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June 10, 2001 at 08:00 PM
The Ultra-Affluents’ Core Characteristics That Advisors Should Know
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One billionaire commands in excess of $1,000 million in net worth, which can easily generate $50 million in annual pre-tax investment income.
Put all the billionaires together and their total worth exceeds the combined income of the bottom 60% of the world population in 2000. Without question, private wealth is alluring and intimidating and intoxicating to those who possess it and to those who strive for it–especially the truly rarified private wealth.
The last two decades have produced the greatest growth in private wealth creation that the world has ever seen. Not only are more people wealthy, but the wealthy are wealthier. Even when we adjust for inflation as well as the decline in the stock market, the wealthy of today are richer than in any time in history.
The wealth of today overshadows the wealth of generations past. Nowhere is this truer than in the United States. The American Dream is one of private wealth, and it is thriving.
The Wealth of the Ultra-Affluent
The first question concerns the amount of wealth controlled by the Ultra-Affluent. Just how much money are we talking about? In order to estimate this number and the scope of private wealth in the United States, we developed an analytic model. This model is based on proprietary data as well as data from other institutions, among them Merrill Lynch, The Spectrem Group, Cornell University, The Essenes Trust, The Soloton Society and The International Association for Research in Income and Wealth.
The model enables us to create numerous possible estimates of the amount of wealth the Ultra-Affluent control. As with all models, we were able to generate range of estimates: a best estimate, a low-end estimate and a high-end estimate. These three estimates enable us to bracket the aggregate wealth of the Ultra-Affluent. (See chart.)
To begin our analytic process, we defined the Ultra-Affluent as a family unit with a net worth of $25 million or more. We are focusing on what most professional advisors and financial institutions would consider significant private wealth. Included in this calculation are billionaires (however, in the model we capped their wealth at $1.2 billion so these few extremely wealthy families would not skew the data; this yields a more conservative result).
With these methodological decisions, the best estimate from the model is that the wealth the Ultra-Affluent commands is $11.9 trillion. The low-end estimate puts the combined net worth of the Ultra-Affluent at $8.4 trillion, while the high-end estimate is $13.8 trillion.
Clearly, a market that is between $8.4 trillion and $13.8 trillion is a very attractive market for everyone in the financial services industry.
The Core Characteristics of the Ultra-Affluent
This new market, generated by the robust economy of the recent past, has become the number one target of advanced financial advisors. Like every other market, however, this one requires a particular skill set. In order to be successful with the Ultra-Affluent, producers must understand them intimately. Anyone wanting to be successful must understand the core characteristics of the Ultra-Affluent.
The same model that enabled us to estimate the wealth controlled by the Ultra-Affluent in conjunction with assessments of a range of professional advisors working with these well-heeled families allows us to profile the core characteristics of this group. Four core characteristics form a conceptual framework advisors can use to think about all the factors important in working with the Ultra-Affluent.
These core characteristics are shared by other people to a greater or lesser extent. They are, however, emblematic of the Ultra-Affluent. They strongly influence the attitudes and behaviors of the Ultra-Affluent and are more pronounced with them.
