Last year, the number of new millionaires in the U.S. increased by 600,000, thanks to the growth of AI-driven markets.

• Last year, the U.S. surpassed the rest of the world in creating millionaires, with 600,000 new millionaires and record-breaking wealth at the top, according to a study by Capgemini.
• The U.S. wealth machine will be powered by the stock rebound at the end of 2023, trillions of dollars in government spending, and the AI boom.
• According to the report, the wealthy are moving their investments from low-risk, preservation-focused assets to more aggressive growth options.

In 2023, the number of millionaires in America increased by 7.3% to 7.5 million people, according to a report. Additionally, their combined wealth grew by 7% to $26.1 trillion from the previous year. According to Capgemini, millionaires are defined as individuals with investable assets of $1 million or more, excluding their primary residence, collectibles, and consumer durables.

The U.S. wealth machine is being powered by the stock rebound at the end of 2023, as well as trillions of dollars in government spending and stimulus, despite higher interest rates.

The wealth of Americans worth $30 million or more increased by 7.5% in 2023, reaching a total of 100,000 individuals, and their combined fortunes grew to $7.4 trillion.

The concentration of wealth among ultra-high net worth individuals is increasing, as they now hold 34% of the total wealth of the millionaire population, despite accounting for only 1% of it.

Whether the wealth growth of the past decade, driven by low interest rates and liquidity, and later by Covid-19 pandemic stimulus and artificial intelligence, will persist, is the major concern. Elias Ghanem, global head of the Capgemini Research Institute for Financial Services, stated that global conflicts, elections, interest rates, and a possible economic slowdown could all slow down the pace of wealth creation.

"Ghanem stated that the past decade was remarkable, but now we face inflation, a possible recession, geopolitical issues, and elections. The circumstances have changed significantly."

In terms of millionaire growth, Asia-Pacific experienced the strongest increase at 4.8%, with Europe following closely behind at 4%. Latin America saw growth of 2.7%, while the Middle East had a more modest increase of 2.1%. On the other hand, Africa experienced a decline of 0.1% in millionaire population.

The percentage of their fixed income holdings increased from 15% to 20%, and their real estate investments also rose from 15% to 19%. However, their stock holdings have been steadily declining, reaching their lowest level in over 20 years at 21%. Despite the major stock averages performing well this year, with the S&P 500 up 12% and the Nasdaq Composite up 14%, wealthy investors are avoiding a market heavily influenced by a small group of tech giants.

Private equity and private credit are expected to receive the largest inflows from wealthy investors this year, as two-thirds of millionaires plan to increase their investments in these areas in 2024, according to a study.

""Because private equity has not performed well, it presents a good entry point for those looking to invest long-term," he stated."

The ultra-wealthy are the most challenging to attract and retain, with an average of seven wealth management relationships in 2021, up from three in 2020. Over three-quarters of the ultra-wealthy plan to switch their primary wealth management firm in 2024.

To win more business from the ultra-wealthy, firms should focus on better understanding their clients, including their family dynamics, psychological risk profiles, investment biases, lifestyles, and geographic diversification, according to Ghanem.

To attract and retain ultra-wealthy clients, wealth management firms must focus on providing value-added services such as succession and next-generation planning, taxes, concierge services, and access to private deals. In order to do this, companies must conduct in-depth research into their clients' broader financial and family lives.

Family offices, the private investment arms of wealthy families, are increasingly becoming a threat to wealth management firms, as more than half of ultra-wealthy investors plan to establish their own family offices. Family offices offer better privacy, personalization, and independence, making them a preferred choice for many investors.

To succeed, wealth management firms must become better partners by offering a comprehensive suite of both financial and nonfinancial products, including global advice, lending, lifestyle advice, insurance solutions, portfolio monitoring, real estate, travel and health care advice, and next-generation education, said the expert.

"They need to provide the whole ecosystem," he said.