The United States experienced record growth in millionaires in 2023, according to a report from Capgemini. The millionaire population in the U.S. grew by 7.3% to reach 7.5 million people. Their combined fortunes skyrocketed to $26.1 trillion, marking a significant 7% increase from the previous year.
Notably, the fortunes of individuals at the very top of the wealth ladder grew at an even faster rate. The number of Americans worth $30 million or more increased by 7.5% in 2023, totaling 100,000 people, with their fortunes reaching $7.4 trillion. Globally, ultra-high net worth individuals, though accounting for only 1% of the millionaire population, now hold 34% of its total wealth, indicating a growing concentration of wealth even among the wealthy.
Despite the significant wealth growth experienced in the past decade, driven by factors like low interest rates, liquidity, and more recently, Covid-19 pandemic stimulus and artificial intelligence, there are looming challenges. Global conflicts, elections, fluctuating interest rates, and a potential economic slowdown could all potentially impede the pace of wealth creation, according to Elias Ghanem, the global head of the Capgemini Research Institute for Financial Services.
While the U.S. demonstrated robust growth in millionaires, the global wealth scenario was more mixed. The number of millionaires worldwide increased by 5.1% in 2023, totaling 22.8 million individuals. Their combined fortunes reached a record $86.8 trillion, with Asia-Pacific showcasing the strongest growth at 4.8%, followed by Europe at 4%, Latin America at 2.7%, the Middle East at 2.1%, and Africa experiencing a marginal decline of 0.1%.
There has been a notable shift in the investment preferences of the wealthy, moving from safe, wealth preservation assets to more aggressive growth options. Cash and cash-equivalent holdings decreased from 34% to 25%, while real estate investments increased from 15% to 19%. Stocks holdings saw a decline to 21%, the lowest level in over 20 years, with the wealthy increasingly leaning towards alternatives like private equity and private credit, signaling a broader investment strategy shift.
As the wealth and population of the ultra-high net worth individuals grow, the competition to manage their fortunes intensifies. Wealth management firms are in a fierce battle to attract and retain ultra-wealthy clients, with the most successful ones being those who focus on understanding their clients deeply. According to Ghanem, companies need to delve beyond financials and comprehend clients’ family dynamics, psychological risk profiles, investment biases, lifestyles, and geographic diversification to offer relevant and personalized services.
Moreover, the rise of family offices as the private investment arms of affluent families poses another challenge to wealth management firms. With more than half of ultra-wealthy investors planning to establish a family office, these entities are viewed as providers of enhanced privacy, personalization, and independence in financial decision-making. To stay competitive, wealth management firms must offer a holistic suite of financial and non-financial products, including global advice, lending, lifestyle guidance, insurance solutions, real estate services, and access to next-generation education opportunities to cater to the evolving needs and expectations of ultra-wealthy clients.
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