In a year marked by economic uncertainty and geopolitical tensions, the United States witnessed a remarkable surge in its millionaire population.
According to a recent study by Capgemini, the U.S. added an impressive 600,000 new millionaires in 2023, far outpacing the rest of the world.
This brings the total number of American millionaires to a staggering 7.5 million, with their combined fortunes reaching $26.1 trillion.
How AI and Markets Created 600,000 New Millionaires
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- U.S. added 600,000 new millionaires in 2023, bringing the total to 7.5 million.
- AI, the stock market rebound, and government stimulus fueled the millionaire boom.
- Ultra-wealthy Americans (worth $30M+) saw the fastest growth, highlighting wealth concentration.
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The study, which defines millionaires as individuals with investible assets of $1 million or more (excluding primary residence, collectibles, and consumer durables), attributes this wealth boom to a combination of factors.
Despite higher interest rates, the stock market rebound in late 2023, coupled with substantial government spending and stimulus, played a significant role in powering the U.S. wealth machine.
Interestingly, the fortunes at the top of the wealth ladder experienced the fastest growth.
The number of Americans worth $30 million or more grew by 7.5% in 2023, reaching 100,000 individuals with a combined wealth of $7.4 trillion.
This trend highlights the increasing concentration of wealth, even among the already wealthy.
Globally, ultra-high-net-worth individuals, who account for just 1% of the millionaire population, now hold 34% of their total wealth.
Looking ahead, experts question whether this exceptional wealth boom, initially fueled by low interest rates and liquidity and more recently by pandemic stimulus and artificial intelligence, can be sustained.
Elias Ghanem, global head of the Capgemini Research Institute for Financial Services, cautions that global conflicts, elections, interest rates, and a potential economic slowdown could slow the pace of wealth creation.
“The last 10 years were exceptional,” Ghanem noted. We now have inflation, a potential recession, geopolitical problems, and elections. The environment is entirely different.”
On a global scale, the wealth picture appears more mixed compared to the U.S.
The worldwide millionaire population grew by 5.1% last year, reaching 22.8 million individuals with combined fortunes of $86.8 trillion.
Asia-Pacific and Europe followed North America in terms of millionaire growth, while Latin America, the Middle East, and Africa experienced more modest increases or even slight declines.
As the wealthy navigate this changing landscape, they are adjusting their investment strategies.
The report indicates a shift from safe, wealth-preserving assets to more aggressive growth assets.
Cash and cash-equivalent holdings decreased from 34% of portfolios at the beginning of 2023 to 25% in January, suggesting that the wealthy are starting to put their money to work.
Fixed income and real estate investments have increased, while stock holdings continue to decline, reaching their lowest level in over two decades.
Ghanem predicts that alternatives, particularly private equity and private credit, will attract the biggest inflows from wealthy investors in 2024.
With two-thirds of millionaires planning to invest more in private equity, he believes that entering now, when prices are lower, could be a smart long-term play.
As the population and wealth of the affluent continue to soar, the competition among wealth management firms to attract and retain these clients is becoming increasingly fierce.
Ghanem emphasizes that the winners will be those who best serve ultra-high-net-worth clients and represent the fastest-growing and most profitable customer base.
However, these individuals are also the most challenging to attract and retain, with an average of seven wealth management relationships, up from three in 2020.
To succeed in this competitive landscape, wealth management firms must prioritize understanding their clients’ broader financial and family lives and offering a comprehensive suite of financial and non-financial products.
Firms that can provide truly global advice, lending, lifestyle services, insurance solutions, portfolio monitoring, real estate, travel, health care advice, and next-generation education will be well-positioned to win the business of the ultra-wealthy.
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