russia’s wealth possessors’ -...
TRANSCRIPT
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Russia’s Wealth Possessors’
Investment Preferences SKOLKOVO Wealth Transformation Centre (SWTC)
Moscow, 30 November 2016
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3 Moscow School of Management SKOLKOVO • SKOLKOVO Wealth Transformation Centre (SWTC)
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4
Methodology
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Identify investment preferences and investment beliefs of Russian wealth possessors
Get new data on the regular topics of SWTC research: succession, service infrastructure, personal motivation
Special focus: whether a typical Russian wealth possessor is indeed an “entrepreneur”
5
Study Goals
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6
Why?
• Client motivation and objectives • Client communication strategy and tactics • Marketing strategy
• Wealth possessors’ motivation • Wealth typology • Approaches to succession
• Benchmarking • Personal motivation • Succession strategy
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Study Typology
7
Qualitative study
Deep open interviews
Elements of respondent-driven sampling
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Inspiration
8
Investment beliefs as a factor underlying investment decision-making process
Jobs to be done – choice of a product is driven by the “jobs” the customer “hires” the product to do
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32 respondents
9 Moscow School of Management SKOLKOVO • SKOLKOVO Wealth Transformation Centre (SWTC)
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< US$ 30M
US$ 30M - 100M
> US$ 100M
57%
13%
30%
Size of respondents’ assets
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11 Moscow School of Management SKOLKOVO • SKOLKOVO Wealth Transformation Centre (SWTC)
Presentation agenda
1. Archetypes
2. Investment Expectations
3. Investment Beliefs
4. Support Infrastructure
5. Succession
6. Personal Success Factors
7. Conclusions
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12
Archetypes
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13
dynasty philanthropist
investor visionary
business angel heir
entrepreneur partner
top manager
opportunist
successor
impact investor
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«Entrepreneurs» «Investors»
Share of liquid assets and real estate exceeds share of investments
into active businesses
~40% ~40%
“Core” business constitutes more than half of total wealth
Segmentation used in the study
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Entrepreneur,
investor, businessman
– the definition can
be fuzzy; there are
elements of all the
above.
Evolving from a
businessman to an investor
You can’t be an
investor without
being an
entrepreneur
«
» «
» « »
Self-definition
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16
24% correlation between self-definition and
objective data
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36%
71%
20%
12%
16%
25%
10%
47%
12%
22%
0% 20% 40% 60% 80% 100%
On average
"Entrepreneurs"
"Investors"
"Core" business
Other businesses
Liquid assets
Residential real estate
Other
Asset allocation by category
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Gradual transformation / evolution of some entrepreneurs into financial investors
Self-awareness / self-definition is lagging behind
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19
Investment Expectations
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Acquire an asset
Grow wealth
Preserve wealth
39%
71%
61%
18%
18%
36%
4%
Ensure personal income
Ensure family lifestyle
No specific goals
Other
<1% correlation between «preserve wealth» and «grow wealth»
~25% correlation between
(а)«preserve wealth»
and «investors»
(б)«grow wealth» and «entrepreneurs»
Investment Goals
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Active business
30-40%
Liquid assets portfolio
5-10%
Investment expectations
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15%
22%
19%
30%
0%
10 – 20%
Can’t answer
20 – 40% 15%
0 – 10%
Acceptable level of investment
“drawdown”
Moscow School of Management SKOLKOVO • SKOLKOVO Wealth Transformation Centre (SWTC)
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33%
42%
Satisfied
Not satisfied
Partially satisfied
25% «Entrepreneurs»
Level of satisfaction with investment
results
67%
25%
8%
«Investors»
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24
Investment Beliefs
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Sample interview questions
How would you define you investment philosophy? What are the underlying principles and beliefs you
rely on when making investment decisions?
If you had a chance to revisit investment decisions you made 5-10 years ago, what would you have
changed?
Suppose you friend has recently sold his business for US$ 30M. What would you recommend him to do with this liquidity?
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The main criterion for
me is the people factor,
ie the people who
manage the business
where I invest
I would recommend a “fresh” investor to
first understand his plans and the plans of his
family. What does he want?
The key is to identify the
level of risk you can accept «
»
«
»
« »
When you don’t know where to invest it is
better to wait. There is no need to rush. « »
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0%
10%
20%
30%
40%
50%
60%
70%
80%
Invest in the areas whichyou can understand
Diversification
Monitor risk
Preference to liquidity
Link to goals andobjectives
Industry focus / businessfundamentals
Importance of the team
Active business is aprerequisite for growing
wealth
"Entrepreneurs" "Investors"
27
8 most common investment beliefs
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Diversifi-cation
Invest in the areas which
you can understand
Industry focus /
business fundamentals
Link to goals and objectives
Importance of the team
Preference to liquidity
Monitor risk
Active business is a prerequisite for growing
wealth
«Investors»
«Entrepreneurs»
Correlation between investment beliefs
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Industry focus / business
fundamentals
Preference to liquidity
Diversification
Invest in areas which you can
understand
Correlation with satisfaction with
investment results
- 19%
22%
- 40%
21%
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30
Service Infrastructure
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On average a Russian wealth possessor is serviced by several Russian and international banks
Differing and even opposing views on service quality in Russian and international banks
Bank changes are relatively rare
Private banking experience
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Unsatisfactory service
High client manager turnover
Low level of professionalism
Main reasons for changing private
banks
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Impact of “deoffshorization” on the size
of financial assets kept in Russia
No impact
Increased
Decreased
28,6%
3,6%
67,9%
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34
Succession
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Legacy
Succession
Inheritance
Key succession strategies
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Planning horizon > 10 years
36
15%
23% 28%
44%
0%
10%
20%
30%
40%
50%
2014 2016
Business Family
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37
30% 39%
18,5%
0%
20%
40%
60%
80%
100%
Business succession plan 2014 Wealth succession plan 2014 Succession plan 2016
No / Never thought about that Some initial thoughts Broadly defined Detailed
Is there a succession plan?
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75% 35%
15% 25%
Trust Will
Prenuptial
agreement
Special types of
insurance
Succession mechanisms used
13% Private / family
foundation
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72% launched businesses together with partners*
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* Number identical in both the 2014 and the 2016 studies`
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40
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
For the next 5 years After 5 years
Will continue to be the owner
Transfer to the family
Sale to an outside investor
IPO
Don't know
Plans regarding «core business» ownership
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41
0% 10% 20% 30% 40% 50% 60% 70%
Yes, as board members
Yes, as employees
Yes, as shareholders
No
Are family members involved in the
business
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42
Use of shareholder agreements
0% 10% 20% 30% 40% 50%
No
Oral agreement
Written, but informal agreement
Shareholder agreement under Russian law
Shareholder agreement under English law
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43
Personal success factors
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Ability to learn something new
Right choice of industry / niche
Caliber of personality / personality traits
Right choice of partners / team
Factors influencing personal
success
Moscow School of Management SKOLKOVO • SKOLKOVO Wealth Transformation Centre (SWTC)
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In my line of business [finance] a
lot was defined by mere
probability to become successful
rather than by any exceptional
personal qualities. Advantages of
the best are made by the faults
of the worst.
I was smarter, stronger,
had wider vision. I
exceeded my peers by
any competitive
characteristic there is.
«
»
«
» I hired smart people.
Tried to deal with
professionals.
« »
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Conclusions
Moscow School of Management SKOLKOVO • SKOLKOVO Wealth Transformation Centre (SWTC)
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1.
Two opposing investment philosophies:
“entrepreneur” and “investor”
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2.
Percentage of “investors” is already
significant
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3.
Even “entrepreneurs” already have a
sizeable portion of their wealth in liquid
assets
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4.
The level of service and
professionalism is the key factor
influencing loyalty to financial
institutions
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5.
Given complexities of the Russian
context succession issues require
special attention
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SKOLKOVO Wealth Transformation Centre (“SWTC”) is a pioneer in research and education in the areas of family governance, asset and wealth management, transformation and succession challenges faced in the Russian and CIS context by business families, their family offices, service providers, including private banking, philanthropic organizations, regulators and academia. SWTC published the first comprehensive studies of Russian wealth possessors: «Russian Wealth Possessors’ study 2015» and «Family offices in Russia: Myths and Facts». SWTC also runs its annual “Successors’ Academy”, the only educational program in Russia on succession issues for the second generation of Russian wealth possessors (https://successors.skolkovo.ru/). SWTC experts regularly advise financial institutions on Russian clients service strategy, as well as advise family offices and UBOs n the best practices in succession, family governance and philanthropy. http://wtc.skolkovo.ru Moscow School of Management SKOLKOVO is the leading private business school in Russian and CIS founded in 2006 by members of Russian and international business community http://www.skolkovo.ru