Private jet owners are an ultra-affluent bunch and, as such, likely have
intricate financial requirements.
The following article is the first of
a two-part series based on the authors' new white paper, entitled The
New Jet Set: A Psychographic Analysis of Luxury Spending. A complete
copy of the paper can be downloaded at www.hannahgrove.com.
The 10th World Wealth Report released in June 2006
by Merrill Lynch/Cap Gemini states that the number of high-net-worth
individuals in the world continues to grow, as does the wealth they
control. The increase in purchasing power of the wealthy is further
reflected in the continued expansion of the nearly recession-proof
luxury goods market and the $5 million-plus residential real estate
market. These trends may seem unfairly biased toward the wealthy but
others can benefit as well. Advisors that have, or aspire to, a
high-net-worth clientele can use this growth as a catalyst for their
own business development.
As long-time students of high-net-worth investors,
we believe that recognizing and understanding distinct segments of
wealth will yield more effective and profitable interactions between
advisors and clients. We recently identified a new segment of wealth
with a considerable net worth and unique demographics-the private jet
owner. We surveyed more than 660 individuals with outright or
fractional ownership of a jet and discovered a few things that make
this an affluent group worth knowing.
Perhaps most importantly, this is a group with
considerable wealth-on average, they have an annual income of $9.2
million and a net worth of $89.3 million. Any way you slice it, private
jet owners are an ultra-affluent bunch and, as such, likely have
intricate financial requirements. As is often the case, there is a
proportionate relationship between the amount of wealth and the
complexity of the financial goals, meaning there is a greater need for
a professional advisor to guide them through the planning process and
supply them with strategies and experts to meet their goals along the
way.
But wealth alone doesn't define this group. Jet
owners possess a variety of characteristics that will help a perceptive
advisor connect with them on a personal and psychological level.
More Youthful
Over the past decade the age range of millionaires has continued to
decline, and the average age of our respondents was 57. This is roughly
ten years younger than the average age of our survey respondents a mere
decade ago. This means that affluent individuals are coming into their
wealth sooner and have a longer period of time over which to manage
their assets and their taxes.
More Women
More than 30% of our survey respondents were women
(Exhibit 1). This is also a marked departure from our studies in the
1980s and 1990s, when women often were less than 10% of the survey
sample. Today, there are more women-owned businesses and more women
represented among the executive ranks of private and public businesses
worldwide. Savvy advisors know that women think about and undertake
investing differently from their male counterparts and will tailor
their approaches accordingly.
Source Of Wealth
By and large, the jet owners in our survey had
accumulated their wealth from an equity position in a business. For
years, the most certain road to wealth has been owning a business, and
this continues to be the case.
Privacy
With a few notable exceptions, jet owners are a
group that values their privacy and anonymity. Almost all choose to
travel in unmarked aircraft and distance themselves from celebrity or
paparazzi, who will increase scrutiny and make them a target of
unwanted attention.
Mobile And Untethered
As noted in recent articles in Newsweek (Going
Places, May 15-22, 2006 issue) and the Sydney Morning Herald (Nomadic
World of Super-Rich, June 19, 2006), the wealthy are perpetually on the
go. In fact, many of the super-rich consider themselves "global
citizens" with homes and businesses on more than one continent.
Obviously, access to a jet increases the ability to travel and can ease
many travel-related frustrations, but with the added bonus of
technology this group can maintain their relentless pace of travel
without missing a beat. Cell phones and the Internet allow jet owners
to stay in touch with virtually any constituent-family members,
friends, business associates, clients-from anywhere in the world.
Land Barons
Despite the propensity to travel, jet owners and
other wealthy individuals still buy real estate, and lots of it. A
majority of jet owners, 86%, own more than two residences worth $2
million or more. Having multiple properties increases the need to
travel, which makes regularly reaching and servicing these homeowners
more difficult for advisors and other services providers.
Insulated
Like most ultra-affluent individuals, jet owners are
often several layers removed from their day-to-day financial affairs.
Many of their monetary transactions, such as the purchase of a car or a
routine tax payment, happen through a business structure, a business
associate or a personal assistant. Just 34% of jet owners open their
own mail and only 19% pay their own bills. As a result, jet owners have
a defense from sales people, fundraisers and creditors, and access to
them is carefully monitored. Advisors will need referrals from trusted
sources in order to reach this segment of the market. Another byproduct
of their detachment is the low level of awareness that most jet owners
have about their finances, so understanding the scope of their assets,
liabilities and investments can be a challenging task for an advisor.
Unrestrained Consumers
The sheer amount of private wealth among jet owners
separates them from other wealthy individuals, especially when it comes
to spending. Not only are they capable of creating a lavish lifestyle
for themselves and their loved ones, they do so without reservation. In
our survey, we questioned jet owners about their 2005 expenditures in
14 important retail categories (Exhibit 2) and the findings were
astounding. The category with the lowest level of spending-wine &
spirits-had an average annual spend of nearly $30,000, which is about
two-thirds of the median household income in the United States (a
current three-year median of $44,473 according to the U.S. Census
Bureau). The next smallest category in terms of spending, experiential
travel, is more than twice the U.S. household income at $98,000 and is
dwarfed by the spending in bigger categories such as home improvements
and fine art.
This data paints a portrait of a new and different
type of investor: most likely an exceptionally wealthy business owner
with wanderlust, a significant portfolio of investments and real
estate, a cadre of employees to attend to every need, and a desire to
surround him or herself with the best things money can buy. Reaching
these individuals can be tricky, but worth the effort given their
outsized net worth and the need for professional advice.
We believe that informed advisors are more effective
advisors. The more knowledge an advisor has about a client's tendencies
and motivations, the easier it will be to anticipate needs, concerns
and actions. Our next column will focus on the psychographic profiles
of private jet owners to help advisors build their knowledge of this
powerful new segment of wealth and, in turn, provide a sympathetic ear
and timely solutions.
Hannah Shaw Grove is the author of
five books on private wealth and advisory practice management. Russ
Alan Prince is president of the consulting firm Prince & Associates.