Entrepreneurship fastest route to global wealth, report reveals

- Amongst high net worth individuals (HNWIs), entrepreneurs and business owners accumulate their wealth over 16 years on average, compared to 23 years for other HNWIs, according to latest edition of Barclays Wealth Insights - Over two-thirds (68%) of S

Entrepreneurship is the most prevalent source of global wealth, the latest report in the Barclays Wealth Insights series reveals, as entrepreneurs are found to accumulate wealth faster than high net worth individuals (HNWIs) who have made their money through earnings, bonuses or inheritance.  It took entrepreneurs and business owners an average of 16 years to accumulate their wealth, compared to 23 years for other HNWIs. These findings are reflected amongst respondents in South Africa, with average accumulation rates of 13 years for entrepreneurs and business owners compared to 19 years for other HNWIs.

The finding reflects expert views that global wealth growth is now being driven by entrepreneurship, rather than inheritance, as 40% of global HNWIs say their main source of wealth came from the sale of, and/or the profits from a business, compared to 26% who say it is from inheritance. In South Africa, the number of HNWIs whose main source of wealth came from entrepreneurship is even higher at 68%, which is the second-highest figure globally behind China at 70%.

Launched yesterday (18 June 2013) and based on a global survey of more than 2,000 HNWIs comprising entrepreneurs, business leaders and investors, the report, Origins and Legacy: The Changing Order of Wealth Creation, provides an in-depth study into how wealth is now being made, spent and shared across the world. The report navigates the global landscape of wealth, examining how different cultures prepare for the future and consider their legacy through wealth and inheritance planning and philanthropy.

Highlighting the movement in global wealth and entrepreneurship, the report finds that wealth is being created twice as quickly in developing regions, such as Asia Pacific and Africa where it took HNWIs an average of 12 and 16 years respectively to accumulate their wealth, compared to more developed markets such as the US and Europe, where it took an average of 28 years and 23 years respectively.

Entrepreneurship plays a crucial part in this shift of wealth from the old world to new, the report shows, with HNWIs in South Africa (68%) and India (59%), more likely to have made their wealth from the sale of a business and/or business profits than those in more developed markets such as the US (21%) and Japan (35%).

“Understanding the changing patterns of wealth creation, especially how people spend and invest wealth after they have created it is of critical interest to Wealth Management from Absa. The nuances in why we accumulate and pass on wealth can be subtle, but it is crucial for us to understand them in order to advise South Africa’s leading entrepreneurs on sustaining and growing wealth inter-generationally, or deploying wealth towards sustainable philanthropy,” says Nomkhita Nqweni, Managing Executive, Wealth Management at Absa.

Impact on philanthropy

The report also finds that the changing origin of wealth has an impact on the motivations for global HNWIs to become involved in philanthropy.  Those in more developed markets tend to give to charitable causes out of a sense of duty and responsibility, with this being the case for 69% of wealthy respondents in the UK and Switzerland, 71% in the US and 84% in Monaco.

In South Africa, one of the predominant motivations for giving to charity was the personal fulfilment philanthropy brings, with 56% of respondents citing this reason. This is in line with the findings from other emerging markets such as China (71%) and Latin America (65%).

When it comes to source of wealth, the motivations for giving time and money to charitable causes differ greatly; with entrepreneurs less likely than those who have inherited wealth to give to charity out of a sense of duty and responsibility, but more likely to donate out of a desire to leave a legacy.

“There is undoubtedly a different spirit to giving, depending on how an individual has accumulated their wealth,” Emma Turner, Head of Client Philanthropy at Barclays explains: “We often see that for entrepreneurs and business owners, passion can drive their involvement in philanthropy.  This group of individuals tend to apply the same business acumen, energy and drive that have seen them become successful in their endeavours to their chosen causes. For those who have inherited their wealth, however, philanthropy often comes out of a sense of duty and responsibility handed down by previous generations. Therefore, maintaining that legacy is important to them in their charitable giving.”