Individuals with a net worth of $5m or more are set to transfer around $15.4trn (£12.3, €13.6trn) of wealth by 2030, globally.
The money will be passed down by almost 550,000 individuals, according to financial services research firm Wealth X.
Its ‘A Generational Shift: Family Wealth Transfer’ report puts that at an average of $28.2m per person.
Family feuds
Emily Griffiths-Hamilton, author of Your Business – Your Family – Their Future, told International Adviser: “For those looking to preserve and grow the financial wealth of a high net worth across generations, they might be interested in knowing the research that indicates that 70% of each generation will involuntarily lose control of their assets through things like inattention, mismanagement, incompetence, foolish expenditures and family feuding.
“In other words, the primary causes of wealth erosion in each generation lies within the family itself, reflecting the less than ideal decision-making in the upcoming generation.
“And yet, one of the key legacies of financially successful families is that of owners making sound strategic decisions.
“Therefore, it will be of paramount importance for advisers and families to engage with and prepare the upcoming generation to continue their family’s tradition of making quality decisions.”
High net worth breakdown
The report also broke down the wealthy into various categories including very high net worth (VHNW) individuals (those with $5m-$30m).
This cohort is around 479, 560 individuals globally, accounting for 87.4% of those transferring wealth.
Collectively, this group will pass down around $4.9trn by 2030, with ab average wealth per person of $10.2m.
Wealth transfer by region to 2030 by VHNW individuals differs a lot:
- North America – 322,260 individuals – $3.301trn;
- Latin America and the Caribbean – 9,110 individuals- $98bn;
- Europe – 73,850 individuals – $752bn;
- Middle East – 14,390 individuals- $152bn;
- Africa – 7,190 individuals – $49bn;
- Asia* – 45,080 individuals – $476bn; and
- Pacific – 8,150 individuals – $88bn
*While many would think that the wealth transfer in Asia would be higher, the population of rich individuals is younger, meaning that the wealth transfer will mostly take place after 2030.
Demographics
The report also split the VHNW individuals by demographics and how the transferred money was made.
Around 55.3% of VHNWs passing wealth are aged 65-74, with 41.9% of those aged 75-84.
Only 2.8% are 85 and older.
Unsurprisingly, there is a huge gender gap with 85.8% of VHNW individuals globally being men, with the rest being women.
Lastly, the majority of the wealth being transferred by VHNW individuals was self-made (85.7%), with 7.9% from both self-made operations and inheritance, and only 6.3% was inheritance-based wealth.
That so little will be inheritance-based supports the comments made by Griffiths-Hamilton, emphasising the importance of having a financial plan in place and ensuring the entire family makes wise decisions.
