The World’s Richest Are Getting Richer Again

A resilient global economy is leading to a rise in wealth once again for the world’s richest individuals, despite plenty of economic and geopolitical uncertainty, according to a new report.

Globally, the population of those with at least US$1 million in investable assets rose by 5.1% last year to 22.8 million, while their wealth rose 4.7% to US$86.8 trillion, according to the 28th annual World Wealth Report from Capgemini Research Institute, a global think tank division of Paris-based Capgemini.

It’s a sharp difference from a year earlier, when global wealth fell 3.3% to US$83 trillion.

The growth trend was particularly evident in the U.S. last year, where economic resilience, slowing inflation, and soaring U.S. stocks led to a 7.3% increase in the population of those with at least US$1 million in investable assets to 7.5 million, Capgemini said. The wealth of these individuals rose 7% to US$26.1 trillion.

“We are back in business,” says Elias Ghanem, global head of Capgemini Research Institute for Financial Services. “It’s a good message for the economy, it’s a good message for the people, and it’s a good message that growth is back on stage.”

Among the ultra wealthy—those with at least US$30 million in investable assets—the global population rose by 5% to 220,000, while their wealth grew by 3.9% to about US$29.4 trillion. That represents 34% of total global wealth, according to Capgemini.

A big reason for the upturn in wealth was a strong recovery in global stocks, and the fact that the wealthy moved their assets out of cash and cash equivalents. Globally, this population’s average allocation to cash was 34% as of January 2023; by January this year, cash allocations dropped to 25% on average.

“There’s a move in the high-net-worth mind from wealth preservation back to growth, and that’s good,” Ghanem says.

Although average global stock allocations dropped to 21% as of January this year from 23% a year earlier, the wealthy boosted their allocations to fixed-income by 5 percentage points to 20%, to lock in higher rates, Ghanem says. They also moved money into real estate as prices declined, increasing that investment, on average, by 4 percentage points to 19%.

“As interest rates went up, the real estate to be sold increased, and thus the price went down, and high-net-worth individuals leveraged the opportunity to invest,” Ghanem says. That investment has a positive ripple effect on the broader economy, he says.

The wealthy also boosted their allocations to alternative investments, mostly private equity and private credit, by 2 percentage points to 15%. That’s money that funds the private sector, where businesses are engaged in creating industries and products “that are essential to transforming our economy,” Ghanem says.

The message all these moves make: “Money is circulating again and money circulating is growth for everyone,” he says.

Capgemini’s annual report doesn’t predict the future, but the shifts in asset allocation point to a new perspective by the wealthy that takes into account the shocks of the recent past, from the pandemic, to inflation, and war.

“The business environment has considered these factors and is able to manage them,” Ghanem says.

Whether China reopens for business remains “a big question mark,” however, he says. Though the Nasdaq stock index in the U.S. gained 43% in 2023, after tumbling 34% a year earlier, the Shanghai Stock Index posted a decline of 3.7% last year, better than a nearly 15% drop a year earlier, but still sluggish.

As a result, Asia has yet to regain its status as the world’s wealthiest region—which it was from 2017-19, on the strength of growth in both China and India, Ghanem says.

The report was based on a survey of 3,119 individuals (including more than 1,300 ultra-wealthy) living in 26 markets in North America, Latin America, Europe, the Middle East, and Asia-Pacific, the firm said.

The findings are aimed at wealth management firms serving these elite populations across the globe. Among the uber-wealthy, Capgemini warns these firms have competition from family offices that are better positioned to orchestrate non-financial services, such as education or travel, and to bargain among banks to get the best deals, and services. That’s reflected in the fact the number of wealth management firms hired by the ultra-wealthy has risen to seven on average from three in 2020, Capgemini found.

“With their diverse operating models fully aligned with the objectives of the families they service, family offices are becoming more visible and are significantly challenging traditional wealth management firms,” the report said.

Capgemini’s conclusion: Wealth management firms need to decide if they want to compete against family offices or collaborate with them.

One way the report urges them to compete is by developing behavioural finance technology driven by artificial intelligence. These systems can be trained to understand biases and identify them early on to help individuals avoid making bad decisions, Ghanem says.

“One of the strongest messages of the report is that it’s time for the banks to leverage AI-powered behavioural finance to interact better with their clients,” he says.

Happy is the family whose members—parents, grandparents and grown children—trust each other enough to cooperate on shared goals, especially financial ones. When that is truly the case, Uncle Sam’s tax rules can help as well.

This matters especially now that mortgage rates are above 7%, and many families are looking for ways to help younger members. If the elders have resources and are confident younger ones can cooperate, a family loan could make homeownership possible while providing the elders with a useful income stream.

Other strategies can actually lower taxes, such as when funding 529 plans or Roth IRAs, or when someone inherits a traditional IRA with required withdrawals larger than they will need.

Here are three strategies useful for functional families.

Intrafamily loans

It is perfectly legal for families to lend money to a relative for a down payment or even a private mortgage.

But it is important not to cut corners, says Ryan McKeown, a CPA with Modern Wealth Enhancement in Minnesota. If the loan is for a down payment, be honest with the mortgage provider and have a formal agreement. The lender owes tax on the interest payments received.

If the loan is for a private mortgage, both sides should have legal representation with a formal written agreement, including payment terms. The lender owes tax on the interest, and the borrower often can deduct it if he or she itemizes.

To avoid IRS trouble, the interest rate shouldn’t be lower than the agency’s Applicable Federal Rate at the time of the loan. Currently that is about 5% for loans longer than nine years; about 4.5% for loans three to nine years; and about 4% for loans three years or less. Currently, traditional mortgage rates are generally above 7%.

In addition, the lender could use the $19,000 annual gift-tax exemption (described below) to forgive some or all of the interest or principal annually. If both lenders and borrowers are married, that is up to $76,000 a year. There is no tax for the borrower on such forgiveness, because it is from a gift.

If you’re going this route, McKeown advises against having a fixed plan to forgive the debt. Instead, do it in one-off letters specifying the amount—and keep careful records. Otherwise the IRS might try to treat the loan as a taxable gift.

Asset gifts

Powerful tax-saving moves for families often use gift-tax provisions. Under current law, anyone can give anyone else up to $19,000 of assets annually, free of gift tax. That means a married couple with three grandchildren could give them a total of $114,000 in 2026.

The gifts can be cash or other assets, like stock. For noncash gifts, the cost basis—which is the starting point for measuring taxable gain after a sale—“carries over” to the recipient. So if someone buys $1,000 of stock and gives it away when it is worth $5,000, the recipient’s cost basis is $1,000. If the recipient later sells the shares for $8,000, the taxable gain is $7,000.

Here’s an example showing how gifts could save a family taxes. Grandma is a widow of modest means, while her child and spouse have prospered. The couple has two children, and they want to contribute $5,000 to a 529 college-savings plan for each—but they need to sell stock to do it. Their tax rate on the sale would be 18.8%, and they would need to sell about $11,000 of stock.

However, Grandma’s federal tax rate on the stock sale is 0%. If the couple gives $10,000 of shares to Grandma, she could sell them, pay no tax, and fund the grandchildren’s 529 plans. This saves about $1,000 of tax.

These moves are legal, and they could be used in other ways, such as to help a young person fund a Roth IRA.

But trust among family members is essential: Under the law, givers can’t put conditions on a gift. Grandma could use her stock proceeds to take a cruise, but she makes 529 contributions instead.

Mark Sellner, a retired tax attorney and CPA living in Sarasota, Fla., uses this strategy. His children sell stock he gives them and fund 529 plans for his grandchildren.

The family’s tax savings aren’t huge, but he likes other benefits. The sales by his children don’t boost his adjusted gross income, which in turn could raise his Medicare Irmaa premiums or his 3.8% surtax on net investment income.

Sellner doesn’t worry about his children using the funds for another purpose.

“There can’t be any strings attached to gifts. Of course, it is up to us to decide whether to make them in the future,” he says.

Two caveats: The “kiddie tax” applies to most children under age 24, and it is levied at the parents’ rate on investment income above $2,700 in 2026. Consider this before making gifts to a young person.

Investors who give away stock also forgo the step-up, an important provision that exempts assets held at death from capital-gains tax.

Sellner knows he’s losing a step-up, but says, “The children could use a little more now. Why should they wait 20 years to get it?”

Disclaimers

A disclaimer is a highly useful strategy in which one heir renounces an inheritance in favor of another heir. Assuming family members cooperate, this can save taxes.

Here’s one example. Dad died and had a large traditional IRA that he left to Mom. She has enough assets and income to cover her expenses, and she lives in a state with a stiff estate tax. The inherited IRA would put her estate over the threshold.

Also surviving are three young-adult children. If Mom disclaims all or part of Dad’s IRA within nine months of his death, that amount could go directly to the children. They will have 10 years to empty the account, and the family as a whole will likely save estate and income taxes.

Disclaimers have many key details, especially regarding beneficiary documents. Although heirs have great freedom in choosing what assets to disclaim, the rules about who gets disclaimed property are rigid. It is best if the original owner names tiers of heirs so that if one disclaims, the next recipient is clear.

The World’s Richest Are Getting Richer Again

Strong family financial planning can help reduce taxes and support younger generations. From intrafamily loans and asset gifts to inheritance disclaimers, strategic cooperation can create meaningful financial benefits—when families have the trust and structure to make it work.

Intrafamily loans

Asset gifts

Disclaimers