U.S. millionaires and billionaires continued to spend and invest in 2008 despite the biggest fiscal crisis in modern history. But the ultra-wealthy also displayed new money habits, including a strong desire to spend on nonmaterial needs.
The market volatility has indeed made the ultra-affluent-those with $30 million or more in liquid assets-more careful with their money. But, generally speaking, they have not cut back on their lifestyles. They are still optimistic and living full lives-traveling more, enjoying unique services and experiences, and seeking out creative investments. They continue to spend on what is most important to them, including their families, their pets, their health and their charitable causes.
Yet the profile of the ultra-wealthy client has also changed. They are younger and, among first-generation wealth, more reflective of the middle-class values they held before making their fortunes. They don't perceive themselves as rich or consumed with material things and want to appear and feel normal. This is a group that is looking for simplicity-a view that might, for example, be reflected in the purchase of concierge services to help unclutter the complexities of life brought on by wealth.
Robert Frank of The Wall Street Journal calls this group the "young and wealthy but normal"-or YAWNs for short. "We're in a strange period of wealth denial," Frank says. "The middle class wants to be wealthy and the wealthy want to be middle class."
These trends have created a sort of dichotomy in the spending patterns of the wealthy. While jets, yachts, fine wines and other prestige items remain on the shopping list of the ultra-affluent, they are also devoting more money to satisfying their nonmaterial needs. They may still want an $85,000 Birkin bag. But they may be just as satisfied having a dinnertime chat with a celebrity chef, playing tennis with a world-ranked player or traveling to Kenya to do volunteer work.
What follows is a closer look at these and other emerging themes in the ultra-high-net-worth market that indicate where the wealthiest clients want to devote their time and money.
Those who can afford the luxuries the middle class lusts after have begun to unclutter and place less emphasis on material things. Instead, the affluent have begun to simplify their daily lives and focus on things they hold most valuable, including charitable causes, political fund-raising or the establishment of family foundations.
The ultra-high-net-worth are transforming their passions and hobbies into investment strategies. They are investing in art, wine and other collectibles as a hedge against the volatile market-and having fun in the process. "Emerging to mid-career artists can be sound investments," says Sarah Cohen, director of Mint Art. "It's crucial to have an in-depth knowledge of which artists have not reached their market potential ... or who have seen a dip in their market value but, given trends, are poised for a comeback."
The Concierge Evolution
The concierge has evolved into a sophisticated "lifestyle management" service that the wealthy now consider a necessity. Concierge firms no longer limit their offerings to entertainment, shopping and restaurant reservations. They have broadened their scope to include services such as art and real estate consulting, personal and professional development, household staff placement and assistance in planning family meetings and other events.
The 'Experience' Age
Memorable experiences have become increasingly valued by the ultra-affluent. Such moments could include a private meeting with the Dalai Lama in Tibet, a private concert with Elton John, dinner with celebrity chefs such as Mario Batali or even a trip to outer space. On a simpler level, the experience could be a tennis lesson with a world-class pro or a session with a high-profile makeup artist.