many projects, including reviving the Medieval village of Solomeo.

Due to the financial uncertainty around the world, we also see growing interest in luxury categories considered as safe asset allocations such as fine art and collectibles.

Record-breaking prices at auctions are being fetched for exclusive items with a storied past that will continue to appreciate in value. In February, a 1957 Ferrari 335 S Spider Scaglietti broke auction sale records for a racing car when it reached £24.7 million.

Finally, there is a growing desire to ensure value is found in the purchases being made. Wealth-X estimates that 64% of the world’s UHNW population is now from a self-made/entrepreneurial endeavour.

The value of money is known and appreciated. The world’s wealthy, even though they are willing to pay considerable sums for experiences, products and services, do not want to feel that they are being taken advantage of.

This article was first published in TTG Luxury.

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