The United States outpaced the rest of the world in creating millionaires last year, adding 600,000 new members to its millionaire ranks, according to a recent study. This surge has been attributed to the booming markets fueled by advancements in artificial intelligence.
The millionaire population in America grew by 7.3% in 2023, reaching 7.5 million people, as reported by Capgemini. Their combined wealth increased by 7% from the previous year, totaling $26.1 trillion. Capgemini defines millionaires as individuals with investable assets of $1 million or more, excluding their primary residence, collectibles, and consumer durables.
Despite higher interest rates, the stock market rebound at the end of 2023, along with significant government spending and stimulus measures, has continued to drive the U.S. wealth engine. The wealth at the very top of the ladder grew the fastest, with the number of Americans worth $30 million or more rising by 7.5% to 100,000, and their total wealth increasing to $7.4 trillion.
Globally, ultra-high net worth individuals, who make up 1% of the millionaire population, now hold 34% of the total wealth, indicating a growing concentration of wealth even among the wealthy.
Elias Ghanem, global head of the Capgemini Research Institute for Financial Services, noted the uncertainties facing future wealth creation, including global conflicts, elections, interest rates, and potential economic slowdowns. He highlighted that while the past decade was exceptional for wealth creation, the current environment presents new challenges.
Worldwide, the number of millionaires grew by 5.1% last year, reaching 22.8 million, with their combined fortunes hitting a record $86.8 trillion. The Asia-Pacific region showed strong growth, second only to North America, followed by Europe, Latin America, and the Middle East, while Africa saw a slight decline.
In terms of investment strategies, wealthy individuals are shifting from wealth preservation to more aggressive growth assets. Their cash and cash-equivalent holdings dropped from 34% to 25% of their portfolios at the start of 2023, while fixed income and real estate investments saw increases. Holdings in stocks, however, have decreased to their lowest level in over 20 years, despite strong performances by major stock indices.
Private equity and private credit are expected to attract significant inflows from wealthy investors this year. Two-thirds of millionaires plan to invest more in private equity in 2024, viewing it as a good long-term opportunity given current valuations.
As the population and wealth of the wealthy grow, the competition among wealth management firms to attract ultra-high net worth clients intensifies. These clients, defined as those worth $30 million or more, are the fastest-growing and most profitable customer base but also the hardest to retain. They typically have multiple wealth management relationships and many plan to switch their primary firms in 2024.
Ghanem emphasized the importance for wealth management firms to understand their clients’ broader financial and family lives, including family dynamics, psychological risk profiles, and lifestyle preferences. To compete effectively with family offices, which many ultra-wealthy clients prefer for their privacy and personalization, wealth management firms need to offer a comprehensive suite of services, including financial and non-financial products, global advice, and lifestyle services.
“They need to provide the whole ecosystem,” Ghanem concluded.
