The Billionaire Halo Effect: The Influence of the Billionaire Population on Lower Wealth Tiers {The Billionaire Halo Effect: The Influence of the Billionaire Population on Lower Wealth Tiers} – English

The Billionaire Halo Effect: The Influence of the Billionaire Population on Lower Wealth Tiers {The Billionaire Halo Effect: The Influence of the Billionaire Population on Lower Wealth Tiers} – English

Over the past six years, Wealth-X has produced its annual “Billionaire Census” tracking the global growth of the billionaire population and billionaire net worth, and the trends that impact how they spend, donate and invest their vast fortunes.

For many organizations, billionaires may seem like an unlikely or unattainable client segment. With just over 2,600 in the world, these individuals in the top tier of wealth are among the most difficult to engage due to the numerous gatekeepers they employ. Even for those organizations that already have billionaires among their clients or donors, billionaires are far from the archetypal wealthy individual they seek to engage, save for perhaps a few super yacht and jet manufacturers.

This relative lack of representation may lead some organizations to discount billionaires as not worthy of serious consideration for development purposes. If billionaires make up such a small part of the donor base or client list, even adjusting for spend, why give extra consideration to what is unique about them? Why spend time prospecting or developing engagement strategies for such a small community – especially when contact with billionaires is more highly gated than any other group of potential clients?

Learn about the
benefits of wealth screening here.

Some companies may also regard billionaires as less important to their engagement strategy because of the price structure of their goods and services; if they are easily accessible to HNW, VHNW or even UHNW individuals, billionaires may seem like an unnecessary group to target.

However, few groups impact HNW, VHNW and UHNW individuals more than billionaires, making it crucial for these organizations to gain a clear understanding of the billionaire demographic and billionaire net worth. This billionaire halo effect on lower wealth tiers is considerable. For many of the wealthy, billionaires are the ultimate social influencers even when those billionaires are not going out of their way to broadcast their behavior. In other words, the wealthy are more likely to be susceptible to following the habits and choices of billionaires across a wide range of fields, which is why understanding billionaire net worth is so important.

In philanthropic giving, billionaires continue to have a clear impact. Giving pledges, types of donations, and the demand for accountability have all trickled down across the wealth tiers.

The Giving Pledge created by Bill and Melinda Gates and Warren Buffett is perhaps the most prominent example. It encourages the world’s most wealthy to donate more than half of their wealth to philanthropic causes in an effort to create lasting change. Bill Ackman, Michael Bloomberg and George Lucas are only a few of today’s 191 signatories, a significant increase from the 40 signatories that started the Pledge in 2010.

According to the Wall Street Journal, Larry Ellison once believed that philanthropic giving is a personal matter that should be done quietly. However, he went public with his donation to The Giving Pledge because “Warren Buffett personally […] said I would be ‘setting an example’ and ‘influencing others’ to give.”

Learn more about
cultivating the next generation of donors here.

The billionaire influence also extends to luxury goods, perhaps the most obvious area of impact on the wealthy. The impulse to keep up, as much as one can, with the “billionaire Joneses” has inspired purchases and trends within the luxury goods market.

The travel habits of the ultra-wealthy not only alter the way luxury travel firms engage the wealthy but also continue to influence trends in the lower tiers of wealth. Travel agencies catering to the ultra-wealthy are launching divisions that cater specifically to billionaires on sabbatical, which is a growing trend among the ultra-wealthy. These individuals want bespoke experiences they can share with their families or use to learn new skills, such as snow leopard spotting with the kids or learning to hunt and gather like our ancestors, a trend that has trickled down to lower tiers of wealth and helped generate a luxury experience economy. This is evident in the way many high net worth individuals use social media to show that they are able to partake in similar experiences as the ultra-wealthy.

Financial services & wealth management is another area where billionaire influence can be clearly seen. Many of the wealthy look to billionaire investors like Warren Buffett for guidance on where to put their funds, or to successful billionaires for advice on how to understand market trends. Books, articles and interviews with billionaires offering investment principles are perennially in the news and on bestseller lists.

Some billionaires are seen as oracles for investment decisions. Warren Buffett is called the “Oracle of Omaha” and his advice is not only considered timeless but is referred to as any long-term investor’s bread and butter. Other notable investors include Ray Dalio, founder of investment firm Bridgewater Associates, and fund manager Peter Lynch. While many billionaires have the luxury of making risky investments, their general outlook on the market is often considered solid advice.

Read about high net
worth wealth management here.

Across philanthropic giving, luxury consumption and financial services, the wealthy look to billionaires for a template to follow. Thus, understanding this wealth tier has a direct influence on how to engage, retain, and develop existing clients who are UHNW, VHNW or even mass affluent.

Wealth-X’s annual Billionaire Census is an excellent guide to understanding billionaire net worth and the global billionaire population: who they are, what they care about, and how they behave. This year’s edition covers several key trends, including how billionaire spending has shifted (their consumption has declined) and where they are holding more of their wealth (in cash).

The report also looks at billionaire passions and interests, including philanthropy, which is the leading hobby among billionaires. More than half are actively involved in charitable giving. Within the field, education is by far the most popular cause. Four-fifths of the billionaire population direct at least part of their philanthropic to education. This includes infrastructure, scholarships and teacher training at the primary and secondary education levels, as well as higher education funding.

These and other trends are important to consider when thinking about how billionaires matter to your business or philanthropic organization, because billionaire engagement is a trend, whether consumption, giving, or asset management has an impact further down the wealth pyramid. In the year of many tech IPOs, these influences may even involve the direct contact of working together in the same office building.

While approaches to billionaires and lower wealth tiers will have some intrinsic differences, it is important to understand billionaire net worth and influence and how the customers in your target client groups are being affected by it. Consider reviewing which activities and trends are benefiting from the billionaire halo. Plan engagement strategies that cater to the aspirational goals of clients, even if they are already very wealthy. Lastly, stay informed about how billionaire behavior is changing, as existing clients and donors will quickly respond to such trends.