30/11/23

NEXT GEN: Next generation of billionaires collect more wealth from inheritance than work, says UBS

As published on: theguardian.com, Thursday 30 November, 2023.

Newly minted billionaires have collected more of their wealth from the deaths of relatives than through their own work and entrepreneurship, according to a Swiss bank favoured by the super-rich.

Of the 137 people who became billionaires in the 12 months to this April, 53 inherited a combined $150.8bn (£119bn) from their family, the report by UBS found. This exceeds the combined $140.7bn created by “84 new self-made” billionaires over the same period.

The bank said it was the first time in the nine-year history of its annual report on the fortunes of the richest 0.00004% of society that “the next generation of billionaires accumulated more wealth through inheritance than entrepreneurship”.

Benjamin Cavalli, the head of strategic clients at UBS Global Wealth Management, said: “This is a theme we expect to see more of over the next 20 years, as more than 1,000 billionaires pass an estimated $5.2tn to their children.”

The report said the “growing significance of these families can be seen across all major geographical regions”. In Asia-Pacific, inheritors’ average wealth was $2bn compared with $1.6bn for entrepreneurs. In the Americas, the inheritors were worth $2.2bn versus the entrepreneurs’ $1.5bn. In Europe, the Middle East and Africa (EMEA), the inheritors’ average wealth of $4.4bn – twice the entrepreneurs’ $2.2bn.

It comes as there is a growing public debate about the role of inheritance tax in helping to pay for public services and to assist families struggling to cope with the cost of living crisis.

Jeremy Hunt, the British chancellor, had been under pressure from some in his party to announce a cut to inheritance tax in his autumn statement last week. He left the tax unchanged at 40% on estates worth more than £325,000. The tax affects fewer than 4% of the UK’s richest families.

Overall, the number of billionaires around the world increased by 7% to 2,544, and their combined wealth increased by 9% to $12tn, UBS said. That is about four times more than the GDP of the UK.

The report said the huge wealth already transferred to the next generation was “just the tip of the iceberg”.

“As increasing numbers of the early tycoons age, so responsibility is beginning to pass to their heirs, fostering potential future multigenerational billionaire families,” UBS said. “This great wealth handover has long been anticipated, but the 2023 edition of the UBS Billionaire Ambitions report shows that it’s under way and gathering momentum.”

The report said: “During the next 20 to 30 years, over 1,000 of today’s billionaires are likely to transfer more than $5.2tn to their heirs. How do we calculate this number? Simply by adding up the wealth of the 1,023 billionaires who are aged 70 or more today.

“Looking to the longer term, the exceptional wealth resulting from the boom in entrepreneurial activity since the 1990s has established a foundation for future generations of billionaire families.”

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Next Gen Wealth Management Wealth Management UBS Succession Inheritance