A vast increase of wealth among the world’s aging billionaire population is creating a new wave of powerful multigenerational families, according to the new Billionaires Insights 2018 report.
The world’s 2,158 billionaires collectively increased their wealth by $1.4 trillion last year to $8.9 trillion—the largest absolute increase in billionaire wealth history.
A total of 199 billionaires were created over the year globally, with nearly one-third gaining their wealth through some form of innovation.
“The past 30 years have seen far greater wealth creation than the Gilded Age,” the report by Swiss bank UBS and accountants PwC said.
“That period bred generations of families in the US and Europe who went on to influence business, banking, politics, philanthropy and the arts for more than 100 years.
“With wealth set to pass from entrepreneurs to their heirs in the coming years, the 21st century multigenerational families are being created.”
The next generation stepping up
More than 40 of the 170 new billionaires created last year inherited their wealth, and given the number of billionaires over the age of 70, the report’s researchers expect a further $3.4 trillion to be handed down over the next 20 years.
“A major wealth transition has begun,” the report said.
“Over the past five years, the sum passed by deceased billionaires to beneficiaries has grown by an average of 17% each year, to reach $117 billion in 2017. In that year alone, 44 heirs inherited more than a billion dollars each.
“The calculation is simple—there are 701 billionaires over the age of 70, whose wealth will transition to heirs and philanthropy over the next 20 years, given the statistical probability of average life expectancy.”
The comments echoed similar findings by Campden Research’s new Global Family Office Report 2018 (GFO), which revealed 70% of the family offices surveyed expected a generational transfer in the next 10 to 15 years.
UBS said the adage that the first generation makes the fortune, the second generation preserves it and the third generation squanders it no longer applied, as some families have kept vast fortunes over five or six generations and have even increased the overall fortune.
Beneficiaries who inherit a business, rather than just assets, were also more likely to branch off and start their own entrepreneurial ventures, creating new wealth.
“The family business is a good nursery for entrepreneurs,” the Billionaires Insights 2018 report said.
“In many cases, families understand the advantages of giving the next generation business experience early. They are seeking to perpetuate the entrepreneurial spirit through supporting sons and daughter, both financially and in other ways, in their efforts to set up new businesses.”
Asia is catching up
The biggest increase in wealth was reported in China, where the country’s 373 billionaires saw their collective riches grow 39% to $1.1 trillion.
The results chimed in with GFORfindings, with Asian family offices recording the highest average investment returns last year at 16.4%, followed by North America (15.9%), Europe (15%) and Emerging Markets (14.7%).
In China, 106 became billionaires in 2017, which roughly comes out to two new billionaires minted every week—growing at a rate almost double that of the Americas and Europe.
“Twelve years ago, the world’s most populous country was home to only 16 billionaires,” the Billionaires Insights 2018 report said.
“Today, as the ‘Chinese Century’ progresses, they number 373, nearly one in five of the global total.”
However, almost all (97%) Chinese billionaires are self-made, with just 3% inheriting their fortune and at the average age of 56, succession to the next generation is likely to happen in the next 10-15 years.
In the Asian region, India had the highest number of elderly billionaires, followed by Hong Kong, with succession planning in those two countries expected to happen imminently, according to the report.