The business of royalty

Sascha: [00:00:02] From Equity Mates Media. This is the dive. I'm your host, Sascha Kelly. Today in Australia, we've got a public holiday, a day off to celebrate the Queen's birthday, despite her actual birthday being back on the 21st of April. It's not overcomplicate matters unnecessary. Between the Queen's birthday and the recent celebration of the Queen's Platinum Jubilee. 

Audio clip: [00:00:24] She is the first British monarch to serve on the throne for 70 years. 

Sascha: [00:00:28] Monarchies are on our mind. It's Monday, the 13th of June. And today I want to know what's the value of a royal family? And to do this? Well, I think I've got the best expert in the business, really. I've got a colleague and the co-founder of Equity Mates, Alec Renehan. Alec, let's talk about what we're going to get into today. What have we want to talk about? 

Alec: [00:00:51] So our business podcast here and even with monarchies on our mind, money is still also on our mind. So we decided to combine these two things and ask how much these royal families own, how much they cost, and whether they bring in any additional revenue for a country. Basically, Sascha, I want to know, a royal family's a good investment, but before then, we've had a lot of fun researching this episode, and I've got a few fun facts about monarchies around the world. 

Sascha: [00:01:19] Fun facts about monarchies. Okay, come on, hit me. 

Alec: [00:01:22] So of the 26 monarchies around the world, 12 are in Europe, which surprised me. Didn't know so many in Europe still existed today. Of the ten quote main royal families in Europe. Side note which two don't make it to the main royal family status? 

Sascha: [00:01:40] That's such a neg.

Alec: [00:01:41] Yeah. Yeah. So there is only of those ten main ones. There's only one that does not receive public money, taxpayer money to carry out their duties. Do you want to guess which one does not receive taxpayer money? 

Sascha: [00:01:56] What about Monaco? 

Alec: [00:01:57] No. Which is strange because Monaco doesn't have income tax, but they still receive taxpayer money. The answer is Liechtenstein. 

Sascha: [00:02:06] Oh, I never would have thought that. 

Alec: [00:02:10] Another fun fact I came across. Of the 26 monarchies around the world, three are elected monarchies. So most monarchies are hereditary. The king or queen dies and their son or daughter takes the throne. Three are elected. Do you want to guess where?

Sascha: [00:02:27] I want to say somewhere in Southeast Asia. One of their one. 

Alec: [00:02:31] You are bang on for two of them. The two in Asia are Malaysia and Cambodia, both elected monarchies. And then there's one more. I'll narrow it down for you. It's in. 

Sascha: [00:02:41] Europe. Great. That that tiny little part of the world. Europe. Oh. Oh, is it Denmark?

Alec: [00:02:48] It's not. It's the Vatican. The Pope, of course. 

Sascha: [00:02:52] That's so stupid of me. That's a good trick question there. That's a good trivia. Thank you. 

Alec: [00:02:57] Thank you. 

Sascha: [00:02:57] All right. That's enough of the random rule facts. Otherwise, that could just turn into the whole episode. Let's get to the business of monarchies. I'm interested to start off with the most expensive royal families around the world. 

Alec: [00:03:10] Yes. So with this one, Sascha, we're looking at the state paying the royals, not how lavish their lives are, but how much taxpayer money goes to fund the royals. And I'll give you the podium, finish the top three, and then an honourable mention that I just wanted to shoehorn into this episode. 

Sascha: [00:03:27] Somehow we're also shoehorning, so come on, give me bronze. Who's on the third position? 

Alec: [00:03:32] Number three is Britain. And the way that the British Crown works is that they have an investment portfolio that generates income each year and that income actually goes to the British Government. I thank you. But then the British government split between 15 and 25% of that income off and give it back to the Crown. It's known as a sovereign grant in 2021. Last year the sovereign grant was £88 million. 

Sascha: [00:03:56] That's pretty good. 

Alec: [00:03:58] I could I could live off that. 

Sascha: [00:03:59] So it's basically like a fancy pension account, like they have the main amount and then a certain amount gets divvied up every year for them to live off. Is that right? 

Alec: [00:04:09] Yeah. They get income from their investments. You know, bonds have a yield. Stocks pay dividends. They probably get rent from property and they get between 15 and 25% of that income every year. 

Sascha: [00:04:20] And the rest of it goes back to the government. 

Alec: [00:04:22] Goes to the taxpayer to fund government spending. 

Sascha: [00:04:25] All right. That's a pretty high tax threshold. 

Alec: [00:04:27] That is a high tax threshold. Actually, I didn't think of it like that. All right. Well, Sascha Silver, Thailand comes in at second. The king has about a $40 billion investment portfolio. But on top of that, the Thai government gives the royals about 1.1 billion U.S. dollars a year. 

Sascha: [00:04:46] Also, not too shabby. 

Alec: [00:04:48] Yes. Just to put that in context, the U.K., £88 million is 107 million U.S. dollars. Thailand, 37 billion baht, which is about 1.1 billion USD. So ten. What the British live off. 

Sascha: [00:05:01] Wow. And they're only in silver. So who's gold? 

Alec: [00:05:04] If Thailand is a ten x, Britain number one is 20 x Britain and then some I think number one is Saudi Arabia. And they are so far ahead of everyone else now. Then notoriously secretive about how much the Saudi government spends on the Saudi royals. And the distinction is a little bit grey because the Saudi royals are the Saudi government. It's not quite as clean as in Britain. But a 1996 US diplomatic cable, which was leaked by WikiLeaks in 2011, gives us a pretty detailed overview of how the Saudi state supports the Saudi royal family. So all of the Saudi royals and remember there are 15,000 members of the House of Saud, including 4000 princes. They're all entitled to a government stipend. And the value of that stipend is determined by your closeness to the king. So, you know, the king's son or daughter gets more than a second cousin, but the second cousins still get something. The US cable in 1996 estimated that the stipend payments alone totalled 2 billion USD a year and that was in 1996. I'm sure there's been some inflation since then, but that $2 billion a year was 5% of the total Saudi government budget. 

Sascha: [00:06:30] I'm just stuck on the fact that there's 15,000 people entitled to some kind of payout. Yeah. 

Alec: [00:06:37] It is crazy. And you want to know if you think the $2 billion a year is a lot in 2011, in the midst of the Arab Spring. The Saudi royal family handed out $37 billion in cash and other benefits to quell any unrest in Saudi Arabia during the Arab Spring. $37 billion. That's a little bit more than the queen's £88 million. 

Sascha: [00:07:03] Yeah, it's really putting things into perspective for me about, you know, how much monarchies can get in different parts of the world. All right. You did mention that you had an honourable mention that you definitely wanted to shoehorn in there. So I want to hear what it is. 

Alec: [00:07:16] And the honourable mention is Monaco, Monaco's royals. They might not be the most expensive. In total, they got about $55 million from the state.

Sascha: [00:07:25] Oh, that's just pennies.

Alec: [00:07:27] But they are the most expensive per capita. So the U.K., they pay about a dollar 60 per citizen of taxpayers. Money goes to the crown.

Sascha: [00:07:38] Arc. 

Alec: [00:07:39] In Monaco, $1,386 per citizen goes from the state to the crown. 

Sascha: [00:07:47] Hold on. But you said that Monaco doesn't have taxes, so how are they getting this money from people who do have design and pay some levy that goes towards the monarchy?

Alec: [00:07:57] Well, that would be a tax. But Monaco doesn't have income tax, but they do have other taxes and levies in other parts of their economy. For example, they have they don't have property tax either, but they do have a 1% tax on rental properties. And so the government still collects money. And then $55 million of that goes to the royal family every year. 

Sascha: [00:08:19] Well, I guess we know why some of those Formula One salaries are going, because they all live in Monaco. 

Alec: [00:08:24] True, Monaco has the highest concentration of millionaires per capita or per square metre as well. It is incredibly wealthy. 

Sascha: [00:08:34] Let's take a quick break and then let's talk about the other side of the equation. Do royal families make money or bring in additional revenue for their countries? In essence, are they worth it? Welcome back to The Dive today. Two unlikely hosts talking about one unlikely topic and that is monarchies. And essentially what is the business of being in a royal family? Alec, we talked about cost. Now we're going to talk about value, which I imagine is kind of a hard thing to put an answer to. 

Alec: [00:09:12] Incredibly hard. Hard to quantify and then hard to actually find information on for those that have tried to quantify it. So I guess there's two big buckets when we talk about value. The first is tangible value. That's cash that's brought in, you know, maybe from additional tourism or from merch sales. But then there's also intangible value, cultural value, international prestige, additional media coverage. But it's all hard to calculate even the tangible stuff. How do you know if a tourist came to Britain because of the royal family or just is visiting Buckingham Palace while they're there? So it's difficult. But luckily, Sascha, there are people that have done the work for us. 

Sascha: [00:09:56] So you outsource the work. You haven't gone and pound the pavement in London this week to find out this information. 

Alec: [00:10:02] I haven't. Sascha But. Forbes Have they had a look at the British royal family and did the maths? They estimate that the royal family brings in £1.9 billion annually to Britain's economy. Now, most of that, they say, is through tourism. They also say that the British royal family bring in £283 million in free media coverage. The queen's jubilee has been getting a lot of free media airtime. 

Sascha: [00:10:31] The events that I have attended to.

Audio clip: [00:10:33] Mark my Diamond. 

Sascha: [00:10:34] Jubilee have been a humbling experience. 

Alec: [00:10:37] So tourism and free media coverage, also the income through the assets. So we spoke about how the royal family receives between 15 and 25% of the income from their assets. The rest of that goes to the British state. So Forbes did the maths. They came in and it's an estimate, we should be very clear. It's an estimate of about £1.9 billion annually. 

Sascha: [00:11:00] That's a pretty good return when you're talking about the fact that they cost, what, 88 million a year. I mean, that's a good return on investment. 

Alec: [00:11:07] Yeah, Sascha, it's like a 95% profit margin. We love to see companies like that bringing in £1.9 billion and only spending 88 million. That's a big thank you. 

Sascha: [00:11:19] So my next follow up question is that the queen of England isn't just the Queen of England. She's also the head of state of all of the Commonwealth nations. Does Australia, Canada, New Zealand, do we have to contribute to this investment as well? 

Alec: [00:11:34] Good news, Sascha. We don't. We do pay the Governor-General, which is the Queen's representative in a Commonwealth country. But we're not chipping in for that 88 million that's going to the crown. 

Sascha: [00:11:45] Interesting. Interesting. Well, there's still pretty incredible numbers, I think. 

Alec: [00:11:49] That's right, Sascha. They are pretty incredible. I think they flatter the average royal family. I think in many ways the British royals are the outlier. I don't think the average royal family around the world is bringing in the tourists, the media attention or driving the merchandise sales that the British royals are. But. Sascha, one last thing before we wrap this episode where other royal families do better than the British are their investment portfolios. You know, the queen's been estimated to be worth $466 million, but a lot of royal families have portfolios in the billions. 

Sascha: [00:12:23] Well, this intrigues me. We are business focussed, so let's finish up with the investment portfolios. Can you give me the podium places. 

Alec: [00:12:30] You will see a commonality here, Sascha. Number three is Qatar at $335 billion. They're big investors in a number of blue chip companies Barclays Bank, British Airways, Volkswagen. But then Sascha, number two is Kuwait, $360 billion portfolio. The Kuwaiti portfolio has increased from about $90 billion in 1991 to $360 billion today, largely thanks to the performance of their blue chip U.S. stocks. So pays to invest well. But Sascha, no prises for guessing who's number one, Saudi Arabia with a portfolio of $1.4 trillion. To put that in context, that's more than the GDP of Spain or of Australia. 

Sascha: [00:13:18] That's astonishing. I guess they do have 15,000 members to look after, but that's still $1.4 trillion. Can go a long way between that. Many people can. 

Alec: [00:13:30] Go a long way, Sascha. So that's basically it. That's the is the value in being royal family. There's more value in being an oil rich state. 

Sascha: [00:13:40] Sure to well, Alec monarchy seem to be probably a far stretch from either of our lives. I think I think I can safely say that. Right. 

Alec: [00:13:48] I think we set out to ask, is there value in a monarchy? Should we be lobbying to have an Australian king or queen down here, down under? I think the answer is no. I think it makes the country money.

Sascha: [00:14:00] I definitely agree with that. Thanks so much for joining us for today's edition of The Dive. If there's a story you want to talk to us about or if you just want to argue the value of having a republic or whether we should keep the monarchy, then get in touch. The dive at Equity Mates dot com is our email address and follow us on all social media channels. All those details as always in the show notes below and remember to write in review us. Give us five stars please on Apple or Spotify. Wherever you listen to your podcasts, it really makes all the difference. Hit that follower, hit that subscribe button and we'll just be there in your podcast player every time you open it up and there's a new episode. But thanks so much for joining me today, Alec. I hope you enjoy your long weekend. 

Alec: [00:14:41] Thanks, Sascha. You too.