Suffer The Rich List Children

You can hear the howls from beneficiary and left wing welfare groups and losers all over New Zealand. “Bloody filthy stinking rich people”. “Rich getting richer”. “Wankers” and the urban text dialect, “Hd thy gt dat rch?”

The NBR have done it again, in their annual “lets upset the poor” special of the weekly, publishing the names of the richest people in New Zealand with guesstimates of their “worth”. Dare I say it the only guaranteed accurate assessment is that of the publisher tycoon of the NBR Barry Colman. The rest, take with the grain of salt on the lemon that the beneficiary groups are currently sucking with their unadulterated envy. Chances are though that those even dipping out this time could buy and sell their streets many times over.

This year's list is as controversial as ever as the threshold has been raised from $25 million to a whopping $50 million. Automatically dropping off 50 people or family groups as relative paupers. These poor chaps and chapesses must also be crying into their Krug and caviar at present.

Only 8 women made the list and 44 entrants included families. The remaining 131 were men.

And this analysis is where the trouble starts in my view.

Obviously dealing in trusts and offshore planning I am in the “managing inherited wealth” business. People die eventually and have to distribute their wads of cash everywhere and want to minimilise being taxed at death on it. We have a few clients who have actually made the money, but most are 2nd or now 3rd generation “wealthsitters”. Their capital is mostly lazy capital so not in the least bit as inspiring as those who worked so hard and risked it all to actually build the sandcastle.

As a true reflection of prestige and achievement, the Rich List I believe should:

1. Divide family wealth entries by the number of members

This would allow individuals to more accurately and fairly compete against families. And discount mentions of the Tainui tribe in the Waikato being up there in terms of wealth, and more importantly finally give a truer reflection of the Todd Family empire.

2. Place a large ugly asterisk *, or two ** next to those who have inherited wealth as a large percentage of their booty or print a separate list for these types.

Again, this would separate those who have actually worked to get where they are and those that have not. I think this is an important distinction and one New Zealanders actually appreciate.

3. Remove the names of all women who have reached their status through matrimonial settlement.

There is no prestige attached to matrimonial settlement unless she has been an active part of the business and would have achieved the status without the husband’s total input. Can’t think of any that spring to mind presently. Jan Cameron is so far ahead in the “rich female who earned it herself” stakes it is not funny.

Developments

The beneficiary and leftist groups as I mention will be screaming blue murder, however even though the threshold has been doubled to $50 million, I can inform them that internationally, with the exception of the top 10 or so, New Zealand’s millionaires fail to live up to much in the way of crassness. New Zealand has relatively "nice" wealthy people. Well, less embarrassing.

By in large they live simple, low-key lives. Witness just yesterday at the Mandarin Oriental Hotel where up pulls the latest hearse of a Rolls Royce and out jumps Chinese tycoon complete with three bodyguards in car with him and a brand new Bentley behind with obvious wife/mistress type and three more bodyguards carrying more of Louis Vuitton’s store than you would find in Auckland. The reaction of the locals is priceless. This is such a normal everyday Hong Kong experience that only the tourists’ bat an eye lid.

As a generalization, in New Zealand the wealthy individuals are down to earth enough to drive their own cool cars. In Asia it is a sign that you are a peasant servant chauffeur to be seen driving or doing serf activities such as opening doors or pouring your own drinks.

Inherited Wealth is evil

Solomon wrote: “An inheritance is being got by greed at first, but its own future will not be blessed.” (Proverbs 20:21)

As a complex function of time, property prices and inflation, the world is getting richer. The single largest problem is that lesser relatives of people with such fabulous minds and money-making ability are being left large wads of cash on unfortunate deaths. The money is passing through without the creator passing on the ability to expand or even sustain the wealth.

Obviously wealth and death tax is evil too, least of all its existence has funded the majority of the industry I work in to avoid it so I should not bag it too much. However sometimes I do wonder if there is a better way to manage such explosions of wealth?

Yes, I do ask sometimes hold my head in my hands when dealing with these types and ask – How much really is enough?

My own family is small and successful enough to with a couple of unfortunate untimely deaths, leave me in the position all things being fair and constant and some good decisions made, such that I would never have to work a 9 to 5 job again and could maintain the relatively modest lifestyle that I currently have. In other words, not viciously poor and each of my siblings has a differing way of dealing with this. So multiply my potential situation (and I assume many other New Zealanders in a similar position with a burgeoning small business on the family) by ten or even a hundred, and bring it forward to the “now”, rather than the “maybe” and you look at the complete lack of incentive these “heirs” to the family crown jewels have to overcome to even get out of bed in the morning.

Being tagged a “heir” also creates “tag along” problems. All of a sudden these 20 and 30 somethings have all the friends in the world and loads of free time. They attract the only other people in the world with such massive amounts of free time - nouveau cool drug dealers, hip hop, greenie, loser types and all sorts of other interesting characters all intent on taking their money from them and in some case dragging them down with them in their criminal or anti-social chain of uselessness. They get in the news and have an inflated sense of self worth, remembering they have actually done nothing to deserve the attention, good or bad.

I am reminded at this point of a young man in his 30’s who is a client of a former employer. His father had died some 6 months before and he was the sole heir to ₤80 million, which in anyone’s language is an absolute shit load of money. He came to meet me in the office boardroom to check out his portfolio that we were managing as corporate director of his companies and trustee of several trusts. He stunk of a combination of alcohol, bad weed and his eyes were as red as a Liverpool supporter. He sat down and the first question he asked was what he should do now as he was about to go see the bank and the broker we had appointed who is regarded as one of the top three in Hong Kong. I suggested to cancel all his meetings, go back to the hotel and take a shower instead. It was freezing in the boardroom but he was sweating and soon took off his jacket to reveal the most staggering display of needle tracks I had seen. My next suggestion was “after the shower go to rehab”. It was the best and only advice I could give him. Managing his money was going to be a lot easier than managing his mind.

The father had done a great job in business but had not prepared his son for any hand-over plan or contingency on death. I don’t think you can shoot up ₤80 million but odds on this kid tried and eventually he did go to rehab.

Babysitting rich kid beneficiaries can be fun when you are in your 20's and they take you out and party, but most of the time its plain irritating as they are mentally ill equipped to focus and handle assets and make even the easiest, yet most important of decisions – who should manage their money if they can’t. You can' t make that decision for them.

New Zealand heirs

Solomon also wrote, “Wisdom along with an inheritance is good and is advantageous . . . For wisdom is for a protection the same as money is for a protection; but the advantage of knowledge is that wisdom itself preserves alive its owners.”

The simple question that needs to be asked is what are New Zealand’s Rich List participants doing to prepare their kids for the death and handover either of their business or a mountain of money?

Some obviously are already in the family business, with mixed results all round. But most have no intent on including their kids, it’s not so much a New Zealand thing. In Asia the best managers of money from what I have seen are the daughters, but tradition and chauvinism rules and it is usually the oldest son who gets the keys to the Kingdom regardless of his ability.

In the States and Asia there is an increasing trend for private bankers and other handlers of wealth such as PwC, Deloitte and the likes to invite and train “heirs” in money management. It’s not a bad idea, especially given that the combination of Dad’s money making prowess and Mum’s ditziness but good looks, does not always mean the child is as smart as they are good looking. I have attended several days of this training on an advisory side, to say it is basic is the understatement of the century. Then you hear the attendees have actually completed Business degrees and you look to the heavens and wonder if Dad bought them the degree as well. They are clueless and ill-prepared.

Life is a funny thing. The more I deal with this area, the more I believe that men can effectively breed out the intellect bloodline of their genes by marrying an extremely good looking, yet entirely thick woman. The children end up gorgeous, yet utterly hopeless. All the money in the world to educate them can only get them to a certain level. In many instances street smarts and total common sense are lacking.

Which makes you wonder that working all those hours to build an empire to leave to your family is the easy part. The hard part I think is teaching them how to continue on the work so the wealth does not simply become a loaded gun waiting to go off.

This is essentially the difference between a successful wealthy parent and a wealthy parent who is still a total failure despite their millions earned in the battle of business. And there are a few on that New Zealand Rich List who are as guilty as sin in this area.