A new report forecasts that up to $9 trillion will be passed on to spouses and partners in the near future in what is being referred to as the “horizontal wealth transfer.” Aging baby boomers and older generations are expected to transmit a total of $84 trillion in wealth to charity and family members over the next few decades. The inheritances are anticipated to predominantly benefit younger generations such as Generation X, millennials, and Generation Z. However, due to the fact that surviving spouses and partners typically receive the initial inheritances and women generally have longer lifespans than men, a significant portion of the bequests in the upcoming years will go to women. According to the UBS Global Wealth Report, it is estimated that $9 trillion will be transferred intra-generationally from one spouse to another. This form of wealth transfer, labeled as the “horizontal wealth transfer,” has the potential to have a substantial impact on wealth management, investing trends, and luxury spending patterns.
The UBS Global Wealth Report emphasizes that due to differences in life expectancy between men and women, wealth is often passed sideways from one spouse to another. The inheriting spouse is likely to retain and manage the wealth for an average of four years before it is further distributed. This intra-generational shift of wealth is anticipated to affect the dynamics of wealth management, investing strategies, and luxury consumption habits that have been traditionally dominated by men. With approximately 10% of wealth transfers staying within the same generation, it highlights a significant shift from the conventional idea of wealth trickling down through generations.
Impact on Global Wealth Transfer
Geographically, the largest horizontal wealth transfers are projected to occur in the Americas. With over 43 million individuals aged 75 and above in the region possessing more than $50 trillion in transferable wealth, the impact of this trend is expected to be substantial. The average age of individuals transmitting wealth surpasses 85, indicating a significant movement of assets. While some families may directly pass fortunes to the next generation, the two-step process of initial inheritance to the surviving spouse and subsequent distribution to the heirs by the spouse highlights the evolving nature of wealth transmission. This process also underscores the crucial role of surviving spouses in shaping the future of wealth distribution.
The horizontal wealth transfer is contributing to what is known as the “feminization of wealth.” As more women experience a rise in incomes and accumulating wealth from inheritances, they are expected to play a greater role in high net-worth investments and consumption patterns. The report from Julius Baer reveals that women now constitute over 11% of the world’s millionaires, showing a notable increase from previous years. This shift is expected to influence the wealth management industry significantly, with increasing numbers of female clients leading to diverse perspectives and preferences in managing assets.
Statistics from UBS indicate that 45% of their wealth clients are now women, reinforcing the changing landscape of wealth management. As more women engage in financial decision-making and investment strategies, the industry is witnessing a notable shift towards serving a more diverse clientele. McKinsey’s report forecasts that women will control a substantial portion of the $30 trillion in baby boomer wealth by 2030, challenging the conventional dominance of male clients and advisors in the wealth management sector.
Influence on Luxury Brands and Philanthropy
Luxury brands that traditionally catered to male consumers are adapting to the evolving wealth landscape. Women’s watches have emerged as one of the fastest growing segments in the luxury watch market, reflecting the increasing purchasing power and autonomy of women. Additionally, philanthropy is poised to benefit from the horizontal wealth transfer, particularly in the realm of supporting women and girls. Contributions to organizations focused on women and girls saw a 9% growth in 2020, suggesting a positive trend towards empowering and uplifting women in philanthropic efforts.
The horizontal wealth transfer presents a significant opportunity for women to play a more influential role in wealth management, investing, luxury spending, and philanthropy. As the dynamics of inheritance and wealth distribution evolve, women are poised to take center stage in shaping the future of global wealth management and investment strategies. The impact of this trend is expected to be far-reaching, with implications for various industries and sectors as the distribution of wealth continues to shift towards greater gender equality.