Love money and your family
Bernard Madoff would probably have not gotten this far if he had lived in Asia. According to a recent study by Forbes Insights, Asian Ultra High Net Worth Individuals (UHNWIs) don’t entrust their money to one single private banker or investment scheme. Rather, they prefer to diversify by choosing conservative investments and committing their fortune to several private bankers or persons in a position of trust within their company.
Finance in particular is a business that is characterised by family involvement. 64% of UHNWIs involved in the finance business come from an influential family background. In Hong Kong, 75% of the surveyed fortunes of UHNWIs are family fortunes. With a growth of 23%, they performed much better than fortunes where families are not involved, which have grown by only 14.5% since 2010. In Hong Kong, 65% of this fortune is self-made, so as far as this is concerned, Bernard Madoff would have been in good hands there.
Family ties amongst UHNWIs vary from one region to another and are impacted by both cultural and economic tradition. The entrepreneurial spirit in China and Russia, for instance, is significantly more pronounced than in Europe. This can easily be explained by the communist political system, which made it practically impossible to build huge personal fortunes at the time. Inherited fortunes are almost non-existent. In Russia, 81% of fortunes are not owned by a family - in China, this figure is 66.5%. However, the financial crisis has had a dampening effect on Chinese growth: while the growth rate for self-made fortunes reached an enviable 152.8% in 2008, it has dropped to 3.1% since 2010.
In India and the Middle East, it is the cultural tradition that determines fortune. Fortune stays within the family and the highest priority is to enable a good education for the generations to come. The self-made aspect plays an important role in India, whereas in the Middle East, 52% of fortunes are inherited and continue to grow.
Regarding the Middle East, a differentiation must be made between Kuwait and Lebanon, which are comparable to India in terms of percentage of family-owned business (India: 73%, Kuwait: 100%, Lebanon: 67%) and the UAE and Saudi Arabia. The latter two have to be added to the more mature European markets, where inheritance and its growth makes up a great deal of fortune. Germany is the country with the highest percentage of inherited fortunes: 35%. The share between family and non-family involvement is almost balanced. Whereas in France, only 14.3% of fortune is inherited, it is also true that these families stick to their business very closely: 64% is family business. Political stability and free markets have clearly contributed to this situation.
The UK is stepping out of line amongst European countries surveyed by Forbes. Its Anglo-Saxon mentality of unbroken entrepreneurial spirit explains that 81% of fortune is self-made and to a large part without family involvement (75%). The UK even outperforms the USA, known as the land of “from rags to riches” opportunities. In the United States, “only” 69% of all fortunes are self-made and families are involved in 58% of cases. EK