Rise of Inherited Wealth: New Billionaires Increasingly Benefit from Family Fortunes

UBS Report Reveals a Shift in the Source of Wealth for New Billionaires

In a surprising turn of events, a recent report from UBS reveals that the majority of wealth accumulated by new billionaires in 2023 came from inheritance, surpassing self-made wealth for the first time in the study’s nine-year history. This trend marks a significant shift in the landscape of billionaire wealth creation, as the past three decades have seen a surge in the number of billionaire entrepreneurs. The report estimates that over the next 20 to 30 years, more than 1,000 billionaires are expected to pass on a staggering $5.2 trillion in wealth to their heirs.

The Rise of Inherited Wealth:

According to the UBS Billionaire Ambitions Report 2023, of the $291.5 billion in wealth controlled by the class of new billionaires, $150.8 billion was inherited, while $140.7 billion was generated by self-made billionaires. This marks a departure from previous years, where self-made wealth had been the predominant source of billionaire fortunes. Wealth managers have long anticipated this trend, as the aging of early tycoons has led to the passing of responsibility and wealth to their heirs, potentially creating multigenerational billionaire families.

China Takes the Lead:

The number of billionaires worldwide rose by 7% in 2023, reaching a total of 2,544 individuals. Mainland China accounted for approximately one-fifth of the global billionaire population, with nearly half of the new billionaires hailing from the country. The report highlights the remarkable rise of China as an economic powerhouse, as it continues to produce a significant number of billionaires.

The Changing Dynamics:

While the overall number of new billionaires increased, the gap between those who inherited their wealth and those who earned it through work has been narrowing. In 2023, there were 84 new self-made billionaires, surpassing the 53 who inherited their fortunes. This stands in contrast to previous years, where the number of self-made billionaires far exceeded those who inherited their wealth. The report also reveals that most self-made billionaires achieved their wealth through organic business growth, with a significant portion attributing their success to initial public offerings (IPOs).

Inheriting Wealth, But Not Necessarily the Family Business:

Interestingly, despite inheriting their fortunes, only 43% of billionaire heirs worldwide took positions in the family business. The majority of heirs chose to pursue their own careers, indicating a shift in the mindset of the next generation of billionaires. The report also highlights the investment preferences of billionaires based on their source of wealth. Those who inherited their fortunes expressed a keen interest in private equity investments, while self-made billionaires showed a preference for fixed income investments, particularly private debt.

Philanthropic Goals and Legacy:

Notably, the report reveals a divergence in philanthropic goals between first-generation billionaires and those who inherited their wealth. 68% of self-made billionaires stated that their philanthropic goals were a primary objective of their legacy, compared to only 32% of those who inherited their fortunes. Successor generations often exhibit reluctance to gift money they have not earned, with many continuing existing family foundations rather than establishing their own philanthropic ventures.

Conclusion:

The UBS report sheds light on a significant shift in the source of wealth for new billionaires, with inheritance overtaking self-made wealth for the first time. While the number of billionaires continues to rise, the dynamics are evolving, with an increasing number of individuals inheriting their fortunes. This trend raises questions about the role of family wealth in perpetuating inequality and the impact it has on the entrepreneurial spirit. As the world witnesses the rise of multigenerational billionaire families, it becomes crucial to understand the implications and potential consequences of inherited wealth in the global economy.