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Private Investments And Private Wealth

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Albert Alley
Private Investments And Private Wealth

Most big money was created through equity, which means there’s a centuries-old relationship between entrepreneurism, ownership, and wealth. These associations have evolved with time but still remain largely in place as more private wealth is created through the formation of start-ups, aided by the buoyancy of the private capital markets. Understanding and supporting these dynamics can be an important key to developing relationships with the truly rich.

One of the most telling and significant findings to come from a large-scale luxury research project with private jet owners, a group of people with annual incomes of almost $10 million and fortunes of nearly ten times that amount, was that more than three-quarters of them attributed their wealth to equity. That is, owning something (say a company, an idea, or a product) that either produces income or can be sold to another entity in a private or public transaction to generate proceeds, and is often a critical mechanism in amassing substantial wealth

Private operating companies take many forms, but often much of the owner’s personal wealth is intertwined with the company for as long as he or she retains control (and sometimes for many years after). As such, the wealth is not in the form of cash but rather in the form of the company and its assets. “A lot of private wealth is illiquid and concentrated and, depending on the exact nature of the situation, may also be uninsurable, unhedgeable and unregulated,” explains Hannah Shaw Grove, senior vice president at iCapital Network and co-author of Maximizing Personal Wealth: An Advanced Planning Primer for Successful Business Owners. “Generally speaking, business owners and entrepreneurs have a high comfort level with this form of ownership, risk and illiquidity.”

 

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Albert Alley
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