Written by: Jason Hovet, Monika Mudranincová, Petr Vykoukal
The wealthy class in this country is growing – and growing up. From objets d’art to luxury trips, the rich are becoming more sophisticated in terms of how they spend their money, and are working to change a common Czech stereotype.
OF THE 7.7 MILLION PEOPLE in the world’s million-dollar club, 11,000 are now Czech, according to a recent World Wealth Report produced by Merrill Lynch and Cap Gemini. In a country with 10 million, that is a sizeable ratio. What is even more remarkable is the rate of growth year-on-year – 12% – of the number of individuals with net worth of more than USD 1 million. From a nice house and car to exotic holidays or a rare bottle of wine, successful entrepreneurs and businesspeople are now more often spending for pure enjoyment, instead of just for flash. In this respect, Czech spending habits are coming closer to their western counterparts.
” The money is older,” says Nils Jebens, referring to western Europe and, more specifically, to his native Norway. As owner of Kampa Group, Jebens sees many of the country’s wealthy elite come through the doors of his group’s upscale restaurants. What he sees is that “they don’t spend too lavishly; they don’t go overboard.” However, this shouldn’t be taken that rich Czechs are misers. “They are spending a lot of money,” Jebens says, but adds that, “they first concentrate on getting the nice house and car.”
So what comes next? Are rich Czechs living it up or stuffing the mattress? Spend or invest? Essentially an industry report for investment banks, the World Wealth Report shows that private investors are becoming more demanding, asking for more service at a better price. At Czech banks, the extra service banks offered VIP clients wasn’t all that distinguishable from normal banking services – now private bankers go out of their way to spend one-on-one time with more “valuable” clients, as well as offering financial products not available to others. Also, private bankers are more often advising clients on financial matters away from banking.
As far as the investing habits of these VIP clients, bigger clients, say someone who has CZK 100 million in the bank, are usually more conservative. It is entrepreneurs and those with “smaller money” who are more aggressive. “However, in both cases, exceptions certainly exist,” says Jan Troníček, director of private banking at HVB bank. At HVB, entrepreneurs make up half of the client list in private banking and top managers 5-10%. The rest are restituents and celebrities. At Živnostenská banka, the opposite can be seen, with restituents making up half the client list. “Entrepreneurs and professional managers currently represent a smaller part of our wealthier clients,” says Michal Vančík, head of private banking. “However, their importance is growing.”
According to many successful entrepreneurs, money is nothing if you don’t do something intelligent with it. As a result, most will re-invest into a current or future business. “I like building companies, doing business,” says Delta bakeries owner Marko Pařík. Using this philosophy, Pařík and his brother Michal have built a small food empire consisting of bakeries, dough factories, the Paneria franchise and Le Patio restaurants. Another cliché postulates that time is money, and Radim Passer, who along with his brother built PasserInvest, says he doesn’t have much time for expensive hobbies. “Expensive hobbies often take a lot of valuable time,” he states. Zentiva’s Jiří Michal, one of the best-paid Czech managers, also shies away from upscale hobbies. “I do a lot of things,” he says, “but I don’t dive or play golf…yet.”
Pařík, too, may be the consummate workaholic – even waking early to work a little while vacationing at his residence abroad. However, for him, it’s not all work and no play. Besides his “small” property abroad, he travels often to exotic locations in the Far East (see sidebar left). But he’s not alone. An increasing number are also more interested in visiting places most tourists cannot. Intercontact Praha travel agency, for example, plans and arranges trips custom-suited to the needs of its clients – which include mainly top managers, entrepreneurs, lawyers, and doctors, as well as pensioners who have been restituted. Among recent organized trips was a group of six who paid CZK 200,000 each to tour Antartica by helicopter. “[Our clients] are people who are willing to spend a little more” for the trip they want, owner Marie Jehličková says. She also sees another promising sign of a maturing spender: “Clients are becoming more demanding,” she says, “which we are very happy about.”
The most demanding clients might just consider flying themselves. And Dagmar Grossmann, owner of Grossmann Jet Service, is betting they will. With 20 years experience chartering private jets, she recently set up her own Prague office. (This is the second such company to offer private charter flights, with the Ostrava-based Silesia Air concentrating mainly on business travel.) “There are about 200 people looking at this service for private purposes,” she says. According to her, it is usually the businesspeople who are looking for the little extra luxuries – champagne, fine cuisine. Private individuals, usually flying the family on holiday, “just want to have a comfortable flight.” The most common destination is Europe, although the jets have a range of 3,000 to 35,000 kilometers and can seat up to 16. With two private jets in Prague now, Grossman believes she could have as many as 10 within five years.
Travel is just one area where the rich spend, and are willing to spend more. It also exemplifies the maturing of the rich elite here. Otto Jelinek, for one, is starting to see less of a difference in the spending habits of the rich in the Czech Republic and Canada, where Jelinek grew up and experienced success in business and politics – even holding several ministerial positions in the government. “[In Canada] people tend to spend money openly,” he says, “but they don’t necessarily show off with it.” Jelinek returned to his native Czech Republic more than 10 years ago and has been chairman at Deloitte & Touche since then. In this time, he has seen spending habits coming closer to western habits. “There are fewer differences now,” he says, pointing out that one reason may be the harder work ethic of a younger generation.
Indeed, in the eyes of the Czech public, businesspeople and billionaires (considered separate categories in research) share the least popularity, although top politicians do take the prize for least popular people. This is according to research done by the Institute of Sociology last year. In the study, Milan Tuček and Jan Misovič also found – in a survey of 1,800 people – that wealth creates the highest social tension in Czech society, even more so than race or political affiliation.
This could help explain why almost everyone approached for this article was reluctant to discuss the subject, or simply refused. It is true, most listed in Lidové noviny’s annual richest Czechs list avoid media attention – for example, number one on the list, Petr Kellner of PPF, who generally avoids the media. Modesty, or fear of jealousy, is one big reason; security is another. But is it necessary for wealthy Czechs to worry about security? According to Michal Kuník, general director of Securitas CR, very few private individuals are using security services – with only about 1-2% of homes and flats protected. But that is slowly starting to change. “Many people are beginning to realize the risks associated with wealth,” says Kuník, adding that their clients mainly ask for installation of security systems, security consulting, monitoring and solutions for crisis situations. “We are seeing a higher demand for bodyguards, but usually in combination with a classical guard, butler and driver,” he says. Costs for this “3-in-1” service can run up to to CZK 100,000 a month and gives a client 24-hour service, complete with someone to check the house, as well as escort the family and kids anywhere (basic cost for a guard runs around CZK 30,000 a month).
But for many this seems extreme. Passer, who was included on Lidové noviny’s top 50 list, says he meets relatively few people who show him any animosity. “Probably I’m lucky that the majority of people I meet are just really nice,” he says. Or it could be that these people are also one of the other 11,000 Czech dollar-millionaires – but were just equally hard to recognize.
A return to old-fashioned values
Enjoying the finer things in life – priceless art, rare wine, fast cars – certainly isn’t new in the Czech Republic. In the time of the First Republic, when a wealthy class flourished, regular luxury purchases and collections were a sign of taste and sophistication. But with a new rich elite here finding their feet, some aren’t so sure there has been a great return to the days of old.
Take art, for example. “I think that we would have to wait a bit for the return of those old habits,” says Mária Gálová, director of the art and antiques auction house Dorotheum. “Buying art [then] was a sign of a particular lifestyle. In this sense we still have a long way to go,” she adds. But there are positive signs, of course. For example, an art gallery focusing on modern art was recently set up by Česká pojišťovna, a daughter company of known art fan Petr Kellner’s PPF.
Petr Vykoukal, Jason Hovet
After years of hard work and accumulating a nice fortune, many successful entrepreneurs are starting to spend both money and time abroad. But why pay for a hotel, when you can just buy a residence yourself?
ALTHOUGH it has always been possible to buy real estate abroad, in the last few years a number of new agencies have started specializing in foreign properties catering to the country’s wealthier side, and successful entrepreneurs are the most common clientele. Opposed to top managers, “entrepreneurs have more money and more time,” says Jan Rejcha, who started Rellox, a company specializing in foreign properties and relocations, at the beginning of this year. But Lucie Pilipová, founder of the two-year-old Mediterranea Real Estate Investments, believes buyers can come from the middle- to upper-classes. She does concede that “most of our clients know each other, but they don’t know that they are all clients.” Above all, people buying these properties need to be “very cosmopolitan,” Pilipová says, noting that learning the local language is almost a necessity.
Financing good will
“Money can’t buy happiness” is a saying that’s slowly being disproven by the charitable elite. Tereza Maxová’s Foundation successful new campaign stresses that charity can change the giver as well as the receiver.
With the number of charities, foundations and civic groups on the rise, a competitive market is being created where large sponsors and contributors are being relied on more heavily. “Competition in the field of charities and foundations is very big, and it’s still growing,” says Maja Svojgrová, a board member at the Foundation for Bone Marrow Transplants (NTKD). Alena Stuchlíková, vice-chairman at the non-profit Czech Epilepsy Association, agrees, saying her group’s modest increase can be attributed to becoming more active in attracting donations. And, with the right advertising, the Tereza Maxová Foundation has also seen a rise in individual contributions, according to its director, Terezie Plasková.