A global survey by UBS and PwC pinpoints the drivers of billionaires' wealth and the different trends in terms of how young some of these persons are and what their priorities are.

Financial services is the single most important driver of billionaires’ fortunes in the US, a new study shows, while also pointing to how age profiles mean wealth protection and transfer are pressing concerns for this population. The financials sector accounted for 30 per cent of the wealth of this group, a UBS/PricewaterhouseCoopers survey has found.

The findings come from the 2015 Billionaires Report, Billionaires: Master architects of great wealth and lasting legacies report, which is based on a survey of 1,300 billionaires and used data from a period from 1995 to 2014 in 14 of the largest markets for such persons, accounting for 75 per cent of such global billionaire wealth. Additionally, UBS and PwC conducted face-to-face interviews with more than 30 billionaires.

The wealth creation process is concentrated among relatively few people: the report found that 917 self-made billionaires created more than $3.6 billion of wealth globally. Many of these persons started out young, with 23 per cent launching their first business ventures before they were 30 years’ old and a total of 68 per cent did so before they reached 40.

“We currently live in an age of opportunity and accelerated wealth creation, similar to the Gilded Age of the late 19th and early 20th Centuries, when entrepreneurship in the US and Europe drove the first wave of innovation in modern history,” Josef Stadler, head of the UBS global ultra high net worth business, said. “But wealth generation is cyclical, and over the last few decades we have benefited from being on a strong arc of the cycle,” he said.

In a call with journalists, UBS managers pointed out that the UHNW segment is the fastest growing area of wealth management – and the most profitable. A number of wealth management players – UBS being one of them – have bulked up resources and staff to focus more on this area in recent years.

Different routes to the top

The report noted the different journeys that today’s billionaires take depending on where they are based. In the US, for example, the financial services sector was the top manufacturer of self-made billionaires (30 per cent), the report noted. The wealth per billionaire in the sector averages $4.5 billion.

By contrast, European (49.5 per cent) and Asian (20 per cent) self-made billionaires were largely created by the consumer industry in the last two decades. With an average wealth of $5.7 billion, European entrepreneurs are wealthier than the Asian ones ($3.2 billion) by far.

“However, the self-made billionaire population in Asia is unique because wealth creation in the region is more recent than in other parts of the world. Asian billionaires are generally younger than billionaires elsewhere, having an average age of 57, which is 10 years junior to US and European billionaires,” the report said.

The age profile of many billionaires – more than two-thirds of those in the sample are more than 60 years’ old – puts issues around wealth protection, transfer and legacy at the front of their minds, it added.

“Billionaire wealth creation over the last two decades has been largely correlated to the financial markets, which have the ability to slow – or worse, turn – in an instant. Therefore, strategic planning is paramount to wealth preservation, whether it be via family offices, personal investing or any other means,” Michael Spellacy, global wealth leader at PwC US, said.

It emerged that most US and European self-made billionaires choose to keep their businesses that built their wealth (60 per cent), while one-third (30 per cent) sell pieces of their business via an initial public offering or trade sale, while 10 per cent cash out. The majority of self-made billionaires that cash out become financial investors, investing on their own, seeking specific risk-return goals, and/or delegating investments to a family office or personal financial advisor.

In other findings, Europe and Asia, billionaires are most likely to create a business dynasty, with 57 per cent of European and 56 per cent of Asian billionaire families, respectively, taking over the family business when the patriarch/founder retires. This scenario is far less likely in the US (36 per cent).

Legacy and giving

Chiming with other reports, the UBS/PwC analysis found that today’s billionaires have a growing interest in philanthropy, supporting education, health and humanitarian causes around the world. In particular, they tend to be focused on efforts that provide tangible, measurable results: knowing how many lives have been impacted by their donations, seeing improved health or living conditions, or financing of various causes through micro-lending.