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Billionaire wealth is not guaranteed forever

New research conducted over two decades across the 14 largest billionaire markets in the world found stark differences between the billionaires “of old” and today

Mar 22, 2016 @ 12:01 am

By John Mathews

Getting to the top is hard, but staying there is even harder. In the world of wealth creation, becoming a billionaire is a substantial feat, but staying a billionaire over long periods of time can be an even tougher enterprise.

As a UBS-PwC study of billionaires over the past 20 years found, billionaire wealth is not guaranteed forever. “The Changing Faces of Billionaires,” based on surveys conducted over two decades across the 14 largest billionaire markets in the world, including 1,300 billionaires in 2015, found stark differences between the billionaires “of old” and those of today. These changes reflect the evolution of global society over the past two decades: Innovation and competition are at all-time highs, geopolitical tensions are pervasive, and the world is increasingly interconnected, creating unique opportunities, as well as challenges, to gaining — and maintaining — that elusive, exclusive billionaire status.

NEW FACES OF BILLIONAIRE WEALTH

More than 1,000 people became billionaires over the last 20 years, but a significant number of those who had been billionaires at the beginning of that time period lost that status: Fewer than half of the billionaires UBS and PwC surveyed in 1995 were still billionaires by 2014. But for the ones that held on, the reward was high. They grew their assets by an average of nearly $3 billion, outperforming both equity markets and global GDP.

The demographics of billionaires have altered dramatically; now the population more closely resembles the citizens of the world. Billionaires in 2016 are more diverse in terms of age (many are younger), gender (more females are gaining billionaire status) and nationality (sources of significant wealth growth are shifting farther East).

FEMALE BILLIONAIRES ARE TAKING OVER

Since 1995, the female billionaire population has exploded, with a growth rate eclipsing that of their male counterparts. In that time period, the number of female billionaires increased 27% faster than the number of males, at a factor of 6.6 compared with 5.2 for men. This growth is most apparent in Asia, where female billionaires now comprise nearly one fifth of the global female billionaire population. They are also younger than their global counterparts.

Female billionaires are becoming more powerful and aggressively driving wealth creation in family businesses. One out of two female billionaires in the U.S., nearly two out of three in Europe and almost all female billionaires in Asia are active wealth creators today. But family businesses are not the sole source of female billionaire growth; many are striking out on their own with great success. In Asia, already half of female billionaires are self-made and we expect more female billionaires to be created through self-made fortunes in the future.

We also anticipate that in the future, female billionaires will use their status to promote good, particularly in the U.S. and Europe, as leaders in philanthropy.

MAINTAINING WEALTH AND AVOIDING TRAPS

In terms of becoming a billionaire, our research identified three personality traits essential to entrepreneurial success for both men and women: smart risk taking, an 'obsessive' business focus and determination. It is with these three core tools that most billionaires were able to build, persevere through tough periods and seize opportunities no one else saw to grow their wealth.

But, as mentioned earlier, great wealth is fleeting. With global market volatility persisting, financial regulation evolving, and two-thirds of the world's billionaires being over the age of 60, the difficulty of maintaining wealth over the long term is growing.

With more than three-quarters of current billionaires having two or more children, a wealth preservation strategy is critical for their future. UBS and PwC found that the keys to making wealth last in multigenerational billionaire families whose wealth comes from a family business are to keep intact all or part of the core business, preserve the family identity, and put the right people and infrastructure in place.

With continued change and challenges ahead, it may be time to amend the old adage: The rich don't always get richer.

John Mathews is head of private wealth management at UBS Wealth Management Americas, which serves ultra-high net worth clients.

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