Instead of becoming business owners, new billionaires are becoming wealthy through inheritance in a "great wealth transfer."

 Important Points

• According to a new UBS report, billionaires have inherited more wealth than they have created through entrepreneurship in the past year.
• This implies that as billionaires age, the so-called "great wealth transfer" is gaining momentum.
• The report concluded that while billionaire wealth increased in the year, it is still below its peak from 2021.

According to a new UBS report, as the "great wealth transfer" gains traction, a new generation of billionaires has amassed more wealth via inheritance than through business ventures in the past year.

The Billionaire Ambitions Report 2023, which was released on Thursday, stated that "many business founders are now ageing and passing their wealth to the next generation after the surge in entrepreneurial activity witnessed over the past few decades."

According to the report, the combined wealth of the 53 heirs was $150.8 billion, more than the $140.7 billion earned by the 84 newly minted billionaires. Since the report's initial publication in 2015, this is the first time that it has been the case.

And this is just the start. It is anticipated that $5.2 trillion in wealth will be transferred from one generation to the next over the course of the next 20 to 30 years.

Benjamin Cavalli, head of UBS global wealth management strategic clients, told reporters during a briefing on Wednesday that "the great wealth transfer is gaining significant momentum."

According to a UBS analysis, billionaire wealth is generally increasing, with a 7% increase in the number of billionaires in the year ending in early April 2023. By the end of this time, there were about 2,544 billionaires. During this period, billionaire wealth increased by 9%, reaching a nominal total of about $12 trillion.

Differences between generations

A related survey of UBS billionaire clients revealed that there are generational differences in views regarding wealth and legacy, so the transfer of wealth might not be as easy as it seems.

Regarding assets and businesses, for instance, 68% of respondents stated, "that they aim to continue and grow what their forebears achieved," and 60% expressed a desire for future generations to share in the wealth that has been accumulated.

The report stated that although they seem aware that they might have to realign and realign their wealth in order to carry on the family legacy, they also have their own goals and aspirations.

This includes changes and advancements in technology as well as the effects of worldwide crises like the Covid-19 pandemic, climate change, and international conflicts.

Families now more than ever need to find a shared purpose and set of values, according to Cavalli. Then, he said, succession planning needs to be "enshrined" with these shared values.

According to the report, one of the generational differences is differences in risk appetite.

According to UBS, the affluent individuals of the first generation have a preference for debt and fixed-income investments, which could be attributed to the current high interest rates. Even so, it seems that the next generation of ultra-wealthy people prefers to invest in private equity, even in spite of asset pricing related to interest rates.

When it comes to philanthropy, generational disparities are also evident. First generation billionaires are more likely to say that making an impact is a major priority for them, while their successors seem reluctant to donate wealth that they did not create.

Impact investing, on the other hand, is becoming more popular, as is running companies in ways that address social and environmental issues for both profit and charity purposes. According to the report, "this survey result may indicate a shift among heirs away from traditional grant-giving philanthropy and toward delivering sustainable outcomes across all activities."

A "strong entrepreneurial theme" among heirs, according to Cavalli, is that they are increasingly leaving behind their families' past businesses to start their own.

According to the data, 43% of heirs who participated in the survey are involved at the C-suite level, and 57% of them do not work for the family business.