Welcome to the modern dynastic era. Today’s billionaires are undergoing a seismic shift, transferring to their heirs around the world an unprecedented amount of wealth so large that it is changing the makeup of the typical billionaire.
Right now, the typical billionaire is around 69 years old and made their money (it’s almost always male) through some form of entrepreneurship. He is interested in philanthropyand will likely live in the United States, which has 751 billionaires and more than $4.5 trillion in wealth.
But this year marked a changing of the guard for the upper echelons of wealth, according to Report on UBS’s billionaire ambitions for 2023. During the period covered by this year’s report, new billionaires accumulated a greater share of their wealth through inheritance than through entrepreneurship. In fact, 53 heirs received approximately $151 billion, compared to the $141 billion earned by the 84 new self-made billionaires around the world. It is likely that the $151 billion figure is an underestimate, given the aversion of the ultra-rich to publicly proclaiming their wealth.
Much has been made of the so-called “great wealth transfer” that society is teetering on the precipice of, as older, wealthier generations begin to pass on their assets to younger people: by 2045, it is estimated that a 84.4 trillion dollars should be inherited among all Americans, $16 trillion of which will be inherited over the next decade. But the transfer of wealth from billionaires is on another level. Over the next two to three decades, UBS, which caters to wealthy clients, expects just 1,000 billionaires to leave an estimated wealth of $5.2 trillion globally.
These young heirs often have different priorities than their ancestors. For example, they are more likely to adapt to the rapid pace of technological change and invest in clean energy solutions. Only 32% of heirs surveyed said their primary goal would be to achieve their philanthropic goals or make an impact on the world and society, compared to 68% of the first generation. They are more interested in impact investing than their parents. More than half of the 53 heirs chose not to work in the family business.
That said, the legacy East important. More than two-thirds of billionaires surveyed by UBS who have inherited their wealth say they want to continue growing what their family started, and 60% want to pass their wealth on to future generations.
And that’s not to overstate the changes happening now: They may have different priorities, but 43% of recent heirs have chosen to continue in the upper echelons of the family business.
What it takes to be a billionaire
The last three decades have seen a historic increase in wealth accumulation. In 1995, there were only 377 billionaires in the world, with a total wealth of $954 billion, according to UBS. There are now 2,544.
This is largely due to accelerating technological change, rising property prices as well as globalization and the growth of emerging markets, UBS reports.
Part of the reason billionaire heirs have inherited more money in the past year than self-made billionaires have accumulated is that this paradigm is changing. UBS uses the uninspired initial public offering (IPO) market of 2022 and early 2023 to illustrate this trend. With fewer IPOs, there are fewer opportunities for billionaires like Mark Zuckerberg. Yet 21% of new self-made billionaires in this period acquired their wealth via an IPO.
“While inheritance will not always surpass entrepreneurship as a source of new wealth for billionaires, it is clearly becoming an increasingly important factor in creating new billionaires, as wealth accumulates over time. within families,” the report states.
It is therefore possible that the tides will recede, at least temporarily. But according to the UBS report, this is only the beginning of the transfer of assets. This will only become more pronounced in the years to come.
