Quentin Fottrell, in MSN’s MarketWatch, noted that, according to “Preparing for Tomorrow: A Report on Family Wealth Transfers,” ultra high net worth individuals will transfer nearly $4 trillion to the next generation in the next ten years. With this transfer already underway, and with “succession and inheritance issues” noted as being the greatest concern for some of the world’s wealthiest individuals by global real estate consultant Knight Frank, Wisconsin Philanthropy Network believes it will have a significant impact on the world of philanthropy.
And, mark your calendar now for October 6, 2016 when Martha Taylor, Vice President of Development, University of Wisconsin Foundation, will moderate Family Philanthropy: Values, Strategy and Legacy. The session will focus on succession planning, family members’ values, planning for change and other topics certain to be affected by the transfer of wealth.
The Largest Wealth Transfer in History has Already Begun
by Quentin Fottrell
Ultra high-net-worth individuals will transfer $3.9 trillion to the next generation by 2026, according to “Preparing for Tomorrow: A Report on Family Wealth Transfers,” released Monday by global wealth consultancy Wealth-X and insurance brokerage and consulting firm NFP. This reflects a 5% decline from the report’s 2014 estimate of $4.1 trillion, but this is because the massive global wealth transfer among the world’s newest superrich has already begun. The biggest concern for the world’s superrich was “succession and inheritance issues” (67%), a recent survey by global real estate consultants Knight Frank found.
This $3.9 trillion expected to be transferred is equal to 13% of all assets of ultrahigh-net-worth individuals, enough to purchase outright the 10 largest companies in the world: Apple, Google parent Alphabet (GOOG), Microsoft (MSFT), ExxonMobil (XOM), Berkshire Hathaway (BRK), Amazon (AMZN), Facebook (FB), Johnson & Johnson (JNJ), General Electric (GE) and China Mobile (CHL). Looking ahead to 2020, the Wealth-X/NFP report sees the wealth of the world’s superrich increasing by 54% to $46 trillion. Some 64% are self-made, and 19% inherited some wealth before creating significantly more themselves.
Last year, ultrahigh-net-worth individuals — defined as those with assets of $30 million or more — aged 80 or over were on average seven times wealthier than those under 30 years old. Despite the higher media profiles given to young Silicon Valley millionaires and billionaires like Facebook Chief Executive Mark Zuckerberg, there are many more who are significantly older. “We estimate that, in total, there are over 14,000 ultrahigh-net-worth individuals likely to transfer assets in the next 10 years,” the report states. This number is larger than the total ultrahigh-net-worth population of China (12,050) or the U.K. (10,650).
The rich appear to be leaving the middle class behind. Most U.S. middle-income households (81%) had flat or falling income between 2004 and 2014, according to recent U.S. Congressional Budget Office data analyzed by the McKinsey Global Institute, a global management company. And 61% of middle-income households say their incomes are either not advancing or they’re staying the same as they were last year: “Most people growing up in advanced economies since World War II have been able to assume they will be better off than their parents. Yet this overwhelmingly positive income trend has ended.”
What’s more, the past 35 years have been a period of extraordinary wealth creation by billionaires, according to the UBS/PwC “2015 Billionaire Report” released last month, with some 917 billionaires who are self-made. “Only the ‘Gilded Age’ at the beginning of the 20th century bears any comparison,” it states. Then fortunes were created from industrial innovation, in sectors such as steel, cars and electricity. Now they are being made from the consumer industry, technology and financial innovation in the U.S. and Europe, as well as consumer products and infrastructure booms in emerging markets.
If these trends continue, the Forbes 400 will see their average wealth skyrocket to $48 billion by 2043 — more than eight times the amount they hold today, according to a report released last month by the Urban Institute, a nonprofit and nonpartisan policy group. The average wealth for white families would increase by 84% to $1.2 million versus $108,000 for African-Americans (27% growth). The American dream is only available to only certain members of society, says Dedrick Asante-Muhammad, a director at the Corporation for Enterprise Development, a nonprofit based in Washington. “It is money in the bank, a first home, a college degree and retirement security.”