The Wealth-X and NFP Family Wealth Transfers Report points outs that the world’s current 211,275 ultra-high net worth individuals (UHNW) will pass on US$16 trillion worth of wealth to the next generation over the next three decades.
The Introduction of the Wealth-X Family Wealth Transfers Report describes the issue and the topics covered in the report.
“[Many of] the world’s wealthiest individuals are approaching retirement, and are starting to implement their wealth succession plans. We are therefore entering a new and unprecedented era of global family wealth transfers and giving, against the backdrop of an expanding UHNW population and rising UHNW wealth. In this report, Wealth-X examines and explains data and trends on wealth succession globally and by region, and provides in-depth analysis on the world’s liquid and illiquid wealth transfer and its relevance for succession planning and the efficient protection of assets through insurance. Without prior planning, transferring wealth to the next generation could lose up to half of the fortune of an UHNW individual. The importance of preparing for wealth transfers cannot be overstated.”
UHNW individuals: Overview of impending wealth transfer to the next generation
Of note, within the coming decade, close to 16,000 UHNW individuals with a combined net worth of over US$4.1 trillion will pass at least part of their wealth to the next generation. The total value of assets passed down through generations is likely to surpass US$16 trillion within three decades. UHNW individuals in the United States are expected to represent almost 40% of this wealth transfer.
The Wealth-X report explores the impact of aging UHNW populations both by region and selected countries, and discusses the implications on taxes, philanthropy, private banking and family offices.
Wealth-X report highlights differing generational perspectives
Not surprisingly, private holdings represent most of the net worth of UHNW individuals who are planning to pass on their wealth. According to Wealth-X, “This presents a US$6 trillion dollar opportunity for banks; not all children of ultra wealthy individuals will want to continue to run their family companies, and so many of these children will then seek an exit from these businesses, most of which are associated to first generation wealth.”
The report goes on to discuss the reasons for children not wishing to take over the family business such as the desire for independence and the opportunity to create their own careers and accomplishments, an interest and passion in a different industry, or even lack of the skills or experience required to run a large enterprise on their own.
Taken as a whole, this means an increase in both UHNW individuals’ liquid holdings and public assets is likely over the next couple of decades, with privately held wealth decreasing correspondingly. This also means that alternative assets such as real estate, collectibles and other luxury items will probably appreciate during and especially after the wealth transfer.