The U.S. experienced a significant increase in millionaires last year, adding 600,000 new millionaires, contributing to record fortunes at the top echelons. America’s millionaire population soared by 7.3% in 2023, reaching 7.5 million individuals, with their combined fortunes amounting to an impressive $26.1 trillion, representing a 7% increase from the previous year. The definition of millionaires, as per Capgemini, includes individuals with investible assets of $1 million or more, excluding primary residences, collectibles, or consumer durables. The U.S. wealth machine has been fueled by a combination of higher interest rates, a strong stock market rebound, extensive government spending, and stimulus packages. Notably, the fortunes of the ultra-wealthy, those with $30 million or more, have seen the fastest growth, with the number of Americans in this category increasing by 7.5% to 100,000 individuals, and their fortunes reaching $7.4 trillion. The concentration of wealth among the extremely wealthy has also been on the rise globally, with ultra-high net worth individuals, constituting 1% of the millionaire population, now holding 34% of the total wealth, showcasing the escalating wealth disparity even within the affluent segment.
While the U.S. has emerged as an epicenter of wealth creation, globally, the picture appears more diversified. The number of millionaires worldwide grew by 5.1% last year, totaling 22.8 million individuals, with their combined fortunes reaching a record-breaking $86.8 trillion. Following North America, the Asia-Pacific region witnessed robust growth in millionaire population at 4.8%, followed by Europe at 4%, Latin America at 2.7%, and the Middle East at 2.1%, while Africa experienced a marginal decline of 0.1%. Historically, Asia had surpassed North America in terms of millionaire population and growth pre-Covid-19, but as of now, the U.S. has regained its dominance. The investment preferences of wealthy individuals have witnessed a shift from conservative wealth preservation strategies to more aggressive growth assets. Cash holdings have reduced from 34% to 25% of portfolios in January 2024, signaling a willingness to deploy capital. Fixed income and real estate investments have seen an uptick, whereas stock holdings have decreased to 21%, the lowest level in over two decades. Despite a buoyant stock market, wealthy investors are apprehensive about the market’s reliance on a few tech giants, leading them to explore alternatives like private equity and private credit, which are expected to attract significant investments in the upcoming year.
As the population and wealth of affluent individuals surge, the competition to manage their fortunes intensifies. The ultra-high net worth clients, those worth $30 million or more, represent the fastest-growing and most profitable segment, making them highly sought-after but challenging to retain. Wealth management firms vying for ultra-wealthy clients must prioritize understanding their clients comprehensively beyond just financial aspects. Family dynamics, psychological risk profiles, investment preferences, lifestyles, and geographic diversification play critical roles in client relationships. Value-added services such as succession and next-generation planning, tax optimization, concierge services, and access to exclusive deals are paramount for attracting and retaining ultra-wealthy clients. Furthermore, as more affluent investors opt to establish family offices for enhanced privacy, personalization, and independence, wealth management firms need to pivot towards offering a wider array of financial and non-financial products. Rather than competing with family offices, wealth management firms must transform into holistic service providers offering a full suite of services ranging from global advice, lending, lifestyle guidance, insurance solutions, portfolio monitoring, real estate consultation, travel and healthcare services, to next-generation education. By creating an integrated ecosystem of services, wealth management firms can position themselves as partners of choice and cater effectively to the evolving needs of ultra-wealthy clients.