Many millennials find themselves frustrated by the elusive nature of traditional American Dreams like homeownership, stable employment, and affordable living costs. However, in the next two decades, Millennials are set to inherit a staggering $90 trillion in assets, potentially making them the wealthiest generation in history. Yet, this windfall is largely reserved for those already born into affluent families, exacerbating existing wealth disparities. According to The Wealth Report by Knight Frank, between now and 2044, the Silent Generation and Baby Boomers are expected to pass on their substantial wealth to Millennials.
However, the distribution of this wealth transfer largely hinges on the lottery of birth. While this shift promises significant changes in how wealth is utilized, particularly in terms of inheritance from prior generations, it also highlights disparities in access to intergenerational wealth. Knight Frank’s global head of research, Liam Bailey, describes these impending changes as “seismic.”
Interestingly, affluent young individuals are increasingly less inclined to view property or real estate as a primary avenue for wealth accumulation in the future. Mike Pickett, director of Cazenove Capital, notes the diminishing appeal of traditional homeownership, citing factors such as the low-interest-rate environment and the rapid increase in house prices over the past decade. Instead, there’s a growing trend among the younger generation, Gen Z, towards embracing alternatives like renting homes, leasing vehicles, and adopting a subscription-based lifestyle.
Mike Pickett further emphasizes that the wealth transfer to younger generations entails more than just the redistribution of existing assets. He highlights the increasing diversity of opportunities available for wealth creation. Pickett notes that the landscape of wealth creation has expanded significantly, with examples such as YouTubers amassing fortunes worth tens of millions of dollars. Moreover, there’s a growing trend of first-generation wealth creation, alongside an expanding array of entrepreneurial avenues for generating wealth. This shift underscores the evolving nature of wealth accumulation and the multitude of paths individuals can pursue to build financial prosperity.
Wealth revival in 2023
The report highlights a notable increase in wealth among individuals globally, particularly in the category of ultra-high-net-worth individuals (those with a net worth of $30 million or more). In 2023, the number of such individuals grew by 4.3% worldwide, reaching a total of 626,619 individuals. North America experienced the most significant growth in this segment, with a 7.2% increase, followed by the Middle East (6.2% increase) and Africa (3.8% increase). However, Latin America saw a decline of 3.6% in its population of ultra-wealthy individuals.
Factors contributing to this growth include an improving interest rate outlook, the strong performance of the US economy, and a substantial uptick in equity markets. The ultra-wealthy demographic continues to view property as an attractive investment, with 19% planning to invest in commercial real estate and 22% intending to purchase residential property in the coming year.
Looking ahead, the report predicts a further increase of 28% in the number of ultra-high-net-worth individuals over the next five years, with significant growth anticipated in Asia, including countries such as India, China, Malaysia, and Indonesia. However, this projected growth rate is notably slower than the 44% increase observed in the preceding five-year period leading up to 2023.