The number of millionaires in the U.S. increased by 600,000 last year | Wilnesh News

The United States far outpaced the rest of the world in millionaire creation last year, adding 600,000 new millionaires and creating record wealth, according to a new study.

According to the report, the number of millionaires in the United States will grow by 7.3% in 2023, reaching 7.5 million grab it. Their total wealth increased to $26.1 trillion, a 7% increase from 2022.

Although interest rates remain high, the stock market rebounded in late 2023 and trillions of dollars in government spending and stimulus continue to power the U.S. wealth machine.

Those at the top of the wealth ladder see their wealth grow the fastest. The number of Americans with a net worth of $30 million or more increased by 7.5% to 100,000 in 2023, while their wealth soared to $7.4 trillion.

Globally, ultra-high net worth individuals make up just 1% of the millionaire population but now own 34% of their total wealth, demonstrating the increasing concentration of wealth even among the wealthy.

The big question is whether the wealth boom of the past decade, initially fueled by low interest rates and liquidity and more recently fueled by the Covid-19 pandemic and artificial intelligence, can be sustained. Global conflicts, elections, interest rates and a potential economic slowdown could all slow the pace of wealth creation, said Elias Ghanem, global head of the Capgemini Financial Services Institute.

“The past ten years have been extraordinary,” Ganim said. “We now have inflation, a potential recession, geopolitical issues and elections. The environment is completely different.”

In fact, the global wealth picture looks more complicated than in the United States. Their combined wealth rose to a record $86.8 trillion.

In addition to North America, the Asia-Pacific region has the strongest growth of millionaires, reaching 4.8%, followed by Europe, with a growth of 4%, Latin America with a growth of 2.7%, the Middle East with a growth of 2.1%, and Africa with a decrease of 0.1%.

Ganim said that while Asia surpassed North America in millionaire population and growth in the years before the Covid-19 pandemic, the United States once again dominates.

When it comes to investing, the report says the wealthy are shifting funds from safe wealth-preserving assets to more active growth-oriented assets. Their holdings of cash and cash equivalents have fallen from a high of 34% of the portfolio in early 2023 to 25% in January, meaning they are starting to draw on cash.

Their fixed income holdings jumped from 15% to 20%, and real estate investments increased from 15% to 19%. Their stock holdings continued to decline, falling to 21%, the lowest level in more than 20 years. While the major stock indexes have performed well this year, S&P 500 Index Up 12% year to date Nasdaq Index Up 14% – Wealthy investors are shying away from a market driven primarily by a handful of large technology stocks.

Alternative investments, particularly private equity and private credit, are likely to receive the largest inflows from wealthy investors this year, Ganim said. Research shows that two-thirds of millionaires plan to increase their private equity investments in 2024.

“Everything is cyclical because private equity has underperformed, so this is a good entry point,” he said. “They think if they get in now, when prices are cheaper, it’s a good long-term investment.”

As the wealth and population of the wealthy surge, the struggle to manage their wealth becomes ever more intense. Ganim said the winners will be those that best serve ultra-high-net-worth clients, or clients worth $30 million or more. Capgemini said the super-rich will be the fastest-growing and most profitable customer group.

They are also the hardest to attract and retain: The ultra-rich have an average of seven wealth management relationships, up from just three in 2020.

Ganim said the most important strategy for companies trying to win more business from the ultra-rich is to understand their customers better. Firms may know a customer’s financial situation, but rarely understand their family dynamics, psychological risk profiles, investment biases, lifestyles or geographic diversity, he said.

As ultra-wealthy clients increasingly turn to wealth management firms to provide value-added services – such as inheritance and next generation planning, tax, concierge services and access to private transactions – firms need to understand their wider financial and family lives Go deeper.

Ganim also said that wealth management companies are facing the impact of family offices, which are the private investment arms of wealthy families. More than half of ultra-wealthy investors plan to set up a family office, which they say offers greater privacy, personalization and independence.

Wealth managers need to become better partners by offering a full range of financial and non-financial products, rather than trying to compete with family offices, he said. Companies that can provide truly global advice across multiple countries, as well as lending, lifestyle advice, insurance solutions, portfolio monitoring, real estate, travel and healthcare advice, and next-generation education will be the winners.

“They need to provide the entire ecosystem,” he said.