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A timeless classic in a new way

Yan from Owner.One

81.6% of capital owners do not share details about assets with their family members. They view early disclosure as risky, while understanding that late disclosure is simply impossible. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. In the event of an emergency, conveying all necessary details to family members can be challenging or impossible. Many believe that existing methods are either unreliable or cumbersome. However, the solution can be simple: grab a sheet of paper and a black marker. Write down a list of your assets, capital, and their locations. Make several copies of this document. Use a black marker to obscure different parts of the information on each copy (this can also be done digitally in MS Word). To ensure the information cannot be read through the redactions, photocopy these documents again. Distribute the lists to different family members. Now, your family has crucial information that they can use in a critical moment, but they will need to come together to combine the pieces of the puzzle. Risks: this method is not perfect, but is certainly better than having no plan at all. It works best if the family members are in reasonably good relationships with each other.

Expand

Playing by one side’s rules

Yan from Owner.One

42.8% of wealth owners are not aware of KYC risks and issues related to banks’ KYC (Know Your Client) procedures. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. Don’t get complacent, if you pass bank compliance when opening an account. Banks regularly conduct reviews of their clients and send requests for additional documentation. They may ask for statements or recommendation letters. Get ready for it in advance; otherwise, you may not have sufficient time to gather the necessary documents, leading to the refusal of transactions. To stay ahead, request recommendation letters, annual, and semi-annual statements from all banks where you hold accounts every six months. Typically, bank inquiries cover the current and previous year, and recommendation letters are valid for six to twelve months. To save time, create a template that can be sent to all relevant banks. Most banks accept free-form requests, but some may require you to use their specific templates. In such cases, you’ll need to send separate requests.

Expand

Rhino running

Yan from Owner.One

A rhinoceros runs fast and sees poorly, but its weight makes it a problem for anything in its path. Banks and partners don’t listen to you; they evaluate a person based on their digital profile. Services such as World-Check or Lexis Nexis are the sources of this data. These platforms were created to check counterparties for involvement in illegal financial activities. However, in reality, they contain information on millions of people. These services are often associated with scandals and data leaks, unjust categorization of individuals as suspicious, and the inclusion of data from irrelevant sources, yet they continue to be widely used. Do not leave this issue unattended. Request information about yourself regularly, at least every six months. You don't need to have done something wrong; it's enough for the World-Check algorithm to flag you as suspicious, or for someone in your contacts to be linked to questionable transactions. There's also the risk of database errors or incorrect interpretations. World-Check is a black box that significantly impacts your capital and assets, potentially leading to loan refusals, blocked transactions, denied bank accounts, and even revocation of residence permits or citizenship. Bank compliance departments work solely with documents and digital traces, so if you face unexplained refusals or biased treatment, World-Check could be the reason.

Expand

The rearview mirror or the history of your money

Yan from Owner.One

92% of capital founders underestimate the importance of Source of Wealth Essay (SoWE) with a proof of Continuity of Ownership. They consider it to be a document of little importance. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. Recently, banking compliance procedures have become increasingly stringent, and it is likely that they will only get worse in the future. Primarily, they request documents proving the continuity of ownership. (Continuity of ownership refers to the history of the origin of your wealth). The timeframe for these requests has also changed: initially, regulators were interested in information from the past 6 months, then from the past year, and then from the past 3 years. These days, you may be required to provide data from the past 10 years. If you have not yet recovered your data, each day you wait only worsens your situation, as your data becomes outdated while the depth of bank inquiries increases. If you do not start addressing this now, eventually these two trends will intersect, and you will find yourself in an untenable situation. Start by recovering copies of documents from the past three years and then delve deeper. Recovering some documents may be difficult or impossible, but by starting this process now, you will already be ahead of many. * Continuity of ownership - the history of all your assets

Expand

Red button

Yan from Owner.One

93% of wealth owners admit that they have no understanding of how their family will act in the event of force majeure. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. In the subway, on trains, and at workplaces, there is always a red button for emergencies. In human life, the variations of unexpected events are much greater. Nevertheless, statistics show that 99.2% of wealthy families do not have a precise action plan for emergencies. Have you thought about what you will do and what plan your family will follow if such an event occurs? To avoid being part of this majority statistic, prepare in advance by developing several future scenarios. Even a simple list of basic actions and assets will prepare you and your family for the most unexpected events. Remember to update the plan every six months. In the event of your sudden absence, the survival of your entire family and the preservation of assets will entirely depend on having clearly formulated and planned actions.

Expand

Ski slopes

Yan from Owner.One

Only 4.02% realize that if their bank requests verification of a frozen transaction – they will have just three days to provide the documents. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. A black slope can be easier with good snow than a blue slope with bad snow. Often, the reasons behind account freezes or bank-canceled transactions are not immediately clear. Regulatory criteria for deeming client transactions suspicious are vague. Sometimes, this judgment is made because a client has a large number of diverse transactions. This can lead to a transaction freeze and a request for additional documentation. To avoid this, separate your bank accounts by transaction types, and ideally, conduct different types of transactions through different banks. This reduces the frequency of regular and unexpected requests and helps you manage and respond to bank inquiries. For example, use separate accounts for dividends, current expenses, bonuses, and investment income. This approach saves time, is convenient, and reduces compliance risks. Of course, dividing assets among multiple accounts and banks may increase the complexity of financial planning. Additionally, if you mistakenly mix up the accounts and conduct an atypical transaction, the regulator will likely send you a request.

Expand

Follow the trail

Yan from Owner.One

Private transactions from $134 000 to $4M, often scrutinized for KYC compliance, are mostly initiated by capital founders with assets between $3M and $99M. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. You’ve sent a payment to another country, and it’s taking a long time to reach its destination — this is a common scenario. People check the status of the payment with the sending bank, not realizing that there can be at least four intermediaries involved in the payment chain. If any bank in this chain holds the payment longer than usual, it’s highly likely that you’ll be required to provide more detailed KYC (Know Your Customer) data next time, even if the payment goes through this time. To be prepared and to track your transactions, you can use services to monitor SWIFT payments. These services track the status of your cross-border transactions in real time and notify you of any delays. You can subscribe to paid versions or use free alternatives available online or through Telegram bots. If you don’t want to spend time on this, you can delegate the task to assistant, who can also monitor the transactions. However, keep in mind the risk of disclosing confidential information, as the data will show either the amount or the purpose of the transaction. Additionally, a major drawback of these services is that they provide data only in real time and do not maintain statistics for individuals.

Expand

The “Alien - Own” strategy: securing your family’s future

Yan from Owner.One

92% of additionally surveyed lawyers claimed that in many cases having detailed information about assets is more important than having documents. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. In today’s world, our lives are diversified not only by types of assets, but also by the jurisdictions where these assets are located. Does ownership of an asset give you your own rights and how can we transfer this capital to heirs without causing them headaches? What rules will govern the inheritance of these assets? The simplest solution might be to draft a will for each individual foreign asset located in its respective country. To create this document, you usually don’t need to travel; in most cases, it can be done at a consulate without the other party’s presence. The key is to plan how to transfer this information to your family in the event of an emergency. Keep in mind that inheritance can be a lengthy and costly process, and until it is finalized, your heirs will have limited access to the assets. This poses a risk of improper management, potentially leading to asset loss. Additionally, inheritance may be subject to high taxes in the relevant country, adding to the financial burden.

Expand

SWIFT

Yan from Owner.One

Few people closely track the movement of their international payments through SWIFT trackers (many of which are publicly available). However, it's worth doing, as the information obtained can signal potential problems ahead. For example, when you send a USD payment from one country to another, it likely passes through a chain of banks, usually between 3 to 5. If the payment gets stuck at one of them, it’s likely that this bank has compliance or KYC-related questions for the sender. In such a case, the bank sends a request to the previous bank in the chain, asking for the sender's client profile. They receive information about the sender’s identity and finances, conduct their own analysis, and then either process the payment or return it. In some cases, they may even freeze the payment. If a gray-area or illegal payment passes through the banks, all the banks in the chain can be held responsible. This is why they are keen to check every payment—no one wants to be the last in the chain if the next bank blocks the payment. It is generally believed that if not for KYC checks, payments would go through almost instantly. If such a request is made by the bank holding up the transaction, all banks in the chain will be aware of it. There's a high likelihood that your sending bank will take notice and start monitoring your future transactions more closely, or even initiate a more thorough review of your entire profile. It's important to track payments and know where they are held up and for how long, even if they eventually go through successfully. This task can be delegated to an assistant, as some SWIFT trackers allow tracking by payment number (without revealing the amount or purpose), so you can maintain anonymity within your circle. It’s crucial to have a well-prepared client file with each of your banks. But that’s a topic for another note.

Expand

Cryptocurrency

Yan from Owner.One

I have nothing against crypto. Quite the opposite. But everything must be done carefully. What’s the main issue with large-scale crypto transactions? Statistics show that in 91% of cases, transitioning from traditional fiat money to crypto and then back again breaks the chain of continuous ownership. After that, the freedom to move capital significantly decreases. Why? Let’s say you have a sum of money, for example, $1M in dividends from your business. You have all the necessary documentation, which makes you a respectable capital owner in the eyes of banks. Now, you decide to purchase cryptocurrency, such as Bitcoin or USDT. The purchase of crypto is a standalone transaction. Later, when you exchange crypto back into traditional currency (whether tomorrow or in a year, but at some point, it will happen), that will be a separate, independent transaction. These two operations are not formally linked in any way. As a result, you exchanged capital with a clean history for crypto, but when you exit, you lack supporting documentation. Your chain of continuous ownership is tragically broken. For small amounts, this isn’t a big deal, but for large amounts, it becomes a problem. Any bank is highly cautious of such funds. When conducting a transaction, the receiving bank will also require a history of ownership, and the lack of it will be a red flag. In the end, you’ve turned an asset into capital that is difficult to move around the world. Justifying the source of funds and maintaining ownership continuity is one of the mantras of the modern financial world. Banks want to understand every stage of a client’s сapital accumulation. Not abstractly, but in great detail, tracing the appearance and movement of every dollar. The simple crypto transaction described above is one whose consequences are extremely difficult or impossible to fix. Can it be done differently? Yes, but statistics show that people only worry about this in 9% of cases.

Expand

Vertical and Horizontal Family Capital

Yan from Owner.One

There are many myths and illogical behaviors among wealthy families in our field. Many of these have been analyzed in Penguin Analytics. One such myth goes like this: when money passes from hand to hand within a family, it's a vertical transfer (to children). Over 90% of our respondents and clients believe this to be true. This is not the case at all. In most situations, the transfer is not vertical, but horizontal (to spouses). This occurs both in planned and unexpected transfers. According to estimates from various analysts (Owner.One, UBS, and local banks), the volume of capital that will change hands within families over the next 10-20 years is projected to be between $75-95 trillion. Moreover, in the coming years alone, horizontal transfers (to spouses) will account for around $8-10 trillion of this capital and asset movement. Projections indicate that this capital will remain at the horizontal level for another 10-15 years before it is transferred vertically (to children). What are the conclusions? In most cases, part of the capital is lost during the transfer from one hand to another (not afterward, as is commonly believed). As a result, the actual loss rate doubles. The founder of the capital needs to pass on not just the capital itself to family members but also its detailed and formalized history since its inception. The increasing compliance and KYC (Know Your Customer) requirements of financial institutions make it extremely difficult, even for the founder, to reconstruct the capital’s history. Without their involvement, it's almost impossible. As a result, family members receive capital that they can use only until the first question arises about its origin. Among capital founders, 42.86% do not know the details of preparing their capital and assets for KYC. Among their family members, a staggering 88.06% are completely unaware of these matters. The problem is exacerbated by the fact that only 4.50% of family heads understand that by doing nothing now, they are merely postponing the issue and passing it onto their family members. How to be prepared for this problem at any given moment is a topic for another post. For now, it’s important to simply recognize that this is a much more complex problem than the physical transfer of capital.

Expand

Bitcoin, US Reserves, and Your Wallet

Yan from Owner.One

Bitcoin (BTC) is slowly but surely carving out its place in the legal world. Fundamental changes that could affect all of us might be coming to the US. Republicans, eyeing a potential Trump presidency (a crypto supporter), have prepared a rather progressive bill. If passed, Bitcoin would become an official reserve asset of the US. This would be just a step away from becoming a tool of monetary policy. If BTC were already considered a reserve asset today, its share would be about 1.8% (with total reserves around $850 billion). Notably, most of this is confiscated from illegal and suspicious transactions. If the bill is passed, the US would purchase an additional 1 million BTC over 5 years, raising its share in reserves to about 8%. So, what does this mean for us? Many wealthy families keep a portion of their wealth in crypto assets. Currently, 4.94%* of wealthy families have such investments, and this number is growing, with increasing allocation of family capital to digital assets. Regulation of crypto transparency has recently been escalating at an exponential rate. The FATF is rapidly and aggressively imposing strict requirements on the crypto market similar to traditional fiat transactions—compliance, KYC, KYT, KYB, AML, and other unwelcome terms. The US is a marker for global financial markets. If (or when?) the bill becomes law, it will give a significant boost to crypto regulation, leading to a rapid end to crypto freedom and the full adoption of traditional financial transaction standards. These are quite strict rules. Those investing in crypto now may face problems soon—problems such as reconstructing the chain of ownership, compliance with KYC requirements, and difficulties in converting crypto to fiat, as well as freedom of capital movement globally. What should you do? It’s wise to start preparing and conducting crypto transactions as if fiat world rules are already fully applicable to crypto. Currently, this approach is used in only 9%* of cases. (*) Statistics are from Penguin Analytics by Owner.One

Expand

A timeless classic in a new way

Yan from Owner.One

81.6% of capital owners do not share details about assets with their family members. They view early disclosure as risky, while understanding that late disclosure is simply impossible. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. In the event of an emergency, conveying all necessary details to family members can be challenging or impossible. Many believe that existing methods are either unreliable or cumbersome. However, the solution can be simple: grab a sheet of paper and a black marker. Write down a list of your assets, capital, and their locations. Make several copies of this document. Use a black marker to obscure different parts of the information on each copy (this can also be done digitally in MS Word). To ensure the information cannot be read through the redactions, photocopy these documents again. Distribute the lists to different family members. Now, your family has crucial information that they can use in a critical moment, but they will need to come together to combine the pieces of the puzzle. Risks: this method is not perfect, but is certainly better than having no plan at all. It works best if the family members are in reasonably good relationships with each other.

Expand

Playing by one side’s rules

Yan from Owner.One

42.8% of wealth owners are not aware of KYC risks and issues related to banks’ KYC (Know Your Client) procedures. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. Don’t get complacent, if you pass bank compliance when opening an account. Banks regularly conduct reviews of their clients and send requests for additional documentation. They may ask for statements or recommendation letters. Get ready for it in advance; otherwise, you may not have sufficient time to gather the necessary documents, leading to the refusal of transactions. To stay ahead, request recommendation letters, annual, and semi-annual statements from all banks where you hold accounts every six months. Typically, bank inquiries cover the current and previous year, and recommendation letters are valid for six to twelve months. To save time, create a template that can be sent to all relevant banks. Most banks accept free-form requests, but some may require you to use their specific templates. In such cases, you’ll need to send separate requests.

Expand

Rhino running

Yan from Owner.One

A rhinoceros runs fast and sees poorly, but its weight makes it a problem for anything in its path. Banks and partners don’t listen to you; they evaluate a person based on their digital profile. Services such as World-Check or Lexis Nexis are the sources of this data. These platforms were created to check counterparties for involvement in illegal financial activities. However, in reality, they contain information on millions of people. These services are often associated with scandals and data leaks, unjust categorization of individuals as suspicious, and the inclusion of data from irrelevant sources, yet they continue to be widely used. Do not leave this issue unattended. Request information about yourself regularly, at least every six months. You don't need to have done something wrong; it's enough for the World-Check algorithm to flag you as suspicious, or for someone in your contacts to be linked to questionable transactions. There's also the risk of database errors or incorrect interpretations. World-Check is a black box that significantly impacts your capital and assets, potentially leading to loan refusals, blocked transactions, denied bank accounts, and even revocation of residence permits or citizenship. Bank compliance departments work solely with documents and digital traces, so if you face unexplained refusals or biased treatment, World-Check could be the reason.

Expand

The rearview mirror or the history of your money

Yan from Owner.One

92% of capital founders underestimate the importance of Source of Wealth Essay (SoWE) with a proof of Continuity of Ownership. They consider it to be a document of little importance. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. Recently, banking compliance procedures have become increasingly stringent, and it is likely that they will only get worse in the future. Primarily, they request documents proving the continuity of ownership. (Continuity of ownership refers to the history of the origin of your wealth). The timeframe for these requests has also changed: initially, regulators were interested in information from the past 6 months, then from the past year, and then from the past 3 years. These days, you may be required to provide data from the past 10 years. If you have not yet recovered your data, each day you wait only worsens your situation, as your data becomes outdated while the depth of bank inquiries increases. If you do not start addressing this now, eventually these two trends will intersect, and you will find yourself in an untenable situation. Start by recovering copies of documents from the past three years and then delve deeper. Recovering some documents may be difficult or impossible, but by starting this process now, you will already be ahead of many. * Continuity of ownership - the history of all your assets

Expand

Red button

Yan from Owner.One

93% of wealth owners admit that they have no understanding of how their family will act in the event of force majeure. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. In the subway, on trains, and at workplaces, there is always a red button for emergencies. In human life, the variations of unexpected events are much greater. Nevertheless, statistics show that 99.2% of wealthy families do not have a precise action plan for emergencies. Have you thought about what you will do and what plan your family will follow if such an event occurs? To avoid being part of this majority statistic, prepare in advance by developing several future scenarios. Even a simple list of basic actions and assets will prepare you and your family for the most unexpected events. Remember to update the plan every six months. In the event of your sudden absence, the survival of your entire family and the preservation of assets will entirely depend on having clearly formulated and planned actions.

Expand

Ski slopes

Yan from Owner.One

Only 4.02% realize that if their bank requests verification of a frozen transaction – they will have just three days to provide the documents. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. A black slope can be easier with good snow than a blue slope with bad snow. Often, the reasons behind account freezes or bank-canceled transactions are not immediately clear. Regulatory criteria for deeming client transactions suspicious are vague. Sometimes, this judgment is made because a client has a large number of diverse transactions. This can lead to a transaction freeze and a request for additional documentation. To avoid this, separate your bank accounts by transaction types, and ideally, conduct different types of transactions through different banks. This reduces the frequency of regular and unexpected requests and helps you manage and respond to bank inquiries. For example, use separate accounts for dividends, current expenses, bonuses, and investment income. This approach saves time, is convenient, and reduces compliance risks. Of course, dividing assets among multiple accounts and banks may increase the complexity of financial planning. Additionally, if you mistakenly mix up the accounts and conduct an atypical transaction, the regulator will likely send you a request.

Expand

Follow the trail

Yan from Owner.One

Private transactions from $134 000 to $4M, often scrutinized for KYC compliance, are mostly initiated by capital founders with assets between $3M and $99M. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. You’ve sent a payment to another country, and it’s taking a long time to reach its destination — this is a common scenario. People check the status of the payment with the sending bank, not realizing that there can be at least four intermediaries involved in the payment chain. If any bank in this chain holds the payment longer than usual, it’s highly likely that you’ll be required to provide more detailed KYC (Know Your Customer) data next time, even if the payment goes through this time. To be prepared and to track your transactions, you can use services to monitor SWIFT payments. These services track the status of your cross-border transactions in real time and notify you of any delays. You can subscribe to paid versions or use free alternatives available online or through Telegram bots. If you don’t want to spend time on this, you can delegate the task to assistant, who can also monitor the transactions. However, keep in mind the risk of disclosing confidential information, as the data will show either the amount or the purpose of the transaction. Additionally, a major drawback of these services is that they provide data only in real time and do not maintain statistics for individuals.

Expand

The “Alien - Own” strategy: securing your family’s future

Yan from Owner.One

92% of additionally surveyed lawyers claimed that in many cases having detailed information about assets is more important than having documents. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. In today’s world, our lives are diversified not only by types of assets, but also by the jurisdictions where these assets are located. Does ownership of an asset give you your own rights and how can we transfer this capital to heirs without causing them headaches? What rules will govern the inheritance of these assets? The simplest solution might be to draft a will for each individual foreign asset located in its respective country. To create this document, you usually don’t need to travel; in most cases, it can be done at a consulate without the other party’s presence. The key is to plan how to transfer this information to your family in the event of an emergency. Keep in mind that inheritance can be a lengthy and costly process, and until it is finalized, your heirs will have limited access to the assets. This poses a risk of improper management, potentially leading to asset loss. Additionally, inheritance may be subject to high taxes in the relevant country, adding to the financial burden.

Expand

SWIFT

Yan from Owner.One

Few people closely track the movement of their international payments through SWIFT trackers (many of which are publicly available). However, it's worth doing, as the information obtained can signal potential problems ahead. For example, when you send a USD payment from one country to another, it likely passes through a chain of banks, usually between 3 to 5. If the payment gets stuck at one of them, it’s likely that this bank has compliance or KYC-related questions for the sender. In such a case, the bank sends a request to the previous bank in the chain, asking for the sender's client profile. They receive information about the sender’s identity and finances, conduct their own analysis, and then either process the payment or return it. In some cases, they may even freeze the payment. If a gray-area or illegal payment passes through the banks, all the banks in the chain can be held responsible. This is why they are keen to check every payment—no one wants to be the last in the chain if the next bank blocks the payment. It is generally believed that if not for KYC checks, payments would go through almost instantly. If such a request is made by the bank holding up the transaction, all banks in the chain will be aware of it. There's a high likelihood that your sending bank will take notice and start monitoring your future transactions more closely, or even initiate a more thorough review of your entire profile. It's important to track payments and know where they are held up and for how long, even if they eventually go through successfully. This task can be delegated to an assistant, as some SWIFT trackers allow tracking by payment number (without revealing the amount or purpose), so you can maintain anonymity within your circle. It’s crucial to have a well-prepared client file with each of your banks. But that’s a topic for another note.

Expand

Cryptocurrency

Yan from Owner.One

I have nothing against crypto. Quite the opposite. But everything must be done carefully. What’s the main issue with large-scale crypto transactions? Statistics show that in 91% of cases, transitioning from traditional fiat money to crypto and then back again breaks the chain of continuous ownership. After that, the freedom to move capital significantly decreases. Why? Let’s say you have a sum of money, for example, $1M in dividends from your business. You have all the necessary documentation, which makes you a respectable capital owner in the eyes of banks. Now, you decide to purchase cryptocurrency, such as Bitcoin or USDT. The purchase of crypto is a standalone transaction. Later, when you exchange crypto back into traditional currency (whether tomorrow or in a year, but at some point, it will happen), that will be a separate, independent transaction. These two operations are not formally linked in any way. As a result, you exchanged capital with a clean history for crypto, but when you exit, you lack supporting documentation. Your chain of continuous ownership is tragically broken. For small amounts, this isn’t a big deal, but for large amounts, it becomes a problem. Any bank is highly cautious of such funds. When conducting a transaction, the receiving bank will also require a history of ownership, and the lack of it will be a red flag. In the end, you’ve turned an asset into capital that is difficult to move around the world. Justifying the source of funds and maintaining ownership continuity is one of the mantras of the modern financial world. Banks want to understand every stage of a client’s сapital accumulation. Not abstractly, but in great detail, tracing the appearance and movement of every dollar. The simple crypto transaction described above is one whose consequences are extremely difficult or impossible to fix. Can it be done differently? Yes, but statistics show that people only worry about this in 9% of cases.

Expand

Vertical and Horizontal Family Capital

Yan from Owner.One

There are many myths and illogical behaviors among wealthy families in our field. Many of these have been analyzed in Penguin Analytics. One such myth goes like this: when money passes from hand to hand within a family, it's a vertical transfer (to children). Over 90% of our respondents and clients believe this to be true. This is not the case at all. In most situations, the transfer is not vertical, but horizontal (to spouses). This occurs both in planned and unexpected transfers. According to estimates from various analysts (Owner.One, UBS, and local banks), the volume of capital that will change hands within families over the next 10-20 years is projected to be between $75-95 trillion. Moreover, in the coming years alone, horizontal transfers (to spouses) will account for around $8-10 trillion of this capital and asset movement. Projections indicate that this capital will remain at the horizontal level for another 10-15 years before it is transferred vertically (to children). What are the conclusions? In most cases, part of the capital is lost during the transfer from one hand to another (not afterward, as is commonly believed). As a result, the actual loss rate doubles. The founder of the capital needs to pass on not just the capital itself to family members but also its detailed and formalized history since its inception. The increasing compliance and KYC (Know Your Customer) requirements of financial institutions make it extremely difficult, even for the founder, to reconstruct the capital’s history. Without their involvement, it's almost impossible. As a result, family members receive capital that they can use only until the first question arises about its origin. Among capital founders, 42.86% do not know the details of preparing their capital and assets for KYC. Among their family members, a staggering 88.06% are completely unaware of these matters. The problem is exacerbated by the fact that only 4.50% of family heads understand that by doing nothing now, they are merely postponing the issue and passing it onto their family members. How to be prepared for this problem at any given moment is a topic for another post. For now, it’s important to simply recognize that this is a much more complex problem than the physical transfer of capital.

Expand

Bitcoin, US Reserves, and Your Wallet

Yan from Owner.One

Bitcoin (BTC) is slowly but surely carving out its place in the legal world. Fundamental changes that could affect all of us might be coming to the US. Republicans, eyeing a potential Trump presidency (a crypto supporter), have prepared a rather progressive bill. If passed, Bitcoin would become an official reserve asset of the US. This would be just a step away from becoming a tool of monetary policy. If BTC were already considered a reserve asset today, its share would be about 1.8% (with total reserves around $850 billion). Notably, most of this is confiscated from illegal and suspicious transactions. If the bill is passed, the US would purchase an additional 1 million BTC over 5 years, raising its share in reserves to about 8%. So, what does this mean for us? Many wealthy families keep a portion of their wealth in crypto assets. Currently, 4.94%* of wealthy families have such investments, and this number is growing, with increasing allocation of family capital to digital assets. Regulation of crypto transparency has recently been escalating at an exponential rate. The FATF is rapidly and aggressively imposing strict requirements on the crypto market similar to traditional fiat transactions—compliance, KYC, KYT, KYB, AML, and other unwelcome terms. The US is a marker for global financial markets. If (or when?) the bill becomes law, it will give a significant boost to crypto regulation, leading to a rapid end to crypto freedom and the full adoption of traditional financial transaction standards. These are quite strict rules. Those investing in crypto now may face problems soon—problems such as reconstructing the chain of ownership, compliance with KYC requirements, and difficulties in converting crypto to fiat, as well as freedom of capital movement globally. What should you do? It’s wise to start preparing and conducting crypto transactions as if fiat world rules are already fully applicable to crypto. Currently, this approach is used in only 9%* of cases. (*) Statistics are from Penguin Analytics by Owner.One

Expand

Yan’s Notes

True Story

Analytics

How it works

About us

start using

Contacts

CLIENTS ONLY

True Story

Analytics

How it works

About us

start using

CLIENTS ONLY

Where Do Wealthy People Keep Their Money?

Image

KEY POINTS

  • High-net-worth individuals often follow common misconceptions in assessing asset liquidity in relation to family wealth transfer. In reality, it’s not identical to the ease of transferring assets to the next generation.
  • 31% keep their money in deposit boxes, bank or brokerage accounts
  • Only 3.29% have investments in alternative assets. These include art, collectibles, wines, digital assets, rare cars, and others. 

Wealthy Families: Portfolio structures 

$340,000 per $1,000,000 is an average loss during the family wealth transfer for HNWI and UHNWI families. It can reach 72%-91% for certain asset classes. Overall, these families bear ¾ of all total losses, occurring during the transfer. 

To uncover the reasons behind that, we surveyed 13,500 capital founders from 18 countries. Their net worths range from $3 million to $100 million. The report also analyzes the portfolio structures of wealthy families.

 

TOP 5 MOST POPULAR ASSETS:

  1. Residential real estate - 12,5%
  2. Bank accounts - 12,4%
  3. Brokerage accounts - 10,8%
  4. Stock and shares in private companies - 9,1%
  5. Stock in public companies - 8,1%

TOP 5 RAREST ASSETS:

  1. Family (private) funds, trusts - 0,45%
  2. Tokens secured by physical assets - 0,62%
  3. Rights to intangible assets - 0,65%
  4. Planes, helicopters, yachts, boats - 0,75%
  5. Venture fund investments - 0,83%
    High-nets tend to favor conservative or ultra-conservative portfolio structures. The breakdown shows that respondents hold 53.4% in non-financial assets and 46.6% in financial assets. 

Cash and Cash Equivalents

Market reports identify that rich people allocate 25% to 34% of their assets to cash. This is the most of any asset class. 

In emergencies, access to cash offers the agility for quick decisions. This is why the wealthy often keep much of their wealth in cash and cash equivalents.

Yet, with prevailing inflation rates, the focus on cash diminishes. Inflation erodes money's purchasing power. 

Fact: 4.7% of capital owners know that 22.7% of bank deposit boxes are overdue at any time. Access to them is restricted. Also, 14.2% of deposit boxes worldwide do not have current identified owners.

Risk: 2.6% know that in some countries if a deposit box is not renewed on time, the bank will open it with the police present. To retrieve the money and valuables, you must explain the money’s origin. 

 

Real Estate

Currently, high-nets hold about 12% to 15% of their wealth in real estate.

Often, they first invest in their primary residence. Afterwards, they buy more properties. They typically rent these out. Later, some may add commercial properties to their portfolio. These include office buildings, hotels, warehouses, and more.

Real estate might not offer quick cash. Many people view it as a profitable long-term investment. It also provides reliable passive income for millionaires.

Owning real estate allows for tax-free growth in net worth. Property values are only taxed when you sell.

Fact: About 16% of prestigious homes worldwide are classified as “owner not identified”.

Bonds

Wealthy individuals put 12%-15% of their wealth into bonds. The pro is adding a stable asset to the family portfolio, which generates a steady income stream.

Bonds are considered a safer choice than stocks. The downside is lower returns. 

On the other hand, it's an asset tailored for wealth storage. Some bonds optimize for taxes. Others help to hedge portfolios against inflation.

Risk: Now active bond management might be required from wealth owners due to inflation or political instability.

 

Private Equity and Hedge Funds

Dividend Stocks

Research indicates that UHNWI and HNWI families dedicate 17.2% of their assets to stocks, with which they target two main goals.

First, they aim to expand the share in their portfolio that generates passive income. Dividend-paying stocks complement rental income from real estate.

Second, high-nets focus on diversifying not just their portfolios but also their time. Consequently, they’re on a mission to save room for new experiences rather than dedicating all of their time to managing investments on a daily basis. 

Dividend stocks check all the boxes. Additionally, they offer some tax advantages as well. A long-term investment in stocks also allows their net worth to grow tax-free through capital gains, as profits in appreciating stock prices are only taxed when sold.

Mutual Funds and ETFs

A recent study identifies that high-nets keep a growing portion of their assets in mutual funds and exchange-traded funds (ETFs). Millionaires are attracted to them as a fast-track option to diversify their portfolios and adjust investment strategies to market shifts.

In essence, ETFs serve as an investment vehicle to pick out new assets without the need to directly acquire them. For example, at the beginning of 2024, the first bitcoin ETFs received a greenlight from the U.S. Securities and Exchange Commission (SEC). BTC ETFs allow investors to gain exposure to the price movements of BTC, but without actually holding the bitcoin itself.

In the end, mutual funds and ETFs contribute to building up an extra security layer in the portfolio to mitigate risks. 

Risk: Brokers have legal grounds not to answer the family's requests. They can do so if details are missing. These include account and contract numbers, and specifics of the signing entity. The latter can be challenging. Some brokers manage between 30 to 250 licensed and sublicensed entities. This is especially true when the contract is signed online.

 

Alternative investments

Passion assets, collectibles, crypto, art, fine wines, rare cars, and other alternative investment assets are not a priority for high-nets. Just 3.29% go for them to structure family wealth.

The explanation might be the following. As mentioned above, UHNWIs and HNWIs prefer conservative or ultra-conservative portfolio structures. Most of them have no exposure to alternative investments. They may also feel insecure about locking their fortunes in asset classes where liquidity level might seem challenging to assess in the long term.

Fact: Cryptocurrencies, like Bitcoin and Ethereum, are more volatile than tokens tied to physical assets, like platinum and oil. Meanwhile, they are more popular among our respondents. 4.32% invest in cryptocurrencies versus just 0.62% in asset-backed tokens.

 

4 Key Questions

 

What HNWIs and UHNWIs get wrong in assessing asset liquidity?

People often prefer certain financial assets because they assume they are more liquid than others. High-net-worth individuals believe these assets are quicker to transfer to family members.

In practice, the process is not as efficient as expected. Capital loss risks peak during both planned and unplanned transfers.

Furthermore, the situation has recently become more complex. This is due to KYC requirements. They regulate matters of ownership continuity and sources of wealth origin. The rules get stricter when the founder transfers capital to family and successors.

 

What do millionaires do with their money? What are the most commonly included assets in family portfolios? 

Families mostly prefer cash and its equivalents. 31% keep their money in deposit boxes, bank or brokerage accounts. Real estate makes up 12.5% of their portfolios. Next comes stocks in private companies at 9.1%, and stocks in public companies at 8.1%.

 

What are the less common investment choices? 

Lesser-chosen assets include private family funds and trusts at just 0.45%. Also, tokens backed by physical assets are at 0.62%, and rights to inventions at 0.65%. Planes, helicopters, yachts, and boats are at 0.75%, and venture fund investments at 0.83%.

 

Why is it important to keep up-to-date information on family wealth?

We named our report ‘Penguin Analytics’. Why?

Simply, penguins are remarkable creatures. They are family-oriented. They are highly adaptable to both heat and cold. Penguins swim underwater at speeds of up to 24 to 40 kilometers per hour. 

Yet when they step on a shore, penguins become somewhat clumsy and ultra-slow, waddling at 3–6 km/h at most.

The penguin metaphor reflects UHNWIs and HNWIs owners and the transfer issue. They’re highly skilled people in building the first generation of wealth. 

However, the task of passing it to the next generations within their family is a penguin-on-shore thing to them. The majority show lackluster results. Statistics are not on their side either. 7 out of 10 family wealth transfers fail.

Our report shows that families with a net worth from $3 million to $100 million are most at risk during the transfer. They account for 75% of total losses in this process.

A study indicated that only 2% know that, on average, up to 31% of family wealth is lost during transfer due to gaps in data. 

A report outlines that to transfer assets effectively, you need to know up to 22 attributes for each asset. The founder and family often have a knowledge gap. This troubles families to find and claim assets.

 

Owner.One for Family Assets and Capital Information

Owner.One focuses on enabling families with $3m to $100m in assets to make their wealth transfer-ready. 

Firstly, Owner.One provides them a client-owned hub for wealth data. Contrary to most financial and non-financial services, customers acquire full ownership over it. They would retain access to all their asset and capital information, even if they decide to part with Owner.One.

Secondly, the service equips clients with just-in-time algorithms. They automatically transfer assets and capital information to families and loved ones. Algorithms run on a blockchain. It guarantees no third-party will be involved in the process or gain unauthorized access to sensitive information.

Customers can store, manage, and transfer information on bank and brokerage accounts, real and commercial estate, legal entities, stocks, jewelry, crypto, and commodity tokens. In total, over 40 assets are covered.

For each, there is a specially designed template within the app. Once filled in, it ensures that all the information needed for a successful transfer or KYC procedures is armed and ready.

 

Conclusion

‘Penguin Analytics’ uncovered capital founders misconceptions about how they assess asset and capital liquidity and the reality of wealth transfer. 

For example, many stick to conservative portfolios with prevailing shares of cash and real estate. At the top of mind, these assets are the first choice to store family wealth. 

On the contrary, the real environment of family wealth transfer is more than meets the eye. On a global scale, $260 billion of personal financial assets are in 'search' status. About $400-$420 billion in assets and property remain unclaimed. For digital assets, the estimation reaches 23.7%.

These numbers correlate with the overall level of loss that families experience when transferring wealth from one generation to the next. It totals 34%, but peaks at 91% for certain asset classes.

 

How do HNWIs and UHNWIs avoid the family wealth transfer trap? Consider these steps:  

  • Switch to modern tech setups to store wealth information. Unreliable approaches to storage cause annual losses of 1/6 of asset record history.
  • Assess the liquidity of your portfolio for possible transfer. Identify gaps in data that block meeting KYC requirements.
  • Review your assets' vital attributes. Identify the required time periods to update them. On average, it takes a year to complete this task without automation tools.

 


 

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