A new report by UBS reveals a significant shift in the accumulation of wealth among billionaires, as inheritance overtakes entrepreneurship in the past year. The study, titled the Billionaire Ambitions Report 2023, indicates that the so-called "great wealth transfer" is gaining momentum, with aging billionaires passing on their fortunes to the next generation.

According to the report, 53 heirs obtained a total of $150.8 billion, surpassing the $140.7 billion acquired by 84 new self-made billionaires. This is the first time since the report's inception in 2015 that inheritance has outpaced entrepreneurial gains. The research suggests that as business founders grow older, they are transferring their wealth to their successors.

The analysis predicts that in the next 20 to 30 years, an estimated $5.2 trillion of wealth will shift from one generation to another. "The great wealth transfer is gaining significant momentum," stated Benjamin Cavalli, head of UBS Global Wealth Management Strategic Clients, during a press briefing.

While billionaire wealth is rebounding, it is still below its peak in 2021. The UBS study found that overall billionaire wealth grew by 9% in the 12 months leading up to early April 2023, reaching approximately $12 trillion in nominal terms. The number of billionaires also increased by 7%, with 2,544 individuals attaining billionaire status within that period.

However, the transfer of wealth may face challenges, as revealed by a corresponding survey of UBS billionaire clients. The report highlights generational differences in perspectives about wealth and legacy. Sixty-eight percent of respondents expressed a desire to continue and expand upon the achievements of their forebearers. Additionally, 60% indicated their aspiration for future generations to benefit from the accumulated wealth.

Nonetheless, heirs also have their own ambitions and ideas, recognizing the need to reshape and reposition their wealth to uphold the family legacy. This includes adapting to technological advancements, the effects of global crises such as the Covid-19 pandemic, climate change, and geopolitical conflicts. Cavalli emphasized the importance of families discovering common values and purpose and incorporating them into succession planning.

The study identified differences in risk appetite among generations. The first generation, who created the wealth, tended to lean toward debt and fixed-income investing, potentially influenced by elevated interest rates. Subsequent generations, however, exhibited a preference for investing in private equity, despite potential asset repricing related to interest rates. Philanthropic tendencies also varied, with first-generation billionaires prioritizing impactful giving, while their successors appeared more reluctant to contribute funds they did not earn themselves.

The report observed a trend towards impact investing and managing businesses that tackle environmental and social issues for both commercial and altruistic purposes. This shift might reflect an evolution among heirs, favoring sustainable outcomes across all activities rather than traditional grant-giving philanthropy.

Cavalli additionally noted a growing inclination among heirs towards entrepreneurship, as more individuals venture beyond their family businesses to forge their own paths. The data revealed that 57% of heirs surveyed do not work in the family business, with 43% becoming involved at the C-suite level.

As the "great wealth transfer" gains momentum, the UBS report suggests that billionaires must navigate not only wealth transfer challenges but also generational differences in investment strategies and philanthropic intentions. By preserving shared values and purpose, families can adapt to an ever-changing landscape and ensure the longevity of their legacies.