The traditional concept of wealth transfer, where assets are passed down from one generation to another, is undergoing a significant transformation with the rise of what is known as “horizontal wealth transfer.” This process involves the transfer of wealth within the same generation, predominantly between spouses and partners. As per a recent report, up to $9 trillion is expected to be part of this horizontal wealth transfer in the coming years, significantly impacting the financial landscape.
One of the noteworthy findings of the report is the shift towards women as key beneficiaries of the horizontal wealth transfer. With women typically outliving men and being the recipients of initial inheritances, a substantial portion of the estimated $84 trillion wealth transfer is expected to go to women. This “feminization of wealth” is a significant trend that is reshaping the wealth management industry and the luxury spending landscape.
According to the report, a significant portion of the wealth transfer is expected to occur “intra-generationally,” with assets passing from one spouse to another. This process, termed as the “horizontal wealth transfer,” highlights the role of surviving spouses and partners as key decision-makers in passing down wealth to the next generation. It is estimated that spouses will pass down over $8.4 trillion to the next generations, emphasizing their crucial role in the wealth transition.
The report suggests that the rise in women’s incomes and wealth, combined with inheritances from older generations, is leading to an increasing influence of women in the wealth management sector. Women are expected to make up a growing share of high net-worth investors and consumers, with over 11% of the world’s millionaires being women. This trend is expected to have a profound impact on wealth management practices, requiring a shift in strategies to cater to the evolving needs of female clients.
Implications for Wealth Management Industry
The changing dynamics of wealth transfer are also expected to reshape the wealth management industry, with a growing number of women becoming key clients in this sector. As per UBS, 45% of their wealth clients are now women, indicating a significant shift towards female investors. The industry is adapting to meet the preferences and requirements of female clients, who have distinct priorities and goals when it comes to managing their wealth.
With women expected to control a substantial portion of the baby boomer wealth by 2030, there is a growing emphasis on empowering female decision-makers in financial and investment matters. The traditionally male-dominated wealth management industry is seeing a shift towards increased female representation, both as clients and advisors. Women are taking center stage in making financial decisions and driving investment strategies, underscoring the need for tailored services to meet their specific needs.
Apart from wealth management, the horizontal wealth transfer is also expected to impact the philanthropy sector, with a growing focus on giving to causes that benefit women and girls. Philanthropic initiatives aimed at empowering women have seen significant growth, with notable contributions from female philanthropists like Melinda French Gates and MacKenzie Scott. Additionally, luxury brands are adapting to cater to the increasing purchasing power and independence of women, with a shift towards more feminine and unisex products in response to changing consumer trends.
The horizontal wealth transfer is poised to have far-reaching implications on the financial landscape, particularly in empowering women as key stakeholders in wealth management and investment decisions. As the dynamics of wealth transfer evolve, it is crucial for industry stakeholders to recognize and respond to the changing needs and preferences of female clients, ensuring a more inclusive and gender-responsive approach to managing wealth in the future.
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