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Understanding Three Types of Wealth: Made, Paid, and Inherited...

Wealth can be classified in various ways, but one of the most insightful classifications is based on its origins. Knowing people's sources of money is essential not just for AML but also for a home seller and buyer's mindset.
Understanding Three Types of Wealth: Made, Paid, and Inherited...
8.9 million people in the UK can be classed as wealthy in that they have significantly higher primary property prices and/or incomes than the population. This wealth can be divided into three main types: entrepreneurial (made), corporate (paid), and inherited. 

Made wealth is entrepreneurial wealth. It comes from personal business ventures and innovation. Entrepreneurs build their fortunes by starting and growing businesses. They do this despite significant risk and uncertainty. 

Self-made millionaires and billionaires create this type of wealth. They find gaps in the market and use their ideas, skills, and determination to create successful businesses. Examples include Sir Richard Branson, who founded the Virgin Group, and James Dyson, the inventor and founder of Dyson Ltd. Both individuals exemplify entrepreneurial wealth through their innovative products and global business ventures. This cohort is about 671,000 (8%) of the wealthiest people in the UK.

Paid or corporate wealth is accrued through high-paying positions within established corporations. It is shared among corporate executives, senior managers, and finance and law professionals. Unlike entrepreneurial wealth, paid wealth is more stable and predictable. 

High-profile examples include Dame Carolyn McCall, CEO of ITV, and AstraZeneca Plc's Pascal Soriot - the highest-paid CEO in the UK at £16.9 million. They have earned substantial wealth through their professional expertise and leadership roles at major companies. This cohort is the largest, at about 7.2 million (81%) of the wealthiest people in the UK.

Inherited wealth is passed down through generations within already affluent families. It can come from many sources, including family businesses, investments, and real estate. Inherited wealth is not about personal achievement. It's about stewarding family assets. The Duke of Westminster is probably the most prominent example. He inherited one of the largest estates in the country, including much of prime central London. The Grosvenor and other aristocratic families have kept wealth for generations. This cohort is about 987,000 (11%) of the wealthiest people in the UK.

It's worth noting that we are currently witnessing the most significant transfer of wealth between generations in history. This "Great Wealth Transfer" sees the Baby Boomer generation passing substantial assets to their heirs, primarily Generation X, Millennials, and Generation Z. 

Baby Boomers and the Silent Generation are estimated to transfer approximately £5.5 trillion over the next 30 years in the UK. Wealth transfers are expected to peak around 2035. That's £620,768 on average for every one of the 8.9m people mentioned above. The average net worth per person in the UK is approximately £172,000. 

Strap in. This is a monumental economic event with far-reaching implications for individuals, families, and the broader economy - an event coined the "Inheritance Economy."

The distribution and origins of wealth have profound implications for society. Wealth creates opportunity and mobility. It lets some individuals achieve success through innovation and expertise. In contrast, inherited wealth shows the role of legacy and family in keeping wealth. These are very different mindsets.

The implications for marketing and buying or selling properties are significant. Wealthy people may be more inclined to invest in commercial properties. 

Entrepreneurs like innovative real estate ventures that promise high returns. They are willing to take risks and have an entrepreneurial mindset, which leads them to seek unique and profitable property investments.

On the other hand, people with paid wealth prefer stability. They may focus on buying homes in established, high-value areas. They often buy based on location, security, and long-term value.

Inherited wealth influences property markets differently. Families with generational wealth often own many residential and commercial properties, often in large portfolios. They typically buy and sell based on the goal of growing and preserving family assets, and they do so for the long term. They might invest in prime real estate and heritage properties, which will increase in value over time. 

These wealth dynamics are crucial for marketers and real estate pros. They tailor their strategies to meet the needs of different types of wealthy clients.

Wealth can be classified into made, paid, and inherited. This offers valuable insights into how people and families accumulate and keep wealth. Wealth comes from entrepreneurial ventures, corporate careers, or family legacies. Each type of wealth plays a distinct role in shaping our economy and mindset. Recognising these differences helps you understand how wealth is created and its impact on behaviour. This is especially true in marketing and property sales.

Simon Leadbetter, Unchained.Marketing