The United States saw a remarkable increase in millionaires last year, standing out among other countries by adding 600,000 new millionaires. According to a report by Capgemini, the millionaire population in America grew by 7.3% in 2023, reaching a total of 7.5 million individuals. Their combined wealth surged to $26.1 trillion, up by 7% from the previous year.
The growth of millionaires in the U.S. can be attributed to various factors such as the stock market rebound at the end of 2023, significant government spending, and economic stimulus packages. Particularly, those at the top tier of wealth in the country have seen the fastest increase in their fortunes. Individuals with a net worth of $30 million or more saw their numbers grow by 7.5% to 100,000, with their total wealth reaching $7.4 trillion.
Global Wealth Trends
While the U.S. experienced a substantial rise in millionaires, globally the wealth landscape appeared more diverse. The worldwide millionaire population increased by 5.1% in 2023, reaching a total of 22.8 million individuals. Their collective fortunes soared to a record $86.8 trillion, showcasing a more mixed growth pattern compared to the U.S.
In regions outside of North America, Asia-Pacific demonstrated the strongest growth in millionaires at 4.8%, followed by Europe at 4%, Latin America at 2.7%, the Middle East at 2.1%, and Africa experiencing a slight decline of 0.1%. While Asia had previously exceeded North America in terms of millionaire numbers and growth before the pandemic, the U.S. appears to have reestablished its dominance.
As the wealthy continue to expand their fortunes, their investment strategies are also evolving. According to the Capgemini report, affluent individuals are shifting from conservative wealth preservation to more aggressive growth assets. Cash holdings dropped from 34% to 25% of their portfolios at the start of 2023, indicating a willingness to deploy their funds. Investments in fixed income and real estate have increased, while stock holdings have decreased to 21%, their lowest level in over two decades.
Despite the impressive performance of major stock indices in recent times, wealthy investors are cautious about a market driven largely by a few major tech companies. Instead, they are turning their attention to alternative investments such as private equity and private credit, with a significant portion planning to increase their exposure to these asset classes in 2024.
With the accumulation of wealth among the affluent, competition in managing their fortunes has intensified. According to Elias Ghanem from Capgemini, the key to success in wealth management lies in catering to ultra-high net worth clients, individuals with assets of $30 million or more. These individuals are becoming the fastest-growing and most profitable segment of the wealth management market.
Understanding ultra-wealthy clients goes beyond their financial status; it involves delving into their family dynamics, psychological risk profiles, investment preferences, lifestyles, and geographic diversification. Due to the shift towards value-added services, wealth management firms need to provide comprehensive solutions that cover areas such as succession planning, tax optimization, concierge services, and access to exclusive opportunities.
Family offices, private investment entities of affluent families, are also posing a challenge to traditional wealth managers. More than half of ultra-wealthy investors are considering establishing a family office due to benefits such as privacy, personalization, and independence. In response, wealth management firms must enhance their offerings by providing a wide range of financial and non-financial services, including global advisory, lending, lifestyle guidance, insurance solutions, and next-generation education.
The landscape of millionaires and wealth management is dynamic and evolving, with the U.S. leading the way in millionaire growth, while global trends showcase a mixed pattern. Wealthy individuals are adjusting their investment strategies towards growth assets, and wealth management firms must adapt to the changing demands of ultra-high net worth clients by offering holistic and personalized services.