Posted on 09/06/2011 3:20:56 AM PDT by 1010RD
Ultra-rich people come in a variety of shapes, sizes and ages. But they can generally be divided into two distinct groups when it comes to what they do with their money - there are those who made it and those who inherited it.
" Inheritors are far less hungry than the ones who worked for it - Raymond Goss
Raymond Goss, investment specialist at Investec, says the first generation with serious money is usually inherently entrepreneurial and entirely focused on wealth creation - they are always on the alert for a great deal and are shrewd and incisive about the bigger picture and how to work it to their advantage.
They are sophisticated investors, demanding of information and insistent about getting the best service at the lowest prices.
Goss says while wealthy people with R30-million to 40-million might use one institution to deal with their financial affairs and investments, people with several hundred million rands' worth of investable assets frequently cherry-pick the best people for the job.
They might, for example, use Goldman Sachs to deal with their property portfolio, Investec to look after their equities and Absa to cover their bonds.
Goss says the children who inherit the money - or the grandchildren if their parents were very involved in the original business - are far less hungry than the ones who worked for it.
They are less likely to be as aggressive about how their money is invested and are far less rigorous about holding onto it and growing it, and are often quite prepared to dole it out liberally.
They are generally well travelled and well educated, but are not terribly insistent about knowing the ins and outs of the options they get offered and are more likely to get caught in Ponzi schemes and other nefarious deals than their parents or grandparents.
The saying "shirtsleeves to shirtsleeves in three generations" springs to mind and Carl Roothman, head of coverage at Absa Wealth, agrees: "About 90% of family fortunes don't survive the third generation," he says.
But, in the first generation at least, money generally begets money. Because the wealthy move in the same circles, they naturally share information about what they're doing and what people they know are doing in their own businesses, and this opens doors to investments and schemes that might only enter the public domain weeks or months later.
As well as being the first to know who's buying whom, whose stock is slipping and who the hottest new hedge fund manager is, the ultra-wealthy are also the first port of call for people needing funding to get businesses off the ground.
This means they are the people most likely to find the next Steve Jobs or Mark Shuttleworth in their reception. But there is a downside.
Too many options create complications. Roothman says the bulk of an ultra-rich person's wealth is usually invested in the business or businesses they created, often in the form of shares.
This is an arena the businessperson is most comfortable in - they know the business, the players and fully understand the industry. Another portion of their wealth is generally tied up in "lifestyle assets" like family homes, game farms and holiday houses.
These are emotional investments that aren't easily sold. For the remainder of the cash a bespoke diversified portfolio is drawn up according to the risk profile of the individual - as it is for all investors - and invested according to a long-term strategy agreed upon with their financial adviser.
While there are few investment instruments available to the very rich that Joe Public can't get exposure to, their time horizon is vastly longer, or even open ended.
Of course it doesn't hurt your investment success rate to have a team of people analysing the markets and keeping their eyes peeled for news or movement.
There are a few recent trends in how the wealthy invest.
Goss says the debt crises in Europe and the US have triggered a shift away from government bonds into corporate debt, particularly to US companies that are well capitalised and that have balance sheets in good shape.
Commodities are also prominent with gold heavily weighted in the current environment. Emerging markets, with an emphasis on Asia, are a good bet, as are big global companies like General Electric, and "Steady-Eddy" companies like Coca-Cola and Pfizer, which keep on trading whatever the global financial climate.
Taking money offshore has lost some of its allure in the global environment, with many people keeping their money in SA at least for the next 18 months to two years.
Alternative investments, such as private equity, hedge funds and derivatives - really "sexy" market-beating instruments - are less common than they were before the global economic crisis of 2008.
This is partly because of people not wanting their money "locked up" for extended periods especially in uncertain times when there is safety in liquidity and also because of the relative opacity of such schemes at a time that there is a premium on products that are straightforward.
But rich people don't get rich without taking risks, and when R20-million here or there isn't going to upset the entire long-term strategy, there's no reason not to have the odd flutter, especially when there's an opportunity to achieve gains not available to anyone else.
Leaving a legacy is often a vital issue for the very wealthy, such as Bill Gates and Warren Buffett who have set up charities to give away most of their wealth.
But protecting the fortune over the generations is another major concern, and financial advisers are required to either simplify or put in place structures like trusts and companies that will - hopefully - protect the assets into the future while providing for the great grandchildren of the original wealth creator.
NB: "About 90% of family fortunes don't survive the third generation," he says.
The Left is setting up the old rich v. poor and income inequality theme so that they can split our nation and re-elect Obama. The reality is that the 'rich' aren't the same from decade to decade and that there is active and volatile movement between the classes in America - from poor to rich to poor again. Exactly what you'd expect in a free and dynamic society.
Add to that an immigration picture in which the world's poor are admitted in droves and you'd expect income 'inequality' to rise. We're a wealthy nation and our poor own cars, air conditioners and live indoors.
Don't let the Left fool you.
Exodus 20:17 "Thou shalt not covet thy neighbor's house, thou shalt not covet thy neighbor's wife, nor his manservant, nor his maidservant, nor his ox, nor his ass, nor any thing that is thy neighbor's."
Pagans have not changed since the beginning of the fall of man.
They were vile then, and they are vile now.
Seriously?
LOL
Nothing new under the sun. God’s laws are eternal, plus his advice works.
The Daily Mail proved British pagans are the worst.
"About 90% of family fortunes don't survive the third generation," he says.Paris Hilton. Please pick up the Red Courtesy Phone.
Actually her parents were essentially cut off before she was born. Her net worth is not really all that much. Five or six million dollars. Yeah, that’s a bunch for you and me, but not so much for a “star.”
Actually her parents were essentially cut off before she was born. Her net worth is not really all that much. Five or six million dollars. Yeah, that’s a bunch for you and me, but not so much for a “star.”
Yes, the broke part is 100% correct.
The way I view money I had to be from RICH genes. . . . . . . .
It's like cow dung. (fertilizer) It only works if you spread it around. In piles it stinks. . . . . . . . .
My problem with the ultra rich in general, especially the NYC (figure of speech) liberal rich, is that they are mostly behind the open borders and illegal immigration policy that has allowed millions of poor often uneducated members of third world society into the USA. It doesn’t hurt them, but helps them.
They were directly responsible for the 1965 Immigration Act that turned us from an ethically and culturally European based nation to what we currently have. Google: Who was behind the 1965 Immigration Act?. Their goal has always been cheap labor, increased ethnic diversity to reduce nationalism, and the dumbing down of the masses.
While the rest of us must face and are exposed to the problems that this has created....including budget shortfalls, none of this is a problem for the ultra rich. They have their own bubble world with its own security; have no need for social security; or no need to ever wait in a hospital emergency room; and they don’t live or fly amongst the masses.
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