For years, the United States has been known as the world’s largest wealth market by a significant margin. Known as the land of opportunity, American has long been shaped by generations of immigrants pursuing the ‘American Dream’ turned home grown millionaires. According to Henley & Partners' just released 2023 USA Wealth Report, the United States accounts for 32% of global wealth and 36% of the world’s millionaires. The study reveals however, that American wealth is on the move, both domestically and overseas.
Per the study, cities such as Austin, Scottsdale, Greenwich and Miami are gaining millionaires, while the wealth hubs of Chicago, Los Angeles and New York City are losing them. Furthermore, more and more wealthy Americans are seeking greener pastures abroad at an unprecedented rate. Why is the United States losing its luster to both domestic and foreign investments alike?
What’s Driving the Change?
In the report, Mehdi Kadiri, Managing Partner and Head of North America at Henley & Partner, takes a deep dive into what’s driving the change. He highlights political polarization caused by partisan conflicts and other societal issues including the widening wealth divide and mounting pressure to increase taxes on the rich, gender inequality and racial discriminations issues as well as rising crime rates and debate around gun control laws as key contributors. Also of mention, of course, is the effect of the pandemic on financial markets, as well as unprecedented inflation and the ongoing war in Ukraine that has impacted supply chains and energy prices.
Some of the most sought-after investment migration options wealthy Americans are considering include the Portugal Golden Residence Permit Program and Malta’s Granting of Citizenship for Exceptional Services by Direct Investment Regulations, which allows for the granting of citizenship by a certificate of naturalization to foreign individuals and their families who contribute to the country’s economic development.
Jeff D. Opdyke, Global investment expert for International Living, posits that, “for many, the American Dream is on life support.” He cites record numbers of U.S. citizens expatriating or renouncing U.S. citizenship as additional evidence of this paradox. He counters the popular media view that such decisions are an attempt to avoid taxes and reasons that the far more prevalent reason is investors seeking “investment and business growth, safer destinations to raise their families, or second passport and alternate residence opportunities that afford everything from entrepreneurial advantages to wealth preservation strategies to better healthcare options.” He sees it as “a strategy focused simultaneously on risk-mitigation and opportunity enhancement.” Opdyke also adds that America’s shrinking middle class means the West will see shrinking control of global consumption - with new consumers joining the middle class in non-Western countries, non-Western countries are ultimately set to outnumber Western consumers one day.
Real estate opportunities are another key factor, according to Nikki Greenberg, Founder and Chief Innovation Officer of Real Estate of the Future. “As prime real estate in the USA heads for a likely slump, the appetite for high-net-worth individuals to purchase properties overseas where they can get more value is expected to continue throughout 2023 as Americans take advantage of their strong currency.”
Domestic Opportunity
For those seeking out opportunities domestically, New York City, The Bay Area, Los Angeles, Chicago and Houston remain the 5 wealthiest cities in the country. However, there are some new players, with Austin, Palm Beach, Scottsdale, Miami and Greenwich and Darien, Conn. as the fastest growing cities for millionaires. The appeal of warmer weather climate in the South, as well as many affluent individuals turning second homes into primary residences due to lifestyle and taxation benefits has been some of the driving factors for the rapid growth.
Not Out of the Game Yet
Despite evidence of wealthy Americans seeking opportunities abroad, the outlook for the United States isn’t as bleak as it seems—it remains unlikely that the United States will ever entirely loose its appeal as a coveted jurisdiction for both foreign and domestic entrepreneurs and investors due to its position as a tech and financial powerhouse, as well as our renowned educational institutions.
The research also shows the United States remains highly competitive in the key drivers of wealth, including growth in key sectors, a well-developed and neutral news media, robust ownership rights, a highly developed banking system and stock market and fairly competitive tax rates.
Based on statistics accurate as of December 2022, America is home to some 770 billionaires and 5.3 million millionaires, with $65 trillion in total private wealth held in the country, the largest wealth market in the world by a margin.
As we enter the greatest wealth transfer period in history, it’s now more important than ever to make sure planners and family offices carry out diligent estate planning to preserve this wealth for the Next Gen. Based on the report, individuals are now conducting business more globally than ever—investing in digital assets, working with remote teams located globally and traveling cross-continentally. A robust succession plan will ensure the longevity of businesses and family fortunes as America’s wealthy embark on their new ventures.