Since the 2008 financial crisis and the protests of the Occupy Wall Street movement, the actions of the global elite have come under much greater scrutiny. This has provided the rest of us with occasional looks into the lifestyles of the super rich.
It ought to go without saying that the 1 percenters are able to do things differently to the rest of us. They can hire the best advisers in law, finance, asset management, business and beyond that money can buy. The rest of us might be able to afford a pony for our daughter, but that pony will not be trained at the top Argentine school. We might take dance classes, but we will not hire in a current World Champion for extra lessons.
As we have seen more about their ways, it has become clear that the top 1 percent have many more opportunities to survive and thrive than the rest of us.
One very obvious advantage they have is the level of their mobility. With international or global businesses comes a requirement to travel. If you need to travel a lot, then your own plane, or helicopter will come in handy. When you land at your destination a limousine will whisk you to your meeting.
This freedom opens the mind to other worries. For many of the business elite, they have made their fortunes in one country and then diversified from there. At home they may be a power player with business, charitable, political and social interests, but if things go wrong and the players change, what will they do?
One solution is to invest wealth internationally. This usually means retaining the services of a family office in one of the world's financial centres (London, Zurich, New York, Singapore) to allocate their assets and safely grow their wealth.
Some of the best investment managers in history work for relatively small companies with high assets under management and only accept billionaire clientele. You and I will never have access to these Masters of the Universe with our paltry net worth's.
Another is to purchase very high-end real estate in one or more global locations. For reasons of history and legality, London has proved to be one of the premier locations and in the best neighbourhoods (Knightsbridge, Chelsea, Mayfair, etc) residential property has become a quasi reserve currency for the super rich. The UK government complained in mid 2015 that many of these properties are owned by offshore companies and may (or may not) be hiding the ownership of criminals.
The reality, of course, is that real estate has always been an asset of choice for money launderers and criminals and London has been a prime location for decades. The difference is that these days the "shady" offshore companies are buying up all the best property. Most of the super rich are more likely to be buying through companies to protect their wealth rather than because of criminal tendencies.
The problem is that if you are originally from a country with a less than democratic ruling elite and you are a high profile business owner, you might want to buy premium assets but not let the ownership become public record. This will make it much easier to hand those assets down to your children in the future with little or no chance of your home government confiscating them.
For other high ticket assets, such as wine, an old master, diamonds, etc, there are now international storage locations located close to airports, often in free trade zones. These freeports mean that the assets remain technically in transit and so taxation is unlikely to be applied to them. These provide another location for putting some millions stored in one of a kind tangibles out of harms way.
Once you have diversified internationally, then what?
If you have access to global locations and markets, it is important that you and your family have the legal right to remain there. This worry has helped to grow a market for second – known as economic – citizenship. For many in the Middle East, Africa and Russia, there is significant political risk to being wealthy. Many of these people would like their children to be able to live and study at some of Europe's finer universities and to have more opportunities to travel than they had.
Given the chance, many 1 percenters would also like to possess a second passport from a neutral country that does not wish to tax them heavily. Lowering a personal tax bill is a great way to have more money available to invest and grow wealth and power.
However, when it comes to taxation, there are some locations for personal residence that are much more favourable than others. If you are a mega millionaire or a billionaire, then Monaco is likely to be a much better location than your original home, especially if you are European. In Asia, Singapore provides excellent opportunities to live very well, travel and reduce personal taxes.
For many though, the real trick that the top 1 percent use to diversify their wealth is to combine most or all of these factors. Once they have a neutral second citizenship, a residence in a tax haven that does not want to know about or tax their international activities, very private wealth management, a range of anonymous upper end assets and their own private transport, the world has changed. Once they reach this level, they operate above national governments and are safe to live and grow their wealth as they please.
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