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December 11, 2023 at 09:04 PM
A majority of billionaires who accumulated wealth in the past year did so through inheritance as opposed to entrepreneurship, according to the 2023 UBS Billionaire Ambitions Report.
“This is a theme we expect to see more of over the next 20 years, as more than 1,000 billionaires pass an estimated $5.2 trillion to their children,” Benjamin Cavalli, head of strategic clients at UBS Global Wealth Management, said in a statement. “The next generation has fresh views about business, investing and philanthropy, redirecting large pools of private wealth to new business opportunities arising from the times we live in.”
Cavalli said that for successions to go smoothly, founders and their families will have to discover common values and purpose to navigate a way forward that satisfies all generations and allows them to build their own legacies.
UBS conducted an online survey between June 28 and Sept. 17 among 79 billionaire clients booked in the United States, Europe, Middle East, Singapore and Hong Kong SAR.
Changing of the Guard
The study found that many billionaires are passing their wealth on to the next generation, and for the first time in nine editions of this report the next generation of billionaires accumulated more wealth through inheritance than entrepreneurship.
Fifty-three heirs inherited a total of $150.8 billion over the past year, compared with the 84 new self-made billionaires’ total accumulation of $140.7 billion.
Sixty-eight percent of billionaires with inherited wealth said they intend to continue and grow what their parents achieved in business, brand or assets. Sixty percent of heirs want to enable future generations to benefit from their wealth, and 32% said they will follow their parents’ predefined philanthropic goals.
However, heirs are conscious that they may need to reshape and reposition their wealth to continue the family legacy. As they inherit their parents’ businesses, investments and foundations, they will focus more on such major economic opportunities and challenges as innovative technologies, the clean-energy transformation and impact investing.
First-generation billionaires are aware of this, with 58% saying their greatest challenge will be instilling the necessary values, education and experience in their heirs to take over.
Heirs also have their own views on risks to the business and how they should be positioned. For example, while first-generation billionaires rank a potential U.S. recession and geopolitical tensions as their primary concerns, heirs are most concerned about inflationary pressures and the availability and price of raw materials.
That said, there’s wide agreement on the opportunities and risks of generative artificial intelligence, with 65% viewing AI as offering one of the greatest commercial opportunities to their operating business over the next 12 months. But as technology gains prominence, 58% viewed a cyber threat or hacking as the biggest risk.
Generational Differences
When it comes to investing, wealth creators and heirs expressed different appetites for risk, with 59% of successor generations favoring direct private equity investments and 55% private equity funds versus only 31% and 17% of first-generation billionaires.
A similar gap between the generations appeared for both developed and emerging markets equities. Yet, like their benefactors, successors also saw the appeal of developed market bonds: 38% of the first generation and 36% of successors said they would invest more.
Among billionaire heirs surveyed, many see alternative opportunities to joining the C-suite of the family business. More than half of the 53 heirs said they would step away, opting for careers more suited to their own ambitions, skills and circumstances.
The survey also found an increase in the number of heirs becoming philanthropists and driving sustainable innovation, creating new business ventures or building on existing ones with a focus on sustainability and philanthropy.
Post-Pandemic Recovery
The UBS study found that globally, billionaire wealth partially recovered in the 2022/2023 period, lifted by billionaires with consumer and retail businesses in Europe, after falling by almost a fifth in the previous 12 months.
Overall, the number of billionaires rose by 7% globally in the past year, increasing from 2,376 to 2,544, and their wealth recovered by 9%, from $11 trillion to $12 trillion.
Billionaires with innovative companies in technology and health care have accumulated the greatest wealth over the past decade, according to UBS. But there are early signs of improving fortunes (+15%) for billionaires with industrial companies, which will likely continue amid the energy transition and higher defense spending in several countries.
See the accompanying gallery for the billionaires’ planned asset class allocations over the next 12 months, ranked by increases in exposure.
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