Blogging from the Luxury Summit: Robert Frank Keynote Speech
Greetings from the American Express Publishing Luxury Summit at the Four Seasons in Westlake Village, California. Last night, I attended the opening dinner. After a meal of an amuse of golden tomato gazpacho, crab beignet with lemon aioli and chicken oyster with wild rocket followed by a Santa Barbara lobster tart with morel mushroom sauce, assorted asparagus celebration paired with the 2005 Cambria Bench Break Chardonnay and then a veal tenderloin with pan-seared foie gras, potato savory caramelized vegetables in a port wine sauce paired with the 2003 Atalon Merlot, it was time to tuck in the words of the keynote speaker Robert Frank. You may have read Frank's work either through his blog for the Wall Street Journal, The Wealth Report, or his popular book Richistan,. Richistan is Frank's name for the world that the wealthy inhabit, a world that coexists with the normal world but also has its own rules and peculiarities. Frank's focus for this particular audience was on how businesses can best market to the rich, especially in this changing economic climate.
For the wealthy, Frank says,right now it's not about the money it's about the mood. What the wealthy value in their staff is the idea of the genuine relationship, of having staff who not only anticipate their every desire but do so in a way that shows that they are inspired, proud and happy to provide that service. This year more than any year is about the genuine relationship: between the wealthy and the larger world and between the people who serve the wealthy and their clients.
What is the future of the wealthy in this recession period? Right now there is still a lot of wealth out there. In the U.S. there are more than 9 million households with a worth of $1 million or more and 1.5 million households worth $5 million or more. As Frank noted in his book, more than $17 trillion in wealth is held by the top one percent. But there is no denying that there is a shift in the making. Over the last six months the trend has moved toward valuing experience and ideas over material goods. Perhaps it is a function of the aging of America, but there is more focus on a person's legacy, moving away from wants and toward needs, from conspicuous consumption to conscientious consumption. One of the most interesting things Frank has observed about the new wealthy is that because they were raised middle-class and created their own wealth they don't see themselves as rich. They often associate being rich with a certain level of snobbery, arrogance or decadence, traits they do not see in themselves. Frank used a term I hadn't heard before YAWN (young and wealthy but normal). While those in the middle class aspire to be and act wealthy those who are wealthy want to pretend they are middle class. At other periods in time, the wealthy have made a great display of their spending power but currently people are engaged in a trend Newsweek talked about last June, stealth wealth, spending money in ways that are less ostentatious. The money is still getting spent, just not in ways that are easily seen.
One trend that relates to the idea of leaving a legacy is the that the wealthy are downsizing and "decluttering" their lives. Instead of having huge homes that require large staffs they are trying to find ways of using their money that don't involve being a slave to their possessions. This is one of the reasons that adventure travel and educational vacations are booming currently, people are looking for the unique experience, for the things that enrich their lives without adding to the burden of possessions. Recently we mentioned an article that stated that despite the slowing economy individuals aren't ready to give up flying in private jets, this relates directly to the trend of life enrichment, it turns out that the lure of the private jet isn't just that it is luxurious but that it makes life better by offering convenience and saves the commodity that we all have the same amount of, time. The wealthy don't want to take care of their things they want to be taken care of, using their money to improve their health, their intellectual growth and their overall quality of life. This relates to the question of philanthropy as well. Whereas people were once content to write a check, now they want an experiential value for that money. They want to see the money in action, learn more about how it is being spent, and be part of the experience. The experience of philanthropy is a big trend with people like Oprah Winfrey, Bill Gates and Warren Buffett not just giving money but being directly involved in the process and getting benefits that go beyond a tax break.
Of course any talk about trends would not be complete without a nod to climate change. For now it seems the rich are trying to find the balance between living well and living green. The rich are becoming acutely aware of their carbon footprint especially as it relates to water and energy use. This has lead to the rise of the large "eco-mansions "such as the Windermere development we talked about recently. Personal carbon offsets are used as a way to still be luxurious and have a pleasant life but not be seen as a toxic polluter.
Overall, what matters to the wealthy now is self-growth and access, the quest for unique experiences, True luxury has a story that goes deeper than the label, the emphasis is on the value, that you are buying something that is not just pricey but that has worth because of its age, scarcity, history and intrinsic quality. Frank charted three phases of wealth: acquisition, self enrichment and leaving a legacy (philanthropy, taking a global view etc). As he sees it, as a culture the wealthy in the U.S. are currently finding their way through self-enrichment and just starting to move into the last phase of leaving a legacy.