Most billionaires now inherit their money, as great wealth transfer begins
The world’s billionaires are now accumulating more wealth through inheritance than via entrepreneurship, according to UBS, indicating the ‘great wealth transfer’ is picking up steam and reflecting a “new cohort of multigenerational families” that will need sophisticated succession planning solutions.
It’s the first time in nine editions of the UBS Billionaire Ambitions Report that most wealth accumulation for the ultra-rich came from inheritance, the global wealth manager said. The report surveyed UBS’ billionaire clients around the world about their challenges and opportunities as “stewards of great wealth”.
The report also found billionaire wealth has recovered partially from post-pandemic declines; that was driven largely by organic business growth and by European billionaires with consumer and retail business, who had seen their wealth fall by almost one-fifth over the past year. The world now has 2,544 billionaires – 7 per cent more than in the 2022 report – and their combined wealth rose to $12 trillion from US$11 trillion last year, a 9 per cent recovery.
Benjamin Cavalli (pictured), head of strategic clients at UBS Global Wealth Management, said the growing role of inheritance in wealth composition is a theme he expects to continue over the next 20 years, when more than 1,000 billionaires are set to pass about US$4.2 trillion on to their children.
“The next generation has fresh views about business, investing and philanthropy, redirecting large pools of private wealth to new business opportunities arising from the times we live in,” he said. “Engineering a smooth succession will require founders and their families to do things differently, more than ever discovering common values and purpose to navigate a way forward that appeases all generations and allows them to continue building their legacies.”
Heirs and entrepreneurs
According to the report, 53 billionaire heirs inherited more than $150 billion over the last year, compared with a total of $140.7 billion in wealth for 84 new self-made billionaires.
“As the great wealth transfer progresses, each generation has their own view on legacy,” the report stated, noting that 68 per cent of respondents with inherited wealth said they plan to continue and grow the business, brand or assets received from the prior generation.
“Believing in continuing the current family legacy, 60 per cent of heirs want to enable future generations to benefit from their wealth, and 32 per cent plan to continue to follow their parents’ predefined philanthropic goals.”
But these heirs are also conscious they may need to reposition their wealth to do so, the report stated. “As they inherit their parents’ business, investments and foundations, heirs look to focus more on today’s major economic opportunities and challenges, such as innovative technologies, the clean-energy transformation and impact investing.”
So, how do the world’s billionaires invest their money? According to the UBS survey, 43 per cent of first-generation billionaires plan to add to private debt allocations over the next year, while 38 per cent say they’ll add to their developed-market bond holdings. Heirs are more likely to invest in private equity – 59 per cent are looking to raise direct private equity investments, and 55 per cent want to invest more in private equity funds.
“Among billionaire heirs, there is a strong entrepreneurial theme, and many see alternative opportunities to joining the C-suite of the family business,” the report stated. “More than half of the 53 heirs surveyed are choosing to step away, opting for careers more suited to their own ambitions, skill and circumstances.”