The changing face of America’s wealthiest clients
The ranks of America’s billionaires are growing — by 53 individuals, to be exact, with about $125 billion in combined fortunes. But the people who make up the country’s uber-rich are changing, according to a new report by UBS and PwC.
“The new billionaire is different,” says John Mathews, head of ultrahigh-net-worth at UBS.
Billionaires are increasingly self-made and women. Fewer are coming from the financial industry, according to the report, which was based on 2017 data.
“Twenty-six percent of the entrants of billionaires in the U.S. were female,” says Tom Holly, who leads the asset and wealth management practice at consulting firm PwC. Only 12% of all billionaires in North America are female, according to the study.
Billionaires are increasingly drawing their wealth from sectors other than finance. In 2012, there were 20 new billionaires in the financial services industry, according to the study. Last year, there were only nine, partly due to the poor performance and lower fees of some hedge funds.
A high number of American billionaires (40%) came from the consumer and retail industry, which includes food, cosmetics and drink. Globally, almost a quarter of billionaire wealth is from this sector, more than any other sector.
Billionaire wealth, at $8.9 trillion, is at its highest level in history — and more than half of new billionaires were self-made, according to the report.
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The report also anticipates a massive generational wealth transfer among the elite. Over the next two decades, $3.4 trillion in wealth will transition to a new generation, according to the study. Last year, 25 heirs in the U.S. inherited at least $1 billion.
Passing such a sizable inheritance is no simple task, and advisors need to consider the ways they can help clients, says Judy Spalthoff, head of family advisor and philanthropy Americas at UBS global wealth management.
“It’s not enough to only consider the transfer,” she says. This can be a years-long process of preparation that requires active communication with families.
In the consumer and retail industry, the most effective way to store wealth through generations is through a family business, according to the study.
But beneficiaries who inherit a business, rather than just assets, are also more likely to branch off and start their own entrepreneurial ventures, creating new wealth, according to the report.
Finally, who handles the family’s fortunes is changing, too. Wives and daughters are increasingly leading family businesses, family offices and philanthropic foundations, according to the report.
But even as billionaire fortunes in the U.S. have climbed to a record high, advisors should note that the growth of this wealth has slowed in comparison to global billionaire wealth. While America still has the largest concentration of billionaire wealth, Asia is on track to exceed the U.S. in terms of total wealth in three years, a rising market of potential clients.
“China is really where we’re seeing unbelievable and unprecedented growth,” Mathews says.