World billionaires speed up transferring assets to children
Among the new billionaires that emerged last year, for the first time, the assets of the inherited group are larger than those of the self-made group.
This is the result stated in the "Billionaire Ambitions Report" of UBS Bank (Switzerland). The report assesses the transfer of most of the assets of billionaires, which has been predicted for a long time, but this year has begun to witness the trend gaining momentum.
Of the 137 new billionaires who emerged last year, 53 received $150.8 billion through wealth transfers. The remaining 84 self-made billionaires accumulated $140.7 billion. This is the first time in eight reports in nearly a decade that new billionaires have more money from inheritance.
The importance of wealth transfer is growing across all geographies. In Asia- Pacific , the median wealth of heirs is $2 billion, compared to $1.6 billion for self-made billionaires. In the Americas, heirs have a median wealth of $2.2 billion, compared to $1.5 billion for self-made billionaires. In Europe, the Middle East and Africa, the median wealth of heirs is $4.4 billion, double that of self-made billionaires ($2.2 billion).
The sluggish IPO market throughout 2022 and early 2023 has also limited the chances of some entrepreneurs becoming self-made billionaires. Max Kunkel, chief investment officer for family offices and institutional clients at UBS, said economic, geopolitical and policy uncertainty have been challenges to corporate wealth creation in recent times.
The family of billionaire Bernard Arnault, Chairman of LVMH. From left to right: Alexandre Arnault, Frédéric Arnault, Jean Arnault, Hélène Mercier-Arnault, Bernard Arnault, Delphine Arnault, Antoine Arnault, Bernard Arnault's niece and nephew. Photo: Guillaume Herbaut
UBS estimates that a total of 1,000 billionaires will transfer $5.2 trillion of their wealth to their children over the next few decades. “Wealth transfers are gaining momentum as many billionaire entrepreneurs age,” explains Benjamin Cavalli, head of strategic clients for UBS Global Wealth Management. The average billionaire is 67, according to a May report from information services Altara. As a result, more and more people are thinking about what will happen to their assets when they die.
A UBS survey found that three-fifths of first-generation billionaires said their biggest concern was passing on the values, education and experience needed to take over to their children. “The main problem with the younger generation is educating them to be ambitious,” one billionaire told the UBS survey team.
The number of billionaires worldwide rose 7% to 2,544 last year. Their combined wealth increased 9% to $12 trillion, before adjusting for inflation. That’s still below the $13.4 trillion peak reached in 2021, when the global billionaire community grew to 2,686 individuals, helped by a post-pandemic recovery in stocks and real estate.
Europe led the growth in billionaire wealth for the first time as a post-pandemic surge in spending lifted the profits and share prices of French luxury companies, benefiting the billionaire families behind them. Among them are LVMH chairman Bernard Arnault and his five children. Arnault is the world’s third-richest person with a net worth of $167 billion, according to the Bloomberg Billionaires Index.
While tech and healthcare billionaires have amassed the most wealth over the past decade, the report highlights the trend of industrial billionaires, notably India’s Gautam Adani of Adani Group and Mukesh Ambani of Reliance. “This could continue as governments in some countries encourage energy transitions and higher defense spending,” the report predicts.
Bill Gates, Warren Buffett... do not leave inheritance to their children but donate it to charity
British billionaire John Caudwell has announced that he will give 70% of his fortune to charity rather than leave it to his children. ''If I give my children a few billion and they spend it all, they will still ruin their lives,'' he told The Daily Mirror.
This is not a new idea for billionaires. Mark Zuckerberg and his wife Priscilla Chan agreed to leave 99% of their Facebook shares (now Meta) to ''advance human potential and promote equality for all children worldwide''.
Mark Zuckerberg and his wife Priscilla Chan with their two children.
The billionaire couple are both signatories of the Giving Pledge campaign - a commitment to donate the majority of their assets to charity...
In early January 2020, on his personal page, Bill Gates posted his thoughts on money. According to Gates, wealthy parents should not leave all their assets to their children.
"Leaving your entire $180 billion fortune to your children will de-motivate them to work and contribute to society... Giving children a huge fortune is not good for them. It distorts what they are capable of doing to create their own path," Gates said.
The Microsoft founder has revealed that he plans to leave each of his children only $10 million in assets so they can start their own businesses and ensure their livelihoods. He will use the rest for charity through the Bill and Melinda Gates Foundation.
Billionaire Warren Buffett and his children. Photo: AP.
Talking about inheriting assets, "stock god" Warren Buffett said he wants to give his children just enough so they can do anything, not just enough so they can do nothing.
The Berkshire Hathaway CEO has pledged to give more than 99% of his wealth to charity, leaving his children with relatively little to inherit. However, each of them has a $2 billion charitable foundation funded by Buffett himself, according to The Washington Post .
Alex Shih - son of Hong Kong (China) real estate tycoon - Wing-Ching Shih also did not enjoy much family wealth, as his father donated all of his shares in the company to charity.
''I accept,'' he said. "He's been talking about this since we were very young. And we don't have a choice. He said it's best not to have a life that's too comfortable too easily. You'll appreciate things more if you achieve things step by step."
''It's not just billionaires who give their wealth to charities instead of their children. I know families who leave just a small portion so their children can have enough to live on,'' said James Fleming, CEO of family investment advisory firm Sandaire.
A survey by asset management company Canada Life (UK) in early 2019 showed that one in five British millionaires over 45 have no plans to leave anything to their children. Half of the 1,000 people surveyed said they would spend all their earnings before they die and 9% would donate to charity.
This is a heavy-handed parenting approach. But if you want to really motivate your kids, Loder says the only way is to make them fear running out of money. This is especially important for spoiled kids who don’t usually have to worry about money, Loder says. “Show them the consequences of continuing their lifestyle, and they’ll change,” he concludes.
According to expert Loder, this is how billionaires educate their children, who have never had to live a miserable life. They want to clearly show the serious consequences of a loose lifestyle so that their children understand and change.
Five years before his death, Hong Kong (China) hotel and real estate tycoon Yu Peng Nian, who had topped Hurun's list of most generous people for many years, announced that he would give away all of his assets.
The man came from a poor background and chose to give away money as a way to raise his children. ''If my children are more talented than me, they will not need this money. But if they are not capable, my wealth will only harm them,'' Mr. Du shared.
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