In the money: The world of wealth

By MICHELE HEWITSON

Rich is relative, right? A top-of-the-range Ferrari will cost you more than half a million but having enough to write the cheque - if that is all you have in the bank - does not mean that you are rich.

Consider this: the wealthiest 10 per cent of New Zealanders hold 53 per cent of the country's wealth. And this: the Inland Revenue Department is conducting a little fishing exercise focusing on high-wealth groups.

Within that group, on a list known as the Top 100, are companies and trusts, but also individuals or family groups with worth, or control of net worth, in excess of $50 million.

People like this have a label all their own. They are known as High Net Worth Individuals (HNWI) to the IRD and to their private bankers and investment managers. In colloquial terms: they are the Filthy Rich.

How are you feeling now? A bit, well, poor? There is more bad news: those HNWI targeted by the IRD are not - or not necessarily - the really, really rich. Like icebergs, what you can measure is what you can see: the car, the house, your place on the A-list.

The real wealth - our total net worth is $363 billion - lies far beneath the surface. Down there in the depths, as economist Brian Easton says, it is "very difficult to get the data. And most of it is very mucky, actually."

And murky. Treasury estimates of projected income for the 1992/93 and 1999/2000 financial year give a blurry snapshot. In 1992/93 there were an estimated 19,000 of us earning more than $100,000 a year, a total of $2.9 billion. In 1999/2000, 41,000 of us earned more than $100,000, a total of $7.8 billion. Note that these figures are estimates and projections.

It is murky for a reason. Those who deal with the very rich can't afford to be seen to be dealing with the very rich.

Perhaps the concept of wealth really means that money can buy you ultimate privacy. The IRD is not going fishing for the fun of it.

In the world of HNWIs the conditions of the deal with their money managers will always include a confidentiality clause. How confidential? An asset manager who works for a firm whose minimum investment portfolio requirement is half a million is happy to talk, on the condition that the company is not identified in any way. Clients don't "feel comfortable seeing our name out there".

He says defining wealth today is difficult. A decade ago, when interest rates were 9 per cent, a million and a half was worth having. Today, if we're talking about a graceful retirement, and excluding your property investment, this money manager reckons about four million would be the minimum. Retire with a million and at 5 per cent interest you will have an income of $50,000 a year.

But he says you would be "amazed at the number of people who have half a million in cash floating around. And a lot, lot more."

Where is the money coming from? Trade sales to overseas business. Cash flow from well-run private business. In the past exit strategies out of private business tended to be driven towards listing on the stock market and floating the business, getting your capital out.

For various expensive compliance cost reasons and the performance of the domestic equity market, this option isn't as attractive, he says.

There is another reason: float and more of your iceberg will be seen above the surface. A lot of wealthy individuals just don't want the publicity, say those who work with wealthy individuals.

Says Simon McArley, a partner at Kensington Swan who has been in the business of tax law since 1985, today's wealthy "have less history and take less time to get there. It's not that they built up the family hardware business into a huge conglomerate. They had a good idea and sold it."

The money mix is also made up of IT dollars, although everyone is waiting for the next big idea to disprove the theory the bubble has burst.

The asset manager cites Peter Maire who sold 70 per cent of Navman to NYSE-listed Brunswick for $56 million. Maire was a big shareholder. Neville Jordan of Endeavour Capital sold MAS Technology to the Americans for more than $100 million.

Sean Dick, Martin Oxley, Kevin McFall, the directors of Marshal Software sold last year to the Americans for $45 million. These are hardly household names, but they are names.

A significant aspect of wealth - or relative wealth - is coming from inheritance tied to property prices. Those inheriting that money from parents who have hung on to property in prime areas now find themselves with nice little sums to invest. They are unlikely to make the business pages.

You can't live in Auckland and talk about money without getting to property. But the whole definition of what it means to be wealthy has undergone radical changes - and not merely in dollar terms.

If a commodity is only worth having if you can see it - that's why we love property - what price the intangibles like health and lifestyle?

Wealth is not simply about money any more. Howard Paterson, who was worth around $120 million, and who died in Fiji choking on a chip, is mentioned by many. "Having $120 million is worth nothing to you when you're dead," says one.

And says entrepreneur Murray Thom, "You can pretty much identify the ones chasing money for money's sake. They're the most miserable people you'll ever meet."

If money can't buy you happiness - or mortality - it can buy you peace of mind. Paul Holmes' 10ha of olives in the Hawkes Bay is an investment but also a place he loves to go to potter. John Hawkesby's vineyard on Waiheke Island is an investment. It is also a lifestyle choice. We're a country which is used to the idea of our very rich wearing gumboots.

When Kensington Swan's McArley began as a tax lawyer, "most of our wealthy private clients were either land-owners or the silver-spoon set. Not so much property developers as farmers."

Ben Elliott, who holds a newly created job with Westpac with a wonderfully grand job title - Head of Wealth Distribution - says the traditional idea that wealth equals investment is no longer necessarily the case.

"For all of us I think wealth is about protection." Yes, he is selling you something here, but it's an indication of changing attitudes to wealth that Westpac research shows what people want from their banks is changing.

"It is also about saying that you might be a business owner and the key to your wealth is health. Or the key to being able to deliver for your customers is the ability for you to continue operating in the business."

He says New Zealanders are on average wealthier than ever. On paper, we are - and we're not.

There is a shift in middle-class aspirations towards what were once the lofty domains of the rich: private schooling, million-dollar houses, an overseas holiday every year. The middle classes, says Elliott, now know the difference between fixed and floating home rates, an investment loan and a non-investment loan (Gosh. Really?)

They have been educated well: "There's been enough Location, Location, Location and money shows on TV." The sharemarket, the property market or dropping the name of your private banker is "a good barbecue conversation".

Up here, in the rarefied air of high-level banking on the 15th floor of the PriceWaterhouseCooper tower, the couches are leather, the art is modern and the view is a million-dollar one: over the harbour past the Hilton and out to Rangitoto. It smells of aspiration.

This is what you get when your bank regards you as a HNWI. The middle classes now want their bank to be "a broader business partner".

Lucky HNWIs you might think. Do we actually have more spending power? "We haven't," says Elliott emphatically. "It's all very well to grow the value of your property from $400,000 to $800,000. But this whole wealth business - as much as this sounds like an odd statement to make - is virtually useless until you need to convert it into spending power."

Property, according to Elliott, is an enigma. It is why you might think you are rich. It is also why you will only ever be rich on paper. Or why you have a chance to get very, very rich.

Being wealthy, he says: "It's about being able to spread your risk."

Still, "Property. Property. Property," says Gaynor. "It's really where the money is being made. In Auckland it certainly is."

It seems so 80s. Gaynor says the difference is that the real property boom is not as visible as when the glass towers and cranes loomed over Auckland. Now it's in residential property and shopping centres out in the 'burbs.

Brian Gray, chief executive of Premium Real Estate in Takapuna, says wealth and real estate values are all relative. He can remember the "hooha" when Premium sold their first million-dollar house in 1985.

In the past financial year the firm sold more than 100 properties for a million, including 20 for more than $2 million, about six for more than three million, two or three for more than four million.

We have all, including Gray, long since settled down about such figures. But, still, he says, "it's a fairly wild growth from one million in 1985."

In any case, a million or six, it's the same old story. Often million-dollar-plus properties will change hands without ever coming on to the market. The rich don't particularly want the rest of us to know what they paid, or how much they're selling for.

People with money, from Sir James Fletcher to John Banks to Murray Thom, say they are not really rich. The rich will always point to those richer than themselves.

Who are the rich? Always someone else.