As the world grapples with economic challenges, a silent but seismic shift in wealth is occurring—a transition from self-made billionaires to their heirs. This transition, often overlooked, is carving out a new gilded age, one marked by vast fortunes passed down not through merit but birthright. “Without robust wealth and inheritance taxes,” warns an analyst, “the children and grandchildren of today’s billionaires will dominate our future politics, economy, culture, and philanthropy.”
A recent UBS report unveils a startling trend: for the first time since 2015, more wealth has been acquired through inheritance than entrepreneurship among billionaires. During a one-year span from April 2022, 53 heirs inherited a colossal $151 billion, surpassing the $140.7 billion garnered by billionaire entrepreneurs. Benjamin Cavalli of UBS Global Wealth Management remarks, “This is a theme we expect to see more of over the next 20 years.”
The report further reveals a 7 percent increase in the global billionaire population, rising to 2,544, with the U.S. alone housing 751 billionaires as of April 2023. Despite a dip during the pandemic, the collective net worth of these billionaires surged back to $12.0 trillion, indicating a resilient and growing concentration of wealth at the top.
Significantly, over 1,000 billionaires over 70 are poised to transfer $5.2 trillion to their heirs in the coming decades. This looming handover, UBS notes, is not just a transfer of wealth but a potential threat to the very fabric of equality and democracy, signifying an era where inherited wealth could shape our societies.
Chuck Collins from the Institute for Policy Studies draws attention to this phenomenon, stating, “this is how wealth dynasties are formed.” He highlights the critical need for substantial inheritance taxes to prevent the formation of these dynastic oligarchies, given the current weak tax structures.
The report also sheds light on the philanthropic tendencies of billionaires’ heirs, who seem more hesitant than their predecessors to commit their wealth to philanthropic causes—a stark contrast to the first-generation billionaires who often utilize philanthropy, at times as a tax avoidance strategy.
Interestingly, the report notes that less than a quarter of these billionaires are concerned about “developments in taxation.” This complacency suggests a disbelief among the ultra-rich that global leaders will respond to calls for taxing their enormous fortunes and those of their descendants. Oxfam International’s observation that two-thirds of countries lack inheritance taxes, allowing wealth to be passed down tax-free, further compounds this issue.
The UBS Billionaire Ambitions Report 2023 highlights a critical shift from entrepreneurship to inheritance among billionaires. It points out the evolving perspectives of each generation regarding their legacy and wealth, indicating a need for more sophisticated succession planning and value alignment among billionaire families.
As wealth is handed down, heirs are increasingly focusing on current economic opportunities and challenges. They are seen to be reshaping their inherited wealth to align with today’s priorities, like sustainable investments and innovative technologies. Yet, they also bring their unique views on risks and opportunities, differing from the first-generation billionaires.
Regionally, the report finds varied investment strategies and concerns. In the Americas, there’s a strong inclination towards private equity investments. In contrast, Europe, the Middle East, and Africa show a preference for developed market bonds, while Asia-Pacific billionaires display a home bias in investment strategies, focusing primarily on opportunities within their region. This wealth transfer signals not just a shift in who holds the wealth, but how it will influence societies globally. The report underscores the necessity of robust wealth and inheritance taxes to prevent a future dominated by unaccountable aristocracies born of fortune rather than merit.
UBS stands as a leading global wealth manager and a pivotal figure in Swiss banking. With its recent acquisition of Credit Suisse, UBS now manages an impressive $5.5 trillion in assets. Its global presence and influence are undeniable, with operations in over 50 countries and listings on both the SIX Swiss Exchange and the New York Stock Exchange.