Global wealth has rebounded strongly after a pandemic-induced decline.
Global wealth is on the upswing following a post-pandemic fall, billionaires have bounced back from 2022’s net loss of $1.4 trillion, and the global luxury market was projected to hit $1.6 trillion in 2023, a new high.
The second Gilded Age shows no sign of retreat.
In the U.S., the bull market prevailed with the S&P 500 rising nearly 25% —despite political brinkmanship over the debt ceiling and a banking crisis that felled five banks. Globally, the wars in Ukraine and the Middle East added to the turmoil.
As the effect of higher interest rates continues to percolate through the economy, with inflation falling and unemployment at 3.7%, many forecasters see a bullish 2024—if the nation’s and indeed the world’s economic clockwork continues to move in the right direction. Although the global economy has proved to be stable, and perhaps even sturdy, the World Bank has projected slower output growth in coming months.
The Billionaire Wrap-up
The number of the world’s billionaires rose by 7% in the 12 months leading to April 2023. They now total 2,544, which is smaller than the group’s peak of 2,686 in 2021, when their worth totaled $13.4 trillion. The net loss of $1.4 trillion the group experienced in 2022 was erased by a $1.5-trillion gain in 2023, according to Bloomberg.
Today the world’s richest have an aggregate worth of $12 trillion, according to the World’s Billionaires List published by Forbes. The group’s recovery is due to the fortunes of European billionaires in the consumer and retail sectors, according to the Billionaire Ambitions Report 2023, compiled by UBS, which provides financial advice and solutions to private, institutional and corporate clients worldwide.
LVMH CEO Bernard Arnault on board his private jet between Beijing and Shanghai. Arnault in January ... [+]
The world’s largest concentration of wealth is in the Americas, but France has the largest share of billionaire wealth in Europe, the Middle East and Africa. “But the number of billionaires increased more in other Western European countries,” which includes Germany, the United Kingdom, Italy and Switzerland, according to UBS’ Billionaire report.
The rising fortunes of the wealthy class tracked tech stock performance, which experienced record ascents in 2023. The zeal about artificial intelligence helped boost tech-savvy investor portfolios by $658 billion, or nearly 50%, according to Bloomberg.
Private and Concierge Services Soar
“There’s such a tremendous generation of wealth, a continuing sense of aspiration for finer things,” says Sherry Dewane, a UBS Certified Financial Planner™ who has advised athletes and entertainers since 1997. The current rise in wealth creation has spurred the popularity of private and concierge services. “It’s really unprecedented; I personally have never seen it to this extent,” she says.
The short list of blue-chip services that cater to the moneyed: concierge health care; education consulting, spa, wellness and fitness services; aviation; travel; cuisine; and business coaching.
Exponential Wealth Generation
In her work with elite entertainment professionals, Dewane observes an overlap in the generating of wealth within industries. For example, she cites the surging gaming industry, a behemoth with annual revenue of $187.7 billion, according to a Forbes report.
“Games have been made from television or movies, and movies have been made from games,” Dewane says. “It’s a huge market.”
A lot of cash has been made by the gaming industry and digital designers in the niche market for virtual fashion, Dewane says. The purchase of gamer “cosmetics” (which includes fashion, accessories and “skins” that clothe avatars) adds up to a multibillion-dollar market in itself—$40 billion according to one account.
Shohei Ohtani's $700-million contract with the Los Angeles Dodgers is a windfall for not only the ... [+]
Incorporeal leopard-print capri pants paired with blazing heels that are literally on fire might seem frivolous when it comes to creating wealth (Gucci, Louis Vuitton and other luxury brands would disagree, given their gamer collabs and partnerships). But Dewane says the subject points to a larger truth.
“There is tons of money, seemingly endless money, being poured into the catchall phrase known as ‘content,’” she says. “The delivery methods have changed and contracts have changed, especially in terms of name, image and likeness. That becomes quite valuable, given that money is generated each time it’s used,” including digitally.
The ripple effects are felt through numerous industries. “Consider Shohei Ohtani who just signed with the Dodgers for $700 million,” Dewane says. “He’s not the only one making money. All of the attorneys, agents, business managers and the handlers involved in that deal also have cash generation.”
The Wealthy Think Differently
The wealthy, along with the experts and handlers who surround them, “think in a different way,” says Ranjeet Guptara, a senior vice president and senior portfolio manager at UBS. “They think across generational lines: the grandparents, parents and the succeeding generations beyond. That requires multiple and layered perspectives as well as strategies.”
Inherited wealth across generations has increased in what the UBS Billionaire Ambitions Report calls “a great wealth transfer.” And it’s gaining momentum. For the first time in the report’s nine editions “… billionaires have accumulated more wealth through inheritance than entrepreneurship.” It’s a trend that UBS experts see as an “increasingly material factor in the creation of new billionaires.”
For the first time in history, inheritance has surpassed entrepreneurship as the primary source of ... [+]
Different generations have different views about philanthropy, investing and business. “As they inherit their parents’ businesses, investments and foundations, heirs look to focus more on today’s major economic opportunities and challenges, such as innovative technologies, the clean-energy transformation and impact investing,” according to the report.
The report found that all generations, however, have their eye on the opportunities and risks of generative artificial intelligence. “Around two-thirds surveyed saw AI as offering one of the greatest commercial opportunities to their operating business over 12 months,” the report found.
The affluent also think in international terms. “Many of our clients work in multiple jurisdictions, and different parts of a family will reside in various countries,” says Guptara. “A whole team can be required to help people think in different currencies and to navigate varying interest rate regimes.”
Realtors Are Part of the Planning Team
In the U.S., the regime includes a marked interest rate escalation that began in March 2022, which “although fascinating and unprecedented,” Guptara says, “is not really something that should derail people from long-term planning.”
Such planning includes focusing on mortgage interest rates, especially adjustable-rate mortgages, which are always a ticking clock, Guptara says. “People are also staying in homes too long, unaware of the effect of interest rates when they come to re-mortgage,” he notes. “There’s this wonderful invention for family reunions called Airbnb; the reunion doesn’t have to be held in the family mansion.”
Dewane mentions a sometimes forgotten reality: “Realtors are part of the planning team, especially at the higher end of incomes,” she says. “Decisions must be made about the most favorable time to sell, and what shape a house is in, among other factors. Those who’ve lived in a house for a long time will likely have a multitude of embedded gains. Determinations need to be made about how to manage that property as well as the taxes—choices that can result in benefits for the family.”
Realtors play a key role in the planning team, particularly high-net-worth individuals.
Both Dewane and Guptara agree that Realtors who finesse high-end deals must realize that they are negotiating for value and, indeed, “have the burden to prove value,” Guptara says. That’s especially crucial as the National Assn. of Realtors battles numerous legal challenges to its policies.
“With VIP homes, one faces an even more difficult task in terms of finding exclusive properties and dealing with very complex and sophisticated portfolios,” he says. “Quality is something such advisors continue to prioritize, and they’re rewarded commensurately.”
Changes in Tax Codes Shift Strategies
Strategies include using charitable remainder trusts, which enable donors to place cash or property in an irrevocable trust that pays a fixed annual income to the donor or a designated beneficiary. A charity receives the remainder of the trust once the donor dies.
“With changes in the tax code, we’re seeing far more of these,” Dewane says. “Not-for-profits are marketing them far more than they used to. In certain parts of the country, tax rates have increased, and so it can be a viable alternative for those who are charitably inclined to fulfill those desires while receiving a tax benefit.”
As tax rates change and, indeed, as overall change is constant, Dewane and Guptara envision a dynamic future for today’s Gilded Age.
“The pace of change will increase,” Dewane says. “No one has a crystal ball, but I don’t see quite the same thing” in terms of adjustments to current peak wealth generation, as compared with the first unprecedented round from the late 1870s to the Great Depression.
Guptara, in fact, believes that “we’re on the cusp of something even more exciting.”
Given the rising impact of artificial intelligence, related manufacturing digitization and big data, “we’re now in the fourth industrial revolution,” he says. “It’s only just starting to impact a majority of industries. Legacy processes are going to see a creative disruption and repurposing. That can only be a good thing. Hopefully there will be cross-fertilization wherein everybody benefits.”
This interview is part of PERSPECTIVES
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