There’s no measure of success in life so black and white as the number of digits in a man’s bank account. While success is a personal measurement of achievement across many facets of life, we most often associate it with crisp stacks of cold hard Benjamins and the freedom they bring. In a society ruled by the concept of cash, how much do you actually need before the right heads start turning?
According to the Australian Financial Review and Bloomberg US, elite private bankers consider US$25 million in investable wealth enough to earn you a seat at the table and the title of ‘rich’. This figure represents the kind of cash most don’t even dream of but astoundingly is reported as being only ‘economy-class rich’. Sums in the vicinity of US$100 million will get you into ‘business class rich’ territory, where the complexity of your estates requires a more seasoned eye.
One owner of those eyes is Peter Charrington, Global Head of Citi Private Bank, who recalls that in 1994 “three million was largely considered ultra-high net worth across the industry”, but “fast-forward almost 25 years, and US$25 million is how we define ultra-high net worth."
At this level, advisors are hands-on with the client, who likely have homes and assets in multiple countries and currencies that might require more cash flow management, customised financing for mortgages, yachts or planes, and the ability to borrow against art or investment portfolios. It may make sense for a client to house business interests in a trust with the advisor as trustee. Other benefits of investing at this level include early access to initial public offerings as well as private funding opportunities. Transaction limits are washed off as large purchases become commonplace such as refuelling a superyacht, which can run up a bill in the hundreds of thousands.
So what slice of the pie does the banker get? Fees can vary widely within and across firms. “Wealthy clients with less than US$100 million might pay from 50 to 100 basis points”, according to Peter Rup, CEO of New York-based Artemis Wealth Advisors. “With an account above US$100 million, a client could pay roughly 40 basis points, and over US$200 million, around 25 to 30 basis points for investment advice.” Steven Fradkin, president of wealth management at Northern Trust, sums it up finely:
"Getting rich is complicated. It's just a good complication to have."
A glance at the Australian Financial Review’s 2018 Rich List released recently puts some of these gargantuan sums into perspective. To earn a spot in Australia’s Top 200 wealthiest people you’ll need a sum of AU$387 million – not exactly a few coins under the couch. Most interesting is where entrants made their bucks, with a staggering 51 out of the 200 being in the property industry - must have been all those foregone avo on toasts, Tim Gurner? A sizeable number of rich listers also came from the retail (22) and finance industries (21). However, somewhat worrying for the financially enthusiastic lads among us is the Top 200’s average age…66.
If you’re feeling a little spare after reading these numbers, get started with the easier way to invest in the stock market. Otherwise, here’s a question from self-made billionaire Jay Samit to get you motivated:
“Are you living the life you’ve always wanted, or are you paying bills until you die?”