Over the past 30 years, the number of ultra-high-net-worth individuals (UHNWIs) around the world have surged, driven by the technology industry boom, the expansion of financial markets, real estate price rises, globalization and the growth in emerging market economies.
The Global Wealth Report 2024 by UBS attributes much of this increase to entrepreneurial activity. Specifically, UBS’s Billionaires Ambitions Report reveals that two-thirds (65%) of new billionaires who emerged during 2022 and 2023 accumulated their wealth through organic means.
Tech founders, including those behind giants like Google, Amazon and Facebook, have become some of the world’s wealthiest individuals. By creating platforms and products that billions of people use daily, they generate unprecedented revenue and profit, amassing immense fortunes often outpacing traditional industries.
As of July 2024, seven of the top ten billionaires globally were tech entrepreneurs, data from Statista show. Elon Musk, co-founder of Tesla and SpaceX, led the ranking with a net worth of US$242.6 billion, followed by Amazon’s Jeff Bezos, with US$211.6 billion. Oracle’s Larry Ellison ranked fourth with US$176.3 billion, followed by Facebook’s Mark Zuckerberg at US$174.5 billion, and Google’s Larry Page at US$152.2 billion.
New data from UBS also reveal a broader increase in global wealth, with more individuals reaching higher wealth brackets. In 2023, 14 individuals were at the top of the wealth pyramid, collectively owning nearly US$2 trillion. The group, though extremely wealthy, was not the smallest in terms of the number of people. The next tier comprised 12 individuals with wealth ranging from US$50 billion to US$100 billion.
Below this tier is a much larger group of over 2,600 individuals who had wealth ranging from US$1 billion to US$50 billion. Below this is the band that spans between US$1 million to US$1 billion and which comprised roughly 58 million people.
Emerging economies drive wealth growth
In 2023, global wealth rebounded from its 3% contraction the previous year, growing by 4.2%. This growth was driven by increases in Europe, the Middle East and Africa (EMEA) at 4.8%, as well as Asia-Pacific (APAC) at 4.4%.
Although global wealth has been on a steady upwards trajectory since 2008, the pace of growth differs from one region to another. APAC, for example, has experienced the fastest growth in overall wealth, up nearly 177% over the past 15 years. The Americas come in second, at nearly 146%, while the EMEA lags far behind at just under 44%.
Euroclear attributes the substantial growth in private wealth in APAC to a significant transfer of wealth to a younger generation. It notes that this new generation of high-net-worth individuals (HNWIs) is tech-savvy, mobile-oriented, and seeks innovative solutions, a shift which requires the development of advanced digital platforms and modern technological infrastructure.
The role of genAI
For Accenture, generative artificial intelligence (genAI) is poised to play a significant role in the future of wealth management in Asia, promising to enhance efficiencies across the value chain and enabling highly personalized client interactions at scale. Accenture’s analysis of six key genAI use cases suggests that the technology could bring hundreds of millions of dollars in profit uplift from cost optimization and productivity gains over a three year period, resulting in a total profit increase of 3.5 times.
Early adopters are already integrating genAI into their services and operations. Wells Fargo is using genAI to improve customer interactions, making them more personalized and engaging; Morgan Stanley has introduced AI @ Morgan Stanley Assistant, a new internal AI model for research tasks; and JPMorgan has unveiled Moneyball, a genAI tool that helps portfolio managers make better investment decisions.
The potential of DLT
Boston Consulting Group (BCG) recommends a broader approach to digital transformation in wealth management, emphasizing the importance of incorporating additional cutting-edge technologies beyond AI.
Among these, distributed ledger technology (DLT) stands out for its ability to record transactions across multiple participants in a decentralized ledger, visible to all participants. The BCG notes that a number of market players are already leveraging the technology to improve efficiencies and tap new growth opportunities.
For example, Northern Trust, an American financial services company, has implemented DLT to enhance the transparency and efficiency of private equity fund administration; Tokenbridge, a UK-based company founded by financial services veterans, uses DLT to tokenize investments, reducing friction and lowering embedded costs; and FundsDLT, a Luxembourg-based company owned by the Deutsche Börse Group, leverages blockchain to automate various processes in fund management, streamlining operations and cutting costs for wealth managers.
Wealth forecasts
UBS has an optimistic outlook on global wealth, expecting continued growth in wealth per adult in almost all key markets. This year, the firm expects the share of emerging markets in global wealth to surpass 30%, a proportion which it projects will rise to nearly 32% by 2028.
The percentage of adults in the lowest wealth bracket will decrease over the next five years, while the number of adults with wealth of over US$1 million is set to rise in 52 out of the 56 markets studied.
Taiwan is projected to experience the most significant growth in the number of USD millionaires, with an estimated 47% increase from 2023 to 2028. While UBS anticipates that some of this sharp rise will be driven by organic wealth growth, particularly from Taiwan’s thriving microchip industry benefiting from the AI boom, a significant portion is expected to come from the immigration of wealthy foreigners.
Finally, roughly US$83 trillion in wealth is expected to be passed on within the next two decades, equivalent to the total value of global economic activity in a single year. A notable amount of this wealth will move horizontally between spouses first, before moving to the next generation, while just over 10%, about US$9 trillion, is expected to be passed on horizontally first, most of it in the Americas.
Featured image credit: edited from freepik
