Differing fortunes

Here at Finance Feeds, we are passionate about the intersection of finance and technology and the interplay between those two sectors, the boundaries between which are becoming less distinct.

The world of finance has a longstanding reputation for wealth creation for both business owners and entrepreneurs, though in recent years rising costs, reduced profit margins and increased competition have made that wealth much harder to accrue.

A report that was originally published and perhaps overlooked earlier in the year resurfaced this week helped put that trend into context.

The UBS PWC report, released under the title Riding The Storm provided an insight into how billionaires have fared during the market turbulence seen in 2020. This represents the seventh report in the series and covers a research universe of 2000 of the worlds richest people, spread across 43 markets throughout the Americas, EMEA and APAC, where 98% of the world billionaires can be found.

This year’s report was compiled after a period of research that ran until the end of July and as such, it captured the first half of 2020 including the market sell-off and subsequent sharp rebound.

The 40-page report is filled with interesting snapshots and information about the super-rich, but some of the most compelling data revolved around the differing fortunes (quite literally in many cases) between billionaire in different industries and sectors.

For example, the combined wealth of billionaires within the financial services industry has been estimated at $229.1 billion, whilst technology billionaires included in the survey had a combined wealth of $565.70 billion.

The growth rates for wealth also varied dramatically between the two sectors with tech billionaires enjoying growth of 41.1% compared to just 12.8% among the financial services peers.

2020 has been a year in which many financial service businesses have experienced dramatic growth in both client numbers and trading activity, although that has not filtered through into the net worth of business owners in the same way that it has in the technology sector.

Technology stocks, of course, have had an extraordinary performance in 2020 with Nasdaq 100 up by 42.80% year to date, in contrast, the S&P 50o Financials sector is down 7.20% over the same period.

The UBS PWC report highlighted one of the main causes of these disparities, saying that “Scientists, computer programmers and engineers are revolutionizing industries at a pace never seen before. Their sphere of activity is spreading from the tech and healthcare sectors to disrupt many parts of the economy. As they apply emerging technologies to drive change, some of them are becoming billionaires.”

It seems that even the richest among us are not immune to disruption.

There are lessons here for the trading and brokerage industries, the most obvious being that companies will need to innovate to survive, and that simply being a reseller of other companies’ liquidity and trading environment will no longer be good enough.

It is clear that we will see a further polarization between those who are prepared to innovate and create their own technology and solutions, or perhaps partner with, or buy up fintech and those businesses that remain rooted in the past.

The future does not look very bright for those who choose to remain in the latter group.