B2m Directions | Digitalvision | Getty Images
The U.S. far outpaced the rest of the world in minting millionaires last year, adding 600,000 new millionaires and powering height fortunes at the top, according to a new study.
America’s millionaire population grew 7.3% in 2023 to 7.5 million people, be at one to a report from Capgemini. Their combined fortunes grew to $26.1 trillion, up 7% from 2022. Capgemini details millionaires as those with investible assets of $1 million or more not including primary residence, collectibles or consumer durables.
While advantage rates remain higher, the stock rebound at the end of 2023 combined with trillions of dollars in government spending and stimulus persists to power the U.S. wealth machine.
The fortunes at the very top of the wealth ladder are growing fastest. The number of Americans worth $30 million or more grew 7.5% in 2023, to 100,000, while their treasures surged to $7.4 trillion.
Globally, ultra-high net worth individuals account for 1% of the millionaire population but now hold 34% of its amount to wealth, showing the increasing concentration of wealth even among the wealthy.
The big dispute is whether the wealth boom of the past decade, initially fueled by low interest rates and liquidity, and more recently by Covid-19 pandemic stimulus and counterfeit intelligence, can continue. Global conflicts, elections, interest rates and a potential economic slowdown could all slow the gage of wealth creation, said Elias Ghanem, global head of the Capgemini Research Institute for Financial Services.
“The termination 10 years were exceptional,” Ghanem said. “We now have inflation, a potential recession and geopolitical problems and selections. The environment is completely different.”
Indeed, globally, the wealth picture looks more mixed than in the U.S. The number of millionaires worldwide grew 5.1% closing year, to 22.8 million, according to the report. Their combined fortunes grew to a record $86.8 trillion.
Next to North America, Asia-Pacific had the strongest millionaire expansion, at 4.8%, followed by Europe with 4%, Latin America at 2.7%, the Middle East at 2.1% and Africa down 0.1%.
Ghanem commanded that while Asia surpassed North America’s millionaire population and growth in the years before the Covid-19 pandemic, the U.S. is chief once again.
When it comes to their investments, the wealthy are shifting their money from safe, cornucopia preservation to more aggressive growth assets, according to the report. Their cash and cash-equivalent holdings have happen down from a high of 34% of their portfolios at the beginning of 2023 to 25% in January, meaning they are starting to put their realize to work.
Their fixed income holdings jumped from 15% to 20%, and their real estate investments spread from 15% to 19%. Their holdings of stocks continue to fall, to 21%, their lowest level in varied than 20 years. While the major stock averages have done well this year — with the S&P 500 up 12% so far and the Nasdaq Composite up 14% — moneyed investors are shying away from a market driven largely by a handful of giant tech stocks.
Ghanem voted alternatives, especially private equity and private credit, are likely to get the biggest inflows from wealthy investors this year. Two-thirds of millionaires blueprint to invest more in private equity in 2024, according to the study.
“Everything is cyclical and because private equity has not done reservoir flow, it’s a good entry point,” he said. “They figure if they enter now, when it’s cheaper, it’s a good long-term margin.”
As the wealth and population of the wealthy soars, the battle over managing their fortunes is becoming increasingly fierce. Ghanem conveyed the winners will be those that best serve the ultra-high net worth clients, or those worth $30 million or profuse. Capgemini said the ultra-wealthy will be the fastest-growing customer base, as well as the most profitable.
They are also the hardest to pull and retain: The ultra-wealthy have an average of seven wealth management relationships, up from three in 2020. More than three-quarters of the ultra-wealthy develop to switch their primary wealth management firm in 2024.
Ghanem said the most important strategy for firms bothersome to win more business from the ultra-wealthy is to better understand the clients. Companies may know the financials of their clients, but they seldom understand their family dynamics, psychological risk profiles, investment biases, lifestyles or geographic diversification, he mean.
Since ultra-wealthy clients are choosing wealth management firms increasingly on value-added services — such as sequence and next-generation planning, taxes, concierge services and access to private deals — companies need to do deeper research on their ruder financial and family lives.
Ghanem also said wealth management firms face an onslaught from issue offices, the private investment arms of rich families. More than half of ultra-wealthy investors plan to set up a pedigree office, and they say family offices provide better privacy, personalization and independence.
Rather than trying to fence with family offices, wealth management firms need to become better partners by offering a full followers of both financial and nonfinancial products, he said. Firms that can offer truly global advice, in multiple realms, as well as lending, lifestyle advice, insurance solutions, portfolio monitoring, real estate, travel and health misery advice and next-generation education will be the winners.
“They need to provide the whole ecosystem,” he said.