They may have more money than the rest of us, but it seems that wealthy people have plenty of things to keep them awake at night
Prioritising the goods and services we buy is an everyday part of all our lives, but for most of us there’s one restriction that tops them all – money. While we all might like to shop at M&S Food, there are times when our pockets will only stretch to Aldi.
Whether buying a new car, tonight’s meal or choosing where to go on holiday, the amount of money we have is a key determinant of our choices. And this is just one factor that affects the lives of us mere mortals. We’re also faced with decisions around job satisfaction and progression, as well as whether our children will get into their first-choice school.
It’s easy to gaze with envy at wealthy individuals for whom money is much less of an issue – in fact, for many, it could be seen as irrelevant. Yet, while having a bucketload of cash might mean you’re not concerned by price tags, that doesn’t mean you don’t have concerns about how you navigate your everyday life. Having money might make life easier, but it certainly doesn’t make it simple.
So, just what is keeping wealthy individuals up at night – and what are their key priorities in life, aside from business and wealth management? In its Wealth Report 2017, Knight Frank focused on three key areas – the factors influencing decisions around where to live, children’s education and travel.
Knight Frank found that the highest priorities for ultra-high-net-worth individuals (UHNWIs) when choosing somewhere to live were lifestyle and personal security – both of which bode well for the Channel Islands in their efforts to attract wealthy residents.
They are factors that could have influenced Roman Abramovich when making his successful application for residency in Jersey (although he’s yet to move in). But it isn’t only Russians who crave safety and certainty.
“We deal with people who move to Jersey for a range of reasons,” says Derek Rhodes, Director at Alex Picot Trust, a firm that focuses on the UK market. “These include security and the fear of a Corbyn government in the UK. People are also waiting to see what happens with Brexit. Privacy is another important matter. The very wealthy do worry about the security of their information because people can use it against them.”
This last point is important for the Channel Islands, where a balance has been struck between the need for transparency and the desire to meet the individual need for privacy. They’ve done so by creating registers of beneficial ownership that are available to the authorities in other countries, but which aren’t open to the public at large.
Whether a wealthy person is from the UK or Tanzania, Stephen Whale, Group Director at JTC, says that the craving for certainty and security crosses national and cultural boundaries. “High-net-worth individuals want the same things, no matter where they’re based,” he says. “They want as much certainty as they can get, both economically and politically, and this is particularly strong for people from Africa.”
Learning curve
If you’re moving home, no matter what your income level, you’re likely to be interested in the standard of education available to your children and, given the resources at their disposal, private schooling is high up HNWIs’ agenda.
“Education is key and forms a part of the wealth transfer element of their concerns,” says Fiona Waite, Director at RBC Wealth Management. “People want their children to be well educated and socially aware. While experience of the workplace is also really important, because there are other routes to entrepreneurship than just education, many are willing to spend a large tranche of their wealth on it, and finding the right school is paramount.”
The UK and US have developed reputations as homes for world-leading educational establishments and, as such, places for their children at British or American schools are highly desired by the wealthy. “Schooling in the UK or the US is considered aspirational for a lot of people,” says Whale. “We have clients in Africa, Russia and China, and they all say they want their children schooled in the UK or the US. They see this as part of doing their best for their children.”
If your children are at school in another continent and you have global business interests, then travel also becomes an important element of your lifestyle. But that doesn’t necessarily mean every wealthy individual has a private jet parked at their local airport. “We’ve seen an increase in the use of firms like NetJets [an aircraft sharing business] rather than people buying their own aircraft, but many of our clients also use regular, scheduled services,” says Rhodes.
Siobhan Crick, Director, Private Client at Sanne, has seen evidence of people taking the private route. “Private aviation is certainly a consideration for clients, particularly for those who have global businesses and homes and therefore family members in various geographical locations,” she says. “We’ve also seen clients taking fractional ownership of aircraft, which often meets their needs at a reduced cost.”
If an individual does purchase their own aircraft or yacht, the reason for doing so usually falls into one of two categories. “We look after a variety of luxury assets, including yachts and aircraft, and there are two ways of thinking on this,” says Greta Pender, Senior Trust Manager at Saffery Champness. “One is driven by the need to travel for business, while the other reason is for fun or for bragging rights. A lot depends on culture and personality.”
Global citizens
For those whose interest is in travelling rather than showing off, there are other ways to increase their freedom to move, says Stephen Whale. “Mobility is the key, and many clients have multiple passports to enable worldwide travel. We’re definitely seeing a pick-up in interest in residency and citizenship schemes because people realise it can help with their travel.”
Of course, travel is often a necessity rather than a recreational pursuit and while families may be spread around the globe, there’s often a geographical focal point. “There tends to be a central hub, either the home country or a major city like Geneva or London,” says Pender.
And it’s here that some may choose to site a family office, although not just for business reasons. “If they can afford it, a family may want a family office to look after their needs,” adds Pender. “As well as managing assets, they can be linked to personal security and so may be used to run bodyguards and concierge services.”
Although the media likes to put issues such as personal security and concierge services in the spotlight, they’re quite a way down the list of priorities for the globally wealthy. At the top of the list is a concern for the family’s future and a desire to ensure that assets will be protected for many years to come.
But the next generation may have different ideas about what the family business should look like. “A lot of the next generation have a different view to their parents – they’re worried about the social performance of their investments,” says Pender.
Importantly, this trend isn’t likely to pass anytime soon, says Fiona Waite. “We’re seeing that ESG [environmental, social and governance] investing is key – it’s not a fad. After the financial crisis, people are aware that businesses with an ESG culture do perform well over time and so, in terms of the financial institution that the family uses, it must be in line with their values.”
When you look at the messages being sent out by the Channel Islands’ financial services industries, it’s clear that those in charge have an understanding of the priorities of wealthy people.
Both Jersey and Guernsey have moved to create yacht and aircraft registries, but these remain small in comparison with the amount of business relating to succession planning and the effort put into moving with the times. So the islands are able to cater for a younger, more socially concerned generation.
The Channel Islands aren’t shy of highlighting their proximity to London – and from there, the rest of the world – when promoting themselves. This ensures that the mobility message is clear to anyone thinking of swapping a city life for an island one.
To many, particularly the mainstream media, the lives of the globally wealthy will likely remain portrayed as being focused on living so fast that concierge services are a must. However, the reality is that for most high-net-worth individuals and their families, like the majority of us, certainty and security sit at the top of their list of priorities in life.
As Siobhan Crick concludes: “The reality is that wealthy people often have the same core concerns that the rest of us have.”