The Rise of Inherited Wealth: $52 Trillion Shifts in the Hands of New Billionaire Heirs
In a shift, billionaire heirs surpass self-made individuals in accumulating wealth, marking a significant change according to UBS's tracking of the world's richest fortunes New opportunities and risks emerge for UBS (305 characters)
In the latest year, billionaires have accumulated more wealth through inheritance than through entrepreneurship for the first time since UBS began tracking the fortunes of the world's richest nearly a decade ago.
According to a report by the Swiss lender, billionaire heirs are more inclined than their parents to target the significant opportunities and challenges in the global economy. They are investing in sectors such as clean energy and artificial intelligence.
According to Benjamin Cavalli, who manages strategic clients in UBS's global wealth management unit, the significant momentum of the great wealth transfer is being driven by aging billionaire entrepreneurs. He stated, "This is a trend that we anticipate will continue over the next two decades, as over 1,000 billionaires are expected to pass down approximately $5.2 trillion to their offspring."
UBS, the bank with half of the world's billionaires as clients, discovered that 53 heirs inherited $150.8 billion over the 12 months leading up to April, surpassing the $140.7 billion amassed by 84 new self-made billionaires during the same period.
In total, the number of billionaires worldwide increased by 7% to 2,544. Their combined wealth also grew by 9% to $12 trillion, without factoring in inflation.
The total remains lower than the peak of $13.4 trillion reached in 2021, when the global billionaire community expanded to 2,686 individuals due to a post-pandemic surge in assets like stocks and property.
The report's findings also indicate the lackluster state of the IPO market in 2022 and early 2023, which restricted opportunities for entrepreneurs to list their businesses and grow their wealth.
Bernard Arnault, the chairman of LVMH, was seen in Paris alongside his wife Helene and four of his five children. From left to right: Frederic, Delphine, Antoine, and Alexandre. It is worth noting that all five of his children are employed at the company.
Europe saw a surge in billionaire wealth for the first time, driven by a "post-pandemic shopping splurge" that boosted the profits and share prices of top luxury goods companies based in France, ultimately benefiting the billionaire families who own them, according to the report.
LVMH chairman Bernard Arnault and his five children are among the world's wealthiest, with a net worth of $167 billion, according to the Bloomberg Billionaires Index. Arnault's wealth surpassed that of Teslas Elon Musk and Amazons Jeff Bezos late last year, making him the third-richest person in the world. The report also noted a trend of improving fortunes for industrial billionaires, such as Indias Gautam Adani and Mukesh Ambani, suggesting a shift in the distribution of wealth.
"This may continue amid government incentives in several countries to promote the energy transition and higher defense spending," the report said.
Risks and opportunity for UBS
UBS has a significant opportunity with the transfer of wealth to younger generations, but Cavalli warns that there are also considerable risks involved. "You can either benefit from this shift in wealth or potentially lose assets in the future if you don't understand who the potential beneficiaries are," he said.
Cavalli mentioned that usually, younger clients prefer to work with a different banker than their parents, although not necessarily a younger banker. It's worth noting that many heirs themselves are over 50.
After saving Credit Suisse from failure in March, UBS has become the second-largest wealth manager in the world, with nearly $5.4 trillion in assets under management, trailing only behind Morgan Stanley.
(Image: Stefan Wermuth/Bloomberg/Getty Images)
The shift in generational wealth may also affect charitable contributions, as fewer than 33% of heiresses view philanthropic goals as a top priority, in contrast to 66% of first-generation billionaires, as reported by UBS. The focus for heirs is more on impact investing, which involves socially or environmentally beneficial investments, as opposed to traditional philanthropy through grants. According to Cavalli, previous patriarchs were known for donating to causes they personally cared about and were passionate about.
Billionaire investor Charlie Munger, who passed away at the age of 99 on Tuesday, was renowned for his philanthropy. In October, he made a charitable donation by gifting Berkshire Hathaway shares valued at $40 million at the time to the Henry E. Huntington Library and Art Gallery, as reported in a regulatory filing.
