Wealth Accumulation and De‐Risking Strategies Among High‐Wealth Individuals

Abstract

The emergence of the asset economy in advanced capitalist countries has enabled significant asset accumulation by high‐wealth individuals, and the rise of finance has provided new, profitable investment vehicles for those with investable capital. This accumulation process has been described as a form of compensatory logic to achieve protection from future risks, especially in the current neoliberal environment with governments reducing state pensions while promoting tax‐deductible private investments as a substitute for state provision. This article reports the results of qualitative research into the private wealth accumulation attitudes and behaviours of high‐wealth individuals and their worries about achieving a comfortable retirement despite their substantial wealth holdings. Although the interviewees reside within the top 5% of the wealth distribution in the UK and would be expected to feel confident that their wealth will be sufficient to support their retirement needs, they convey a sense of uneasiness and concern that they will still not have enough to support their expected retirement lifestyles. In response to this perceived risk, these high‐wealth individuals engage in a variety of what I call “de‐risking” behaviours with the goal of mitigating the risk of insufficient wealth to support retirement. The article contributes to our understanding of the processes utilised by high‐wealth individuals to help ensure they have sufficient wealth to support their desired comfortable retirement by engaging in strategies intended to de‐risk their financial lives.

Wealth Stratification and the Insurance Function of Wealth

“…The remaining four are single-country studies carried out with data from Germany, Italy, and the UK. Five of the six studies carry out quantitative data analyses, and one study (Carmichael, 2023) decided on a qualitative research design. Three out of six studies measure wealth in terms of housing wealth (homeownership/tenure status and housing value; see Althaber et al, 2023;Bedük, 2023;Heidenreich & Broschinski, 2023), one study measures it in terms of financial wealth (Rapp & Humer, 2023) and another creates an index to directly measure the insurance capacity of wealth (Gritti et al, 2023).…”

“…Three out of six studies measure wealth in terms of housing wealth (homeownership/tenure status and housing value; see Althaber et al, 2023;Bedük, 2023;Heidenreich & Broschinski, 2023), one study measures it in terms of financial wealth (Rapp & Humer, 2023) and another creates an index to directly measure the insurance capacity of wealth (Gritti et al, 2023). One study investigates high-net-worth individuals (Carmichael, 2023).…”

“…Both patterns are independent of which partner has more income or wealth. Carmichael (2023) analyzes how high-net-worth individuals perceive the insurance provided by their wealth and their strategies to maintain it during their future retirement based on qualitative interviews with 35 individuals in the top 5% of the net worth distribution in the UK. In contrast to many other studies, the author finds that high-net-worth individuals perceive and fear risks that may jeopardize a comfortable retirement.…”

“…While almost all articles show that wealth can buffer the consequences of negative events, referring to its actual insurance function, one article suggests that this might not necessarily be the case for its anticipated insurance function. Carmichael (2023) shows that very wealthy individuals feel uneasy and concerned about the future insurance capacity of their actual wealth.…”

“…Likewise, Carmichael (2023) raises new questions on how the fear of losing one's wealth affects the "anticipated" insurance function. If individuals or families are afraid to lose their wealth, this may stop them from making risky decisions.…”