A report of global trends among UHNW individuals teases out their regional differences - and points of similarity.

Asia-Pacific billionaires came by their fortunes more recently than is typically the case for their American and European peers and more of them sprang from poverty, colouring how they approach the transfer and protection of their assets, a survey by UBS and PricewaterhouseCoopers shows.

The firms launched their 2015 Billionaires Report, called Billionaires: Master architects of great wealth and lasting legacies, seeking to drill down into the differences between billionaires’ wealth creation, preservation, transfer and philanthropy practices across major economic regions.

The Asian distinctions are particularly notable, the report said, reiterating an oft-repeated line on how much of the wealth creation dynamic has shifted eastward.

"As Asian billionaire families grow in size and complexity, succession planning and the engagement of the second generation have become increasingly important components in establishing a lasting family legacy," Francis Liu, regional market manager, UHNW Greater China, UBS Wealth Management, said.

“Asia’s billionaires make up 36 per cent of self-made billionaire wealth, overtaking Europe for the first time and second only to the US. Looking forward, we expect the region to be the centre of new billionaire wealth creation. If anybody has any doubt, look no further than the fact that one new billionaire was created almost every week in China in the first quarter,” Antoinette Hoon, private banking advisory services partner, PwC Hong Kong, said in the same report.

“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. In addition, a significant proportion grew up in poverty (25 per cent), compared to 8 per cent in the US and 6 per cent in Europe,” the report, which surveyed 1,300 billionaires, said.

“As a result of these factors, UBS and PwC anticipate Asia to be the centre of new billionaire wealth creation going forward,” it continued.

The report analysed data from 1995 to 2014 across the 14 largest billionaire markets, accounting for 75 per cent of global billionaire wealth. Additionally, UBS and PwC conducted face-to-face interviews with more than 30 such people.

Concentration
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 doing 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, the 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, the report continued.

“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.

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, and 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 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), the report continued.

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 various causes through micro-lending.