The “great wealth transfer” marks a significant generational shift. A recent report by UBS reveals that a new wave of billionaires is amassing wealth primarily through inheritance rather than entrepreneurial endeavors. The Billionaire Ambitions Report 2023 indicates that as many business founders age, they are passing on substantial wealth to the next generation.
Over the last year, 53 heirs received a staggering $150.8 billion, surpassing the $140.7 billion accumulated by 84 new self-made billionaires. This marks the first time such a trend has been observed since the report’s initial publication in 2015. The report foresees the momentum of this wealth transfer intensifying, with an estimated $5.2 trillion set to change hands from one generation to the next in the next 20 to 30 years.
During a recent briefing, Benjamin Cavalli, head of UBS global wealth management strategic clients, emphasized the growing momentum of the great wealth transfer. The UBS analysis further reveals that overall, billionaire wealth is rebounding, experiencing a 7% increase in the 12 months leading up to early April 2023. At the end of this period, 2,544 individuals held billionaire status, with total billionaire wealth reaching around $12 trillion in nominal terms—an increase of 9%.
However, the transfer of wealth may encounter challenges, as outlined in a corresponding UBS survey of billionaire clients. Generational differences in opinions regarding wealth and legacy are apparent, with 68% of respondents expressing a desire to continue and expand upon the achievements of their forebears. Additionally, 60% expressed a wish for future generations to benefit from accumulated wealth.
Despite these aspirations, the survey revealed that heirs also harbor their own ideas and ambitions, recognizing the need to reshape and reposition their wealth to sustain the family legacy. Technological changes, global crises like the COVID-19 pandemic, climate change, and worldwide conflicts contribute to the complexities heirs face in managing and growing family wealth.
Families are urged to identify common values and purposes more than ever before, with these values becoming integral to succession planning. Generational distinctions are evident in risk appetite, investment preferences, and philanthropic goals. The first generation, responsible for creating the wealth, tends to favor debt and fixed-income investing, possibly influenced by elevated interest rates.
On the other side, later generations exhibit a preference for investing in private equity despite potential asset repricing related to interest rate changes. In philanthropy, first-generation billionaires emphasize having a meaningful impact, while successors may hesitate to give away money they did not earn themselves.
Interestingly, there is a growing trend toward impact investing and managing businesses in ways that address environmental and social issues, reflecting a shift among heirs away from traditional grant-giving philanthropy. Cavalli noted a “strong entrepreneurial theme” among heirs, with 57% of heirs surveyed not working in the family business and 43% taking on roles at the C-suite level.
The evolving wealth transfer highlights the intricate balance between preserving family legacies and adapting to contemporary challenges and opportunities. As the “great wealth transfer” continues to unfold, it shapes the future trajectory of billionaire wealth and the values associated with its stewardship.
