New generation of billionaires becoming more driven

A report looks at the motivations of younger billionaires and a new stage in wealth planning for the ultra-rich

By Leo Almazora

Oct 29, 2018

The latest edition of UBS and PWC’s annual Billionaire’s Insight Report should make for some interesting reading among wealth managers.

Among the report’s highlights was China’s rising significance among the global billionaire population. The US still held the largest concentration of billionaire wealth — a total of US$3.1 trillion as of 2017. But China, with a total of around $1.1 trillion, appears set to catch up. Out of 89 self-made billionaire entrepreneurs the country minted last year, 17% founded their businesses less than 10 years ago, compared to 7% of the newest self-starting billionaires-club members in the US.

Canada’s billionaire wealth profile was comparatively modest, with only US$148.5 billion in total in 2017. But there was also a 28% year-on-year growth in the number of billionaires in the country, as opposed to 17% in China and 4% in the US.

Looking at the characteristics of younger billionaires globally, the report found many were using their wealth to do good. More than a third (38%) of family offices are currently engaged in sustainable investing, and 45% said they plan to step up such investment efforts in the next 12 months.

The survey also suggests that young billionaires who inherit a family business want to seek their own economic value. Among multigenerational billionaires who inherited a family business, some 62% go on to start their own businesses — possibly because risk-taking is less painful in the information-rich internet era. In contrast, only 42% of those who inherit assets do the same, suggesting that keeping the original business is a way to keep a family’s entrepreneurial spirit burning.

There’s also a global passing of the torch afoot as the ultra-wealthy transfer their wealth, forming new multigenerational billionaire families. In 2017, 44 heirs inherited over a billion dollars each, adding up to a total of US$189 billion. “Over the next two decades we expect a wealth transition of US$ 3.4 trillion – almost 40% of current total billionaire wealth,” the report said.

As a new wave of billionaires crashes upon the world, the report said, wealth managers must consider new principles of succession planning that consider the new generation’s characteristics:

Involve the next generation early: planning the structure of succession together can help families ensure it reflects the next generation’s goals while finding common ground with the current generation.
Prepare women to excel: more wives and daughters are taking the reins for businesses, investments, and philanthropic efforts, as recognition of gender equality grows.
Embark on a family project together: Collectively pursuing common philanthropic or entrepreneurial ventures can help families cultivate a spirit of joint decision-making and shared purpose.
Encourage entrepreneurship: With a mechanism to encourage new business — such as a private fund or structure — billionaire families can give potential successors power over new product lines or markets, which can help hone their business acumen .
Think about sustainability: With mounting evidence of steady profit growth among sustainable businesses, as well as the millennial generation’s passion to work for businesses with strong social purpose, integrating sustainability into business strategy can be effective in serving the interests of the business and succession.