how to accumulate wealth for your family in the 21 century · 2015. 12. 20. · london. advisory...
TRANSCRIPT
![Page 1: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/1.jpg)
1
International Consultants LtdAndrew Leung
How to accumulate wealth for your family in the 21st century
with apologies to Mother Teresa & Thomas Piketty
A presentation
Andrew K P Leung, SBS, FRSA
![Page 2: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/2.jpg)
Disclaimer
All materials contained in this presentation, including any analysis, comments, remarks, opinions and pointers are for information, debate and discussions ONLY. No warranty of their accuracy, completeness, timeliness or reliability is implied.
Any reliance on these materials in any way assumes total exemption of any liability whatsoever of Andrew Leung International Consultants Limited and Andrew K P Leung including all their current and future Affiliates, Associates or Assigns.
2
![Page 3: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/3.jpg)
It’s Capital, stupid!
3
![Page 4: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/4.jpg)
Global aging slows economic growth
4
![Page 5: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/5.jpg)
“Demographic Cliff”
5
![Page 6: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/6.jpg)
Longer life expectancies encourage saving
6
![Page 7: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/7.jpg)
Capital rate of return once again surpasses economic output rate
7
• Highest rate of return to capital - eve of French Revolution (1789) and during Belle Epoque(end Franco-Prussian War 1871 to 1914 WW I).
• Wartime destructions and conflicts between 2 WWs reduced capital rate of return.
• Meanwhile, productivity increases after WWII pushed rate of return to labour
• After 2012, as economies slowed, rate of return to capital began to return to levels approaching Belle Epoque and pre-French Revolution
![Page 8: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/8.jpg)
Back to the French Revolution and Belle Epoque?
8
![Page 9: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/9.jpg)
Vautrin on Parisian wealth in 1810s – “marry rich” rather than work
9
![Page 10: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/10.jpg)
They didn’t get there by “Earned Income”
10
![Page 11: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/11.jpg)
The way the cookie crumbles
11
![Page 12: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/12.jpg)
Private capital resumes trajectory in 21st century
12
![Page 13: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/13.jpg)
Global trend of private wealth accumulation
13
![Page 14: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/14.jpg)
Easier to get rich with capital, barring exceptions ?
14
![Page 15: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/15.jpg)
Concentration of Capital Income
15
![Page 16: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/16.jpg)
The fabulous top 0.01%?
16
![Page 17: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/17.jpg)
More “modest” thresholds for relative comfort and leisure
17
• IRS 2010-2014 database, top 1% Americans make $380,354 (~HK$3 m a year).
• World’s wealthiest 0.1% (4.5 m people) own average 10 m euro @ = 200 x average; 4% return = HK$ 4 m a year; 1% (45 m people) own 3 m euro @ (50 x average)
• Royal Skandia survey (15.11.2015) found Hong Kong people need HK$1.5 m a year to be content. Dubai HK$2.1 m, Singapore HK$1.8 m, Germany only HK$664,830, with a global average of HK$1.2 m.
• 2013 April Survey, bottom 20% HK average salary = HK$8,786 p.m. = HK$105,432 p.a. 140 x = HK$14.76 m a year ; 4% return requires HK$369 m Capital
![Page 18: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/18.jpg)
A Hong Kong equivalent
18
• Piketty shows that the upper class (society of rentiers) possessed incomes 50 to 100 times average.
• In the context of present-day Hong Kong, 80 x average annual salary ($14,877 x 12) = HK$14.28 m a year, which would require an up-front capital of HK$357 m at 4% rate of return.
• This is not far from HK$369 m =140 x bottom 20% average income
![Page 19: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/19.jpg)
Attainable in several generations through inheritance
19
![Page 20: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/20.jpg)
Timing is everything
20
![Page 21: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/21.jpg)
Stock market cycles coincide with 11-yr sun-spot cycles
21
![Page 22: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/22.jpg)
Housing re-gains lure in tsunamis of paper money
22
![Page 23: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/23.jpg)
Ascendency of housing and other domestic capital
23
![Page 24: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/24.jpg)
Banking on the world’s expanding middle-class
24
Heinz’s owners — Warren E. Buffett’s Berkshire Hathaway and the Brazilian investment firm 3G Capital -took over Kraft Foods in stock and cash dividend deal , March 2015
![Page 25: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/25.jpg)
Climate Change – transition from fossil energy
25
![Page 26: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/26.jpg)
Water becoming a scarce commodity
26
![Page 27: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/27.jpg)
Everything is connected
27
![Page 28: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/28.jpg)
Global e-tailing and e-commerce
28
![Page 29: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/29.jpg)
The rising silver-hair market
29
![Page 30: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/30.jpg)
Middle-class aspirations
30
![Page 31: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/31.jpg)
Currencies driven by key dynamics
31
![Page 32: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/32.jpg)
Emerging regional dynamos
32
![Page 33: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/33.jpg)
A minimum yet attainable threshold
33
To build up an investment portfolio of HK$ 375 m over several generations in a low-tax regime to produce a steady income-stream of say, HK$15 m a year (today’s prices) at 4% rate of return. A Hong Kong property portfolio carefully constructed over time is a good bet.
![Page 34: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/34.jpg)
Mind the inheritance traps
34
![Page 35: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/35.jpg)
Critique of Piketty
35
1% not static but route is entrepreneurial (capital) or genius (film or football stars etc), not labour?
![Page 36: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/36.jpg)
You can’t legislate the poor into prosperity and wealth is globally mobile
36
![Page 37: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/37.jpg)
The real incentive
37
For the sake of off-springs’ total freedom to pursue dreams
![Page 38: How to accumulate wealth for your family in the 21 century · 2015. 12. 20. · London. Advisory Board Member of China Policy Institute, Nottingham University, 200510. Governing Council,](https://reader035.vdocuments.us/reader035/viewer/2022081619/60fddd015eb54873d7623cb7/html5/thumbnails/38.jpg)
38
Andrew Leung International Consultants Ltd
Thank you
Andrew K P Leung, SBS, FRSAwww.andrewleunginternationalconsultants.com
International and independent China Specialist with over 40 years professional experience covering Hong Kong and Mainland China. Chairman of Andrew Leung International Consultants, founded in London now relocated to Hong Kong. Provides strategic advice on China-related finance, investment, politics and economics globally, including both business and governments. China Futures Fellow selected worldwide by Berkshire Publishing Group, Massachusetts. On the Brain Trust of Evian Group, a Lausanne-based think-tank. Founding Chairman of China Group of Institute of Directors City Branch, London. Advisory Board Member of China Policy Institute, Nottingham University, 2005-10. Governing Council, King’s College London, 2004-10. Visiting Professor with Metropolitan University Business School. Helped set up Standard Chartered Bank’s first merchant-banking subsidiary in Hong Kong (1983); oversaw the trans-migration of industries into China as Deputy Director-General of Industry; US-government sponsored month-long visit to brief Fortune 50 CEOs on China beyond Tiananmen Square (1990); Editor-at-Large of a London-based international consultancy on China’s energies (2007). Sponsored Speaker on China at international conferences, including Forum Istanbul, Turkey, Annual African Banking and Financial Institutions Conference in Accra, Ghana, and Low Carbon Earth Summit in Dalian, China. Regular interviewee on live television with CNBC, Aljazeera English, Times Now of India, BBC and other international channels. Awarded Hong Kong’s Silver Bauhinia Star (SBS) and included in UK's Who's Who since 2002.