A sum of wealth equal to the entire economy of India is to be transferred to a younger generation in the next few years, a report said, while showing 2015 saw the world's richest encounter some headwinds.

(An earlier version of this article was published yesterday afternoon.) 

The wealth management world must brace itself to advise clients on a massive intergenerational transfer of assets in the next few years, totalling more than $2.1 trillion and equal to the gross domestic product of India, UBS and PricewaterhouseCoopers said in a report on ultra high net worth trends.

The vast sum involves fewer than 500 people, highlighting the massive concentration of wealth in the hands of billionaires, although the pace of their wealth growth has decelerated somewhat in the recent past, the firms said in their annual Billionaires Insights report.

After more than two decades of rapid wealth creation, there has been a relative pause in growth among those forming today’s “Gilded Age”, the report said. Volatile markets, wealth transfer to the younger generation and falls in commodity prices last year hit the pace of wealth growth in 2015.

“It is too early to tell if the past 30 years’ extraordinary period of wealth creation is coming to an end, but it’s clearly slowing. The world is still making billionaires, but most of them are in Asia,” the report said.

With so much money changing hands and talk of how the younger generation are unlikely to follow their parents in choice of banks, Josef Stadler, head of global ultra high net worth at UBS Wealth Management, told journalists at a briefing that he did not fear losing out to this shift. “I’m not concerned about the next generation pulling money away,” he said, arguing that recent evidence did not point to such developments affecting clients of UBS. “The amount of money being transferred is unprecedented. We have to be prepared and we are prepared.”

While he did not give an exact figure, Stadler said UBS serviced about 60 per cent of billionaires worldwide.

The gainers
In 2015, 210 fortunes broke through the billion-dollar wealth ceiling, increasing the billionaire population to 1,397, UBS and PwC said, based on the 14 main wealth markets they cover. Total wealth, however, fell to $5.1 trillion last year from $5.4 trillion; average wealth per person fell to $3.7 billion from $4 billion between 2014 and 2015. Last year, 210 people became billionaires, and more than half of them were based in Asia; some 160 people fell off the UBS/PwC database, however.

The US still has the highest number of billionaires, but wealth creation is slowing down. The population rose by only five persons in 2015, to 538. Their total wealth contracted by 6 per cent from a year earlier, to $2.4 trillion. “The world’s leading billionaire economy has lost some of its momentum”, the report said.

In Europe, families have proven more adept at preserving wealth than among their peers in Asia and the US although they haven’t been as effective in creating wealth in the first place. Billionaire wealth in Europe held broadly steady in 2015, at $1.3 trillion; Europe has the largest number of multi-generational billionaires.

Asia rising
In Asia, one billionaire is being created every three days, with China leading the charge, the report continued. Some 113 Asian entrepreneurs became billionaires in 2015, accounting for 54 per cent of the global total last year. The region’s billionaire wealth stood at $1.5 trillion, a slight year-on-year fall due to some impact from currency depreciation, the report said.

Uncertain fortunes
The assumption that wealth multiplies without limit across generations, as asserted controversially more than a year ago by French academic Thomas Piketty, is challenged by the UBS/PwC report, stating that billionaire wealth is often shortlived because of the vagaries of business and dilution among inheritors. Of the fortunes that have gone under the $1 billion mark in the past 20 years, 90 per cent of them did so in the first and second generation and 70 per cent of them have not remained intact.

Keeping it together in Germany and Switzerland
“At a time of economic headwinds and imminent wealth transfer, Europe’s old legacies are a model for new billionaires. Mapping of markets shows Europe, and especially Germany and Switzerland, as the markets with the greatest share of `old’ wealth. Asia’s family-oriented billionaires may wish to adapt the European model of wealth preservation to their own needs,” the report said.