Private Islands for Super Rich

At a recent members-only meeting of the California based Institute for Private Investors, some of America's richest were partaking in the ultimate luxury: talking about the problems associated with extreme wealth, such as handling conflicts between multimillionaire heirs and choosing a reliable wealth manager. There was comfort in being among people who could relate; 80 percent of IPI's members have investable assets of $50 million or more. For them, sipping champagne at a paparazzi-covered art opening is as pass? as carrying around the latest Louis Vuitton handbag, and far less important than the exclusivity IPI membership affords them. "What the wealthiest families want is to have a community where they can share questions, resources and experiences," says IPI director Kristi Kuechler.

Hey, everybody needs to fit in somewhere.

The superrich have long had various places—clubs, jets, resorts and communities—where they could temporarily retreat from the rest of the world. But now the members-only phenomenon is exploding into a whole way of life, encompassing everything from private-banking coalitions to invitation-only health clinics. With security concerns growing and Internet gossip capable of trashing global reputations in an instant, those with money are increasingly locking their entire lives behind closed doors. Rather than attend media-heavy events, they arrange concerts, fashion shows and art exhibitions in their own homes. They shop afterhours and have their neighbors (and potential friends) vetted for class and cash. In essence, it's a return to the way the wealthy lived before the hippie ethic of the 1960s made it cool to mingle with other classes. "The very rich don't want to be in restaurants where they might be sitting next to a tourist," says William Cash, editor of Spear's Wealth Management Survey, a European magazine for multimillionaires.

In part, the focus on members only is simply a result of there being more rich people to associate with. According to Merrill Lynch and Capgemini's 2007 World Wealth Report, the number of people with more than $1 million in assets excluding their primary residence grew by more than 8 percent last year, to 9.5 million worldwide. Their ranks are swelling the fastest in the developing world: Latin America saw a whopping 23 percent growth in nouveaux riches last year. The wealthy elite also live more globally nowadays with, say, an Indian passport, a castle in Scotland, a pied-à-terre in Manhattan and a private Caribbean island. Because of their global presence, the ultrarich can no longer count on local word-of-mouth networks to tune them in to whom they can trust.

As a result, businesses like IPI, which are built on creating trusted elite communities, are booming. In February the New York-based Luxury Institute will roll out a new Web site, LuxuryRatings.com, that will allow members with a minimum net worth of $3 million to exchange recommendations and advice with other high rollers on such essentials as yacht brokers, private islands, prenup lawyers, art dealers and even neurosurgeons. Quintessentially, the luxury-lifestyle concierge service—started by Prince Charles's nephew in Britain—has grown from 14 offices around the world a year ago to more than twice that today. It charges up to $50,000 a year in exchange for getting its clients into the most exclusive international parties, events and clubs.

The rich definitely do not want to live among the masses. More gated communities are on the rise, including Dubai's man-made World islands and Moscow's new $3 billion Rublyovo-Arkhangelskoye development. At London's new ultra-exclusive address, 1 Hyde Park, more than 700 applicants have registered to pay as much as $41.2 million for one of just 80 apartments—even though the complex is not set to open until 2010. "They dine privately, shop privately, view art privately; everything is private, private, private," says Ahlya Fateh, managing editor of Britain's upper-class lifestyle magazine Tatler. "These people literally never leave the confines of [exclusive London postcode] SW3 unless they're in a helicopter or blacked-out Humvee entourage."

With privacy at such a premium, yachts are back in fashion, too. The 200-year-old yacht brokerage Camper & Nicholsons has seen its luxury-charter business triple in the past five years. Jeffrey Beneville, head of Camper & Nicholson's development business, says there is such a tremendous appetite for $100 million yachts that the company has a "supply problem" right now. "We're basically in the business of building private islands that orbit the earth," he says.

The ultrawealthy are also entering into formal compacts to pool assets and share advice on investing and philanthropy. When American George Russell sold his family's investment firm for more than $1 billion in 1998, he developed the Threshold Group, an exclusive investment club for wealthy families that values human trust above financial ones. "We're a bit choosy about who we invite," says Russell, who makes applicants fill out detailed questionnaires on topics including family values. Different networks emphasize different things; New York-based Synergos focuses on philanthropy, while Tiger 21 emphasizes social networking. In Chicago, Family Office Exchange runs a network of 350 families across 22 countries who meet annually; the group's most popular service is its Listserv, where families query each other on things like estate planning and buying private jets.

Partnerships like these have probably been around as long as money has, but their desirability has been elevated by the growing complexity and exclusivity of global financial markets. Accessing the best hedge funds, for instance, can require near-limitless resources, and pooling resources provides more buying power. In addition, the need for networking has grown. As globalization ties far-off markets closer together, even the most accomplished business people are scrambling to expand their Rolodexes—for business as well as personal reasons. Todd Millay, a partner at CCC Alliance, a Boston-based network for the ultrarich, says that while middle-class people can easily discuss their jobs and livelihoods at a dinner party, wealthy families can't just "invite people over and expect them to understand what it's like to have $300 million."

Gated living is also being inspired by more-concrete fears. Global rates of kidnapping and homicide are on the rise, and many of the elite are aware of the security risks their wealth poses. Kroll, the world's leading private-security firm, based in New York, says that its business with ultrahigh-net-worth individuals has increased steadily. Not only do the superrich outfit their homes and cars with the latest closed-circuit TV cameras and tracking devices, but they are sending their families—and staff—to courses to learn how to better read potentially dangerous situations. "It does not matter if you have Fort Knox around your house —if you let someone in the gate who has not been screened, that is your weakest link," says Ian French, Kroll's managing director of security consulting.

The superrich are increasingly willing to pay high premiums for health care, too. Medical concierge services are popping up across the globe; whether they're in Toronto or Tbilisi, the wealthy can contact their doctors at any hour and keep the world's top specialists on speed dial. Since PinnacleCare opened in 2002, the concierge medical company—which has offices in the United States, London and Madrid—has grown 60 percent a year. For an annual fee of $8,000 to $40,000 a year, members buy services like 24/7 access to their medical records or a doctor who will meet them on the tarmac as soon as their Gulfstream touches down. "Our clients are the kind of people who seek out the best kind of financial advisers, estate planners, tax lawyers, and they do the same [with] their health care," says PinnacleCare's chairman, Bruce Spector. Money may not buy happiness, but it certainly can buy membership.

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