Nov 7, 2022
The Centi-Millionaire: A New Class of Rich
Misha Glenny, Award-winning journalist and broadcaster, keynote speaker, and author with a background in cyber security, geopolitics, and criminology.
Literally not a day goes by without the names Musk, Buffet, Slim, Mittal, Deripaska, or one of the other roughly 3,000 billionaires bombarding us from every angle, platform, or newspaper. We are obsessed. Who’s up? Who’s down? Who’s getting divorced? Who’s taken over a mega corporation? Who’s landed on the moon first?
But this array of hyper-successful, incalculably ambitious, and frequently weird characters has often blotted out the rapid growth of another dynamic elite — the centi-millionaires, ultra-high-net-worth individuals whose wallets bulge with anything over USD 100 million in investable assets.
This new class of rich, whose numbers have more than doubled since 2,000, splashes out on yachts and private jets, and they seek out domiciles in the Swiss Alps or the French Riviera. As the latest research from New World Wealth commissioned by Henley & Partners points out, they are drawn to territories that have high levels of personal security and are renowned for their exclusive accommodation options — think high-end hotels and lodges. A surprising number also seeks out virgin territories where they can establish eco-estates, perhaps as a way of establishing their right-on credentials, notwithstanding their lavish lifestyles.
So who are these people? The origin of their money generally falls into four categories: inherited wealth, baby boomers selling off their small to medium size enterprises, high-rolling stock market players, and the CEOs of multi-nationals and highly successful tech companies.
It is no surprise to learn that most centi-millionaires are white males over 55 years old from the USA and Europe. 38% come from America and the majority are either in New England or the San Francisco Bay Area. But that picture is slowly beginning to change. Geographically, the shift is easily visible. At around 57%, the growth of centi-millionaires in Asia will be twice that of Europe and the USA over the next decade. Concentrated primarily in China and India, the cent-millionaires in these countries are set to eclipse their European and American peers.
The gender balance is also changing faster among this group than it is among billionaires. “We are seeing more and more women in the UHNWI sphere,” observed Luca Derlin of Deutsche International Private Bank to the Luxembourg for Finance agency. Barclays claim that 15% of centi-millionaires are now women, attributing their rise primarily to their entrepreneurial abilities. Amazingly, three countries boast more female centi-millionaires than their male counterparts — these are (perhaps counterintuitively) Qatar, Madagascar, and Saudi Arabia. Significantly, women are prominent in the younger cohort of centi-millionaires.
So how is this group of people increasing their wealth? First, the offspring of billionaires are now benefiting from their fathers’ largesse. Four years ago, I was dining with a senior central banker who told me that “part of the increase in ultra-high-net-worth individuals lies in what is effectively dynastic wealth. These are the sons and daughters of billionaires and multi-millionaires.” Like their parents, this class is one that has benefitted from the extraordinary injection of public money that the Covid-19 pandemic caused. The larger your financial footprint at the start of the pandemic, the more likely you were to benefit from government handouts.
Second is the ascent of young entrepreneurs, especially those who have successful tech companies. During the 19th and much of the 20th century, Karl Marx’s theory of labor surplus value was a useful explanation of how capital accumulated: the difference between what factory owners paid their workforce and the value that the employees produced. In the last three decades, the theory of surplus data value has started to replace surplus labor value. Google earns its money not by paying a large workforce but by selling data that its customers willingly provide it with. The data is what accumulates wealth. You need a much smaller workforce (although if you’re lucky enough to find a job at Google, you get paid well above the average). Tech entrepreneurs who hit upon an app or service that requires a small labor force but is universally attractive to customers — dating apps, for example — can build up significant fortunes in a small space of time.
Bloomberg reports that tech literacy is also changing the investment habits of millennial and Gen-Z centi-millionaires. They increasingly rely on algorithms to make their investment decisions and are less sceptical about cryptocurrencies and non-fungible tokens (NFTs) than their elders.
Third, we have the baby boomers who are now cashing in their stock options and selling their businesses. They form a group with the successful stock market players and real estate investors. Average annual returns on the S&P 500 index over the past decade have been 14.7%, with some years like 2013 and 2019 running as high as 30%. Again, those with more capital to begin with have been able to maximize their capital if they have been shrewd investors.
Environmental, social, and governance and green investments are likely to assume an ever-increasing part of their portfolios. Although they are changing their profile, their habits, and their aspirations, the centi-millionaires are here to stay.
This essay was first published in the Henley & Partners Centi-Millionaire Report. You can download the full report here.
