This Is How They Became Billionaires and Remained Billionaires

A report from UBS Group Inc gives us an insight on how the billionaires made their money and how they hold on to them and even pass it to the next generation.

The report took into account the data and the surveys from 1300 billionaires in the period between 1995 and 2014.

These people make up 75% of the billionaires in the world. More than 30 billionaires were interviewed directly, face to face, to reach these results.

According to investopedia.com, the research found that 917 self-made billionaires have generated more than $3.6 trillion of wealth globally.

Twenty-three percent launched their first business venture before the age of 30 and 68% did so before turning 40.

“We currently live in an age of opportunity and accelerated wealth creation, similar to the Gilded Age of the late 19th and early 20th Centuries, when entrepreneurship in the U.S. and Europe drove the first wave of innovation in modern history,” said Josef Stadler, head of Global Ultra-High-Net-Worth at UBS, in a statement.

“But wealth generation is cyclical, and over the last few decades we have benefited from being on a strong arc of the cycle.”

Billionaires exhibit similar character traits, including an appetite for smart risk-taking, an obsessive focus on business and a strong work ethic. But they have built their fortunes in different ways.

In the U.S., for example, financial services was the top producer of self-made billionaires (30%) with wealth per billionaire in this sector averaging $4.5 billion.

Self-made billionaires in Europe (49.5%) and Asia (20%) were in large part created by the consumer industry in the last 20 years.

With an average wealth of $5.7 billion, European billionaires are wealthier than those in Asia ($3.2 billion) by a large margin.

The research points out, however, that the self-made billionaire population in Asia is unique because wealth creation in the region is more recent than in other parts of the world.

Asian billionaires tend to be younger than other billionaires, with an average age of 57. This is 10 years younger than their U.S. and European counterparts.

Because a significant proportion of Asia’s billionaires grew up in poverty — 25% compared to 8% in the U.S. and 6% in Europe — UBS and PwC anticipate Asia to be the center of new billionaire wealth creation going forward.

More than two-thirds of the world’s billionaires are over 60 years old and have more than one child.

This means wealth preservation, wealth transfer and legacy are at the top of their minds.

The research maintains that wealth thins over time, especially as families grow. As billionaires age they face the difficult decision of what to do with the businesses that made them wealthy: keep or sell all or pieces of the business.

The report found that most U.S. and European billionaires choose to keep their businesses (60%), one-third (30%) sell pieces via an initial public offering (IPO) or trade sale and 10% cash out.

The majority that cash out become financial investors, investing on their own, seeking specific risk-return goals, and/or delegating investments to a family office or personal financial advisor.

Fifty-seven percent of European and 56% of Asian billionaire families take over the family business when the patriarch/founder retires compared to just 36% in the U.S.