The Thin Edge of the Wedge: Who is the 1%?

In 2006, a film made by Jamie Johnson, heir to the Johnson & Johnson fortune, depicted Americans who controlled nearly 50% of America’s total financial wealth in 2004. The stir this created rippled across the globe until it became a wave of outrage and resentment. Eventually, for a variety of supportive reasons, banners were painted and people marched, and finally ‘Occupy Wall St’ set up vigil outside New York’s powerful financial houses.

But the 1% remained unperturbed. This is largely to do with financial acumen, personal character and practical insight. The wealth of the 1% isn’t under their mattresses – it’s tied to vast investments, ventures, projects, product development, research, science, technology, energy exploration and inventions. All of which are the very things we depend upon to prop up job opportunities, pension funds, life policies, etc, right down to competitive pricing in the supermarket. In fact, the wealth of the 1%, including their taxes, underpins just about everything on the planet.

Facts and figures

Globally-speaking, more than half of the world’s wealth is now owned by the top 1%. This situation, forecast at the beginning of 2015, predicted that 1% of the world’s population would be richer than the remaining 99% by 2016 – but it seems this threshold may have already been crossed. Increasingly, there is a spiralling inequality that in many people’s minds does not bode well for the future.

However, the Global Wealth Report of 2015 has highlighted an unexpected fact: the world’s wealthiest 1% is not entirely made up of billionaires, but contains a significant number of people whose assets amount to around $800,000 or over.

Those ultra high-net worth individuals whose assets exceed $50 million may actually only amount to approximately 123,000 – but as a group they may lay claim to 45% of the world’s wealth. The report states: “We estimate 71% of adults worldwide – have wealth below $10,000, while the group of millionaires, who comprise less than 1% of the global population, account for 45% of total wealth.”

The sobering truth for the rest of us, is that 50% have less than $3,000 to their names. In fact people who have assets creeping above this amount – right up to around $70,000 – could find themselves placed in the world’s top 50%. Even a modest $68,800 might find the top 10% bracket. Although the only certainty about these figures is that they change continually.

Two thoughts spring to mind:

  • building wealth is entirely possible
  • how do we emulate the people who do this?

So who are the 1%?

Surprisingly they are not necessarily from the financial professions where you might expect high-flyers, risk-takers and those in the know to flourish. Nor are they predominately entrepreneurs – although these are well-represented. No, it seems that a large proportion in the top bracket are often in the medical profession.

What becomes clear about the 1% is that it’s hard to define them on a steady basis because the numbers can fluctuate literally from day to day. The steadiest among them would be the older members of the 1% club – and the relationship between age and income and years of quiet, incisive investment, is not hard to understand.

But even apart from this, trying to identify exact profiles reveals some very interesting character traits about people who make money, manage it superbly (or luckily) to their benefit – and who contribute actively and determinedly to our often tremulous dreams of the future.

How did the rich get rich?

There is a lot of old money in the top 1% – but this is changing rapidly due to the rise of the financial sector and emerging markets. It’s getting easier to grow money because options and opportunities are developing and changing all the time. Britain grew their billionaire club from 53 to 113 in the last five years.

Owning your own business and property rights is a good footprint to begin with – but starting a business where nobody else can get one going can be a major factor in creating wealth. Building on this niche enterprise to establish a monopoly in a difficult region can cement the business environment and all concomitant opportunities in your favour. Examples of tricky beginnings in hostile environments would be the wild east of post-communist Russia during the nineties where fortunes were made by those capable of taking on the challenge, such as Roman Abramovich.

There are some shared – and possibly impressive – personal traits of people falling into the 1% whether permanently or temporarily: steely resolve, competitive, merciless, knowledge seekers, astute, alert, sharpened by risk. They enjoy the intrigue of the mental challenge and are not afraid of it. They consistently show an inclination towards financial objectives when young. Invariably, many have already begun businesses or a saving/investment regime before the age of 20.

Instead of predicting disaster from the growing disparity between rich and poor, we can learn a few good pointers from the 1% that can take us up, rather than wasting time on bleak scenarios of bringing them down. The ‘club’ is not by any means closed. They are not special, alien beings. Those who apply themselves to learning the vagaries of finance, developing an eye for opportunity, establishing a preparedness to take calculated risks, and beginning the journey early enough and young enough with discipline and resolute focus – can find themselves supping with those of similar agility and tenacity in the complicated world of wealth.

At Foster Wealth we believe that growing your financial portfolio to meet your 1% aspirations is entirely possible. Why? Because we believe in the 1%. It’s called inspiration. The other 99% is our hard work, professionalism, attention to detail and personal attention to your success. Our experience, knowledge and flexibility is sharpened daily by the fortunes of the 1% – not to mention our own perspicacity, vision and timing.

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