The millionaire population of the United States grew by 7.3% in 2023 to 7.43 million in 2023 according to a new report from Capgemini Research Institute—growth that far outpaced the rest of the world fueled by a strong stock market that other reports have shown also boosted the number of 401(k) millionaires.
The combined fortunes of U.S. millionaires grew to $26.1 trillion, up 7% from 2022, per Capgemini’s World Wealth Report 2024. Capgemini defines millionaires as those with investible assets of $1 million or more not including primary residence, collectibles or consumer durables. The report reflects the views of 3,119 high-net-worth individuals, including 1,300+ ultra-HNWIs; 75 executives from pure wealth management (WM) firms, universal banks, broker/dealers, and family offices; and along with survey responses from 750+ relationship managers across North America, Europe, and Asia-Pacific.
Rebounding markets and a brighter outlook lifted 2023 global HNWI wealth by 4.7%, and HNWI population numbers increased by 5.1%. While growth was seen across all wealth bands, the ultra-HNWI segment (investors with USD 30 million+) enjoyed the most robust recovery in dollar terms.
The same is true for the U.S. The number of Americans worth $30 million or more grew 7.5% in 2023 to 90,700, while their fortunes swelled to $7.4 trillion.
Globally, the report found the ultra-HNWI account for just 1% of the millionaire population, but now hold 34% of its total wealth. This illustrates the increasing concentration of wealth even among the wealthy.
HNWI looking to private equity
According to the report, solid economic resilience, cooling inflationary pressures, and a formidable U.S. equity market rally drove momentum.
This trend continues in most markets, for both wealth and population respectively, but to a lesser extent:
• The Asia-Pacific HNWI segment (4.2% and 4.8%) and Europe (3.9% and 4.0%) experienced more modest wealth and population growth.
• Latin America and the Middle East recorded limited HNWI growth, with wealth up 2.3% and 2.9%, and population up 2.7% and 2.1%.
• In contrast, Africa was the only region where HNWI wealth (-1.0%) and population (-0.1%) fell due to falling commodity prices and declining foreign investment.
As HNWI growth thrives, the report found asset allocations are starting to shift from wealth preservation to growth. Early 2024 data reveal a normalization of cash holdings to 25% of portfolio totals, a stark contrast to the multi-decade highs of 34% seen in January 2023. The report indicates two out of three HNWIs are planning to invest more in private equity during 2024, to leverage possible future growth opportunities.
Fixed-income holdings jumped from 15% to 20%, and HNWI real estate investments increased from 15% to 19%. Holdings of stocks continue to fall, to 21%, their lowest level in more than 20 years. In an article about the Capgemini study, CNBC noted that while the major stock averages have done well this year—with the S&P 500 up 12% as of June 7 and the Nasdaq Composite up 14%—wealthy investors are shying away from a market driven largely by a handful of giant tech stocks.
Great wealth transfer drives need for value-added services
Over the next two decades, the report estimated that aging generations will transfer over $80 trillion, driving appetite for financial (investment management and tax planning) and non-financial (philanthropy, concierge services, passion investments and networking opportunities) value-added services, representing a lucrative opportunity for wealth management firms.
“There are active steps firms can take to engage and retain clients for a personalized, omnichannel experience as the great wealth transfer unfolds and growth of HNWIs continues.”
Capgemini’s Nilesh Vaidya
The report reveals 78% of UHNWIs consider value-added services essential and over 77% count on their wealth management firm to support them with their inter-generational wealth transfer needs. As HNWIs seek thoughtful guidance, 65% say they are concerned about the lack of personalized advice tailored to their changing financial situation.
“Clients are demanding more from their wealth managers and the stakes have never been higher. There are active steps firms can take to engage and retain clients for a personalized, omnichannel experience as the great wealth transfer unfolds and growth of HNWIs continues,” said Nilesh Vaidya, Global Industry Head of Retail Banking and Wealth Management at Capgemini.
“While the traditional way of profiling clients is ubiquitous, the application of AI-powered behavioral finance tools, using psychographics, should be considered,” he added. “They can offer a competitive advantage by understanding individuals’ decision-making to deliver a greater degree of client intimacy. The creation of channels for real-time communication will be crucial to manage biases that sudden, volatile market movements might trigger.”
More than 65% of the HNWIs reveal biases influence investment decisions, especially during significant life events such as marriage, divorce, and retirement. As a result, 79% of HNWIs want guidance from relationship managers (RMs) to help them manage these unknown biases.
By integrating behavioral finance with artificial intelligence, wealth management firms can assess how clients react to market fluctuations and make data-driven decisions that are less susceptible to emotional or cognitive biases. The report highlights that AI-powered systems can analyze data and detect patterns that may be difficult for humans to recognize, enabling RMs to take proactive measures in advising clients.
‘401(k) Millionaire’ ranks also rising
A strong Q4 stock market led to a huge 20% spike in the number of “401(k) Millionaires” at the end of 2023 among retirement savers with plans recordkept by Fidelity, the company announced back in February. The increase in the final quarter of 2023 translated to 422,000 participants having account balances reaching seven figures at the end of last year, compared to 349,000 at the end of Q3.
The number of 401(k) accounts with balances of $1 million or more at Fidelity further rose to a record 485,000 in the first quarter of 2024, Fidelity reported in late May. Thanks again to surging stocks, the number of retirement account millionaires jumped 15% from the prior quarter and 43% since March 2023.
Another measuring stick of retirement account millionaires is the federal government’s 401(k)-like Thrift Savings Plan.
According to data from the Federal Retirement Thrift Investment Board (FRTIB), there were 116,827 TSP millionaires as of the end of 2023—a 52% increase over the 76,889 who had at least seven-figure account balances at the end of 2022.
SEE ALSO:
• 401(k) Millionaire Ranks Spike 20%
• 10 U.S. Cities with the Highest Retirement Income