The Wealthy Will Transfer $15.4 Trillion by 2030
The lower Manhattan skyline from the East River, September 2018.DON EMMERT/AFP/GETTY IMAGES
The world’s richest individuals—those with a net worth of at least US$5 million—will be passing down $15.4 trillion of wealth to the next generation by 2030, with more than half of those assets transferred within North America, according to a report released on Wednesday from Wealth-X.
The research and consulting firm, headquartered in New York and London, points out the amount to be transferred is equal in value to the entire economy of China, or “17 times the market capitalization of Amazon.” The nearly 550,000 involved will each pass on an average of $28.2 million, Wealth-X said.
“A Generational Shift: Family Wealth Transfer Report 2019,”is the firm’s first in-depth look at the issue of wealth transfer for this segment of the world’s population, who number about 2.6 million and have a net worth of nearly US$57 trillion.
It’s relevant particularly for the many self-made millionaires and billionaires who are not ready to transition out of the companies they founded, and for the financial services firms that advise them.
But it’s also a wake-up call for nonprofits, says Maya Imberg, Wealth-X’s director of thought leadership & analytics.
“In the not-for-profit sector, if you have an important donor who has a good relationship with the organization, and their wealth passes to their children or grandchildren, and the next generation doesn't have the same relationship, your fundraising is going to be affected,” Imberg says.
Perhaps not surprisingly, the Wealth-X report reveals that more than two-thirds of the estimated asset transfer—or $10.4 trillion—will come from only 18,480 individuals in the world who have $100 million in assets or more. This is largely because individuals accumulate more wealth as they age, with nearly 63% age 75 or older today, according to the report.
“They are very influential people if you look at the big picture,” Imberg says.
The proportions are more in line in North America, where 42.4% in the wealthiest tier (those with $100 million or more) are passing down their wealth, compared with 37.5% of those with $5 million to $30 million. The wealthy in North America will account for $8.8 trillion of the wealth transfer by 2030—more than half of the global total.
While individuals in Asia are accumulating wealth at a fast pace, they will pass on only $1.9 trillion, or 12% of the total, generally because the wealthy population is younger. In China, the average age of those with $30 million or more is 55, compared with a global average age of 63.
One message that came through to Imberg from speaking with a range of advisors at family offices and wealth management firms is a “prominent shift in the values and vision of the next generation,” she says. “They will use their wealth in different ways.”
As the report said, “this group of inheritors is likely to place greater importance on feeling some connection with their investments and to seek meaning in the way they use their wealth.” One way that is manifesting is in an uptick of interest in investing for positive social and environmental impact.
“This heightened interest is likely to continue, although the sector has yet to undergo a market downturn, and, looking ahead, such a connection could test the next generation’s commitment to such assets,” the report said.
Another finding was that the degree of preparedness by families for wealth transfer doesn’t correlate with the amount of wealth they have. “It boils down to an openness to engage in the planning process,” the report said. “It’s easy to push these types of conversation away, they aren’t easy to deal with,” Imberg says. But, “the earlier you start, the better,” she says. And it’s best to “allow for an open and honest discussion, so the children might be able to tell you how they would like to be involved in the future—whether they are involved in the business or more involved in philanthropic ventures—so you can make the right decisions.”
No comments:
Post a Comment