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What Asian billionaires can learn from Germans and Swiss
Europeans offer clues on growing and preserving fortunes
Bayani S Cruz 1 Nov 2016
Asian billionaires should take their cue from their European counterparts, particularly the Germans and the Swiss, who are generally more efficient at creating and keeping wealth than their US or UK counterparts, according to a report by UBS Wealth Management.
 
“The first reason why the Germans and Swiss are more efficient at creating and keeping wealth is that these two countries both have stable governance, lower interest rates, highly efficient economies, strong currencies and high level of education. On average it is easier to create value there. I’m not saying it’s difficult in other countries but on average it’s easier,” says Josef Stadler, head of Global Ultra High Net Worth, UBS Wealth Management
 
The second reason is the absence of punitive inheritance taxes, which makes it easier for billionaire families in Germany and Switzerland to keep wealth in the family.
“The way many Swiss and German families think is that they want to keep a significant part of their wealth in operating entities, in companies and diversify into bankable assets but they don’t keep 90% or 100% in bankable assets. On average that is favorable for wealth creation. Whereas what we see in the UK and the US is a tendency not to keep the business in the family but to cash out first and handle the cash,” Stadler says.  
 
According to the UBS study, total billionaire wealth declined in 2015 by US$300 billion to US$5.1 trillion while average billionaire wealth fell from US$4.0 billion to US$3.7 billion due to headwinds such as the transfer of assets within families, commodity price deflation and an appreciating US dollar.
 
Europe has the greatest number of multigenerational billionaires at 182 (54%), and they have proven to be the most resilient at preserving their fortunes. The US has 175 (33%) multi-generational billionaires and APAC has 76 (15%).
 
For the first time in 10 years, the average wealth of self-made US billionaires surpassed the average wealth of US billionaires with inherited fortunes (US$4.5 billion vs US$4.3 billion).
 
Led by China, Asia created one billionaire nearly every three days accounting for over half of new billionaires in 2015
 
Most of 2015’s new billionaires were entrepreneurs and from Asia. One hundred and fifty of the 210 were self-made and 113 from Asia. Most of the 60 inheriting their fortunes in 2015 were from Europe. Dilution ensured that these new multigenerational rich tended to be less wealthy than their self-made peers. But volatility in the number of billionaires is not just down to business risks. It’s said that nothing in life is certain except death and taxes. As the global billionaire population ages, some are dropping off the list as their wealth passes to the next genera- tion.
 
Contradicting common perceptions, and in spite of Europe’s economic difficulties, its billionaires are proving most resilient. Their total wealth was almost unchanged in 2015 at USD 1.3trn (a small fall of 3%). When it comes to multigenerational billionaires, Europe now ranks first in terms of number of billionaires and a close second to the US in terms of multigenerational wealth.
 
Europe was the home to 56 new billionaires in 2015 – more than the US. But most (59%) inherited their wealth or at least the majo- rity of it. After 44 drop-offs, this amounted to a net increase of 12, lifting the region’s total billionaire population to 339.
 
Europe is leading the world in wealth preservation. Its multigenerational billionaires survived 2015 far better than their peers in other markets. Their average wealth fell just 7%, from US$41 billion to US$3.8 billion.
 
Just as the US is home to the world’s largest collection of billionaires, so it sets the scene in billionaire trends. Almost half (47%) of billionaire wealth in our database is based in the US, yet in 2015 its billionaire population rose by just five. Further, total US billionaire wealth fell by 6% – from US$2.6 trillion to US$2.4 trillion.
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