As the political and social events of 2016 have shown us, nothing can be assumed or depended upon. As we head into 2017, what can we expect in the coming years from ultra high net worth individuals (UHNWIs), and how will this affect the superyacht market?
According to Knight Frank’s 2016 Wealth Report, the number of UHNWIs has increased 61% since 2005. With ever-growing luxury markets in Latin America, Africa and Asia, is this level of growth sustainable? With PWC’s ‘Billionaire Insight’ reporting a new billionaire every 3 days in 2015, the ultra-wealthy landscape is ever-changing and will have significant implications for our market.
Richard Watson is a futurist and scenario-thinker, who makes societal predictions based on current trends and real-world situations. He explains the different attitudes to spending of the emerging luxury consumer, when compared to those with established wealth, “New UHNWs will continue to spend lavishly on luxury goods. The reason for this is to prove to others in their immediate peer group that they are no longer poor. As individuals get richer, this spending will shift from products to more discrete services and experiences.”
In this way, a superyacht fulfills both the needs and desires of the new UHNWs - showcasing their new found wealth - as well as providing the privacy more established members of this social group crave. “As for what’s next, expect time and space to become the ultimate luxuries,” predicts Watson.
He also believes that the demand for unique, singular products will flourish, “[There will be a rise of] goods and services that are one–offs or only available to a limited number of people, especially products than can only be bought if you fulfil certain non-financial criteria.” This news will be welcomed by fully-custom yacht builders, who will continue to produce bespoke products for their clients.
Looking at spending practices of the ultra-wealthy, Watson predicts that more and more purchases will move into the digital sphere, “One thing I am seeing is UHNW expenditure is moving online. Wealth has always tended towards discretion (the term ‘stealth wealth’ aptly sums it up) and where better to shop in secret than online?”
We are seeing elements of this in the industry already. Dynamiq Yachts, for example, has a website where the user can build their own yacht from three models. The ease of this transaction could be the future for purchasing vessels, removing the personal communication between buyer and seller that has remained steadfast in our market.
Knight Frank’s report also highlights the rise in philanthropic activities, “On average, 67% of those who took part in the Attitudes Survey said their clients’ philanthropic activities had increased over the past 10 years, with almost 80% saying activity would increase further over the next 10.” High-profile celebrities and entrepreneurs such as Mark Zuckerberg, Bill and Melinda Gates and Warren Buffett are pledging to give away the majority of their estates. With this level of wealth donation, it implies a move away from the tradition of inherited wealth and a potential hindrance for the market.
When considering other threats, the Attitude Study (Wealth Report) lists the top 10 concerns for UHNWs as personal safety and security; compliance issues; the global economy; online security and privacy; tax for the wealthy; the environment; succession & inheritance issues; personal & family health issues and stock market volatility. However, Watson identifies a slightly different problem, “The biggest threat in the future is probably income, wealth and opportunity polarisation. UHNWs are more visible than they used to be,” explains Watson, bringing to mind the recent media furore over Sir Philip Green’s two yachts amongst the BHS pension crisis.
The coming decades may not be an easy journey for the superyacht market, with another recession potentially on the cards, Brexit and a Trump presidency, we’ll just have to wait and see.