WM Market Reports

Inheritors Overtake Creators As Billionaires – UBS Study

Tom Burroughes Group Editor London 30 November 2023

Inheritors Overtake Creators As Billionaires – UBS Study

For the first time in nine editions of the report, billionaires have accumulated more wealth through inheritance than entrepreneurship, indicating that the great wealth transfer is gaining momentum.

Wealth managers know that they must engage with NextGen inheritors to avoid losing this major client segment. And the scale of this task is highlighted by a UBS annual study of billionaires showing that those inheriting wealth overtook creators in terms of the sums involved.

The Swiss bank’s annual report on billionaires, released today, has been issued since 2015. And, for the first time, inheritors got more money than those who built wealth in the first place. That means that banks such as UBS realise that they must be prepared as a multi-trillion-dollar transfer takes place. It may also be a warning that the pace of business growth is, on balance, slackening. 

“This [generational wealth transfer] is one of the biggest opportunities for a firm like ours, and also the biggest risk,” Benjamin Cavalli, head of strategic clients at UBS Global Wealth Management, told WealthBriefing in a briefing to journalists. “If we don’t have access to beneficiaries on the receiving side, then you can either be on the winning side of it or be in a vacuum.”

Inter-generational wealth transfer is a cliché in the sector, but no less real for that. With trillions of dollars at play, banks and others are increasingly engaging with family offices and UHNW individuals, including business owners, to ensure that they retain a big slice of the wealth. 

As pointed out by UBS yesterday, “NextGen” doesn’t necessarily mean “young”: some inheritors are middle-aged.

A cascade of money
The ninth UBS Billionaire Ambitions report showed that a total of $150.8 billion was inherited by 53 heirs over the last year, exceeding the 84 new self-made billionaires’ total of $140.7 billion. 

Globally, billionaire wealth partially recovered in the 2022/2023 period, lifted by billionaires with consumer and retail businesses in Europe, after falling by almost a fifth in the previous 12 months. Overall, the number of billionaires rose by 7 per cent globally in the last year, increasing from 2,376 to 2,5442 with their wealth recovering by 9 per cent, from $11.0 trillion to $12.0 trillion.

While billionaires with innovative companies in technology and healthcare have accumulated the greatest wealth over the past decade, there are early signs of improving fortunes (+15 per cent) for billionaires with industrials companies, which is likely continue amid the energy transition and higher defence spending in several countries, the bank said. 

For the second year in a row, UBS surveyed 79 billionaire clients from Europe (including Switzerland), the Middle East, Singapore, Hong Kong, and the US, between 28 June and 17 September 2023.

Wealth planning and engagement with families over inheritance, and at an early stage, is essential, Carvalli said. It also means that it is important to hire and appoint the right bankers to match this cohort of clients, he said.

With the likely $5.2 trillion of inter-generational wealth being transferred in the next 20 to 30 years, data suggests that this process is “gathering momentum,” he said. 

UBS was asked whether sanctions against Russians since its invasion of Ukraine in February 2022 had hit the billionaire wealth figures. The bank said it was unable to respond to that question.

A total of $150.8 billion was inherited by 53 heirs over the last year, exceeding the 84 new self-made billionaires’ total of 4140.7 billion.

Sixty-eight per cent of billionaires surveyed with inherited wealth, said that they aim to continue and grow what their parents achieved in terms of business, brand, or assets. Believing in continuing the family legacy, 60 per cent of heirs want to enable future generations to benefit from their wealth and plan to continue to follow their parents pre-defined philanthropic goals (32 per cent).

Heirs also have their own views on risks to the business and how they should be positioned for the future. For example, 66 per cent of first-generation billionaires rank a potential US recession as their primary concern, closely followed by geopolitical tensions (62 per cent). In contrast, heirs are concerned about inflationary pressures (57 per cent) and the availability and price of raw materials (52 per cent). However, all agree on the opportunities and risks of generative artificial intelligence, with 65 per cent viewing AI as offering one of the greatest commercial opportunities to their operating business over the next 12 months. 

As technology gains prominence, 58 per cent of respondents to the survey viewed a cyber threat or hacking as the biggest risk.

When it comes to investing, 43 per cent of first-generation billionaires intend to increase their allocation to private debt over the next 12 months and 38 per cent plan to increase developed market bond holdings. Heirs favour private equity, with 59 per cent seeking to raise direct private equity investments and 55 per cent planning to invest more in private equity funds.

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