Women set to inherit trillions
Roughly $83 trillion (£62.8 trillion) of wealth is expected to be transferred between generations globally within the next 2o to 25 years. But, with women generally outliving their male partners, intragenerational wealth transfer is likely to come before intergenerational inheritance.
UBS estimate that around 10% of this $83 trillion figure will be shifted horizontally between spouses in the next ten years, in what they’ve dubbed the ‘Great Horizontal Wealth Transfer’.
Generally speaking, wives in heterosexual relationships are more likely than their husbands to be widowed and, thus, inherit the wealth. This is because women, on average, have a higher life expectancy. In the UK, the average life expectancy for women is nearly 83, compared to just 79 for men. As a result, even if couples married at the same age, wives would be more likely to outlive their partners. However, women are also more likely to be younger than when they get married, further increasing their chance of widowhood and, in turn, the likelihood of wealth being passed on to them.
According to Wealth-X, a quarter of ultra-high-net-worth (UHNW) women – defined as those with more than $30 million (£22.6 million) in assets – have acquired their wealth through inheritance. As wealth begins to shift intragenerationally, these wealthy women will be faced with a choice over who to trust with their finances. And, according to research, most will not continue with the same financial adviser, with 70% of women switching within a year of their spouse’s death.
A “critical battleground”
So, what does this mean for wealth managers? Paul Donovan, chief economist at UBS Global Wealth Management, suggested that this intragenerational transfer, along with other broader forces in the economy, will add to the “feminization” of wealth management.
“With women’s incomes and wealth rising, combined with inheritances for both older and younger inheritors, analysts expect women will make up a growing share of high net-worth investors and consumers,” Donovan said, adding this had important implications for the industry as clients will likely be “different people, with different ideas and different things they want to do with their wealth.”
Affluent women approach wealth management somewhat differently than their male counterparts, according to research by McKinsey & Co. As a group, they are more likely to seek professional advice and less likely to feel confident about their own skill at financial decision making. McKinsey found that female decision makers also tended to be less risk tolerant and more focused on life goals. In seeking an adviser, they tend to place more emphasis on a personal fit and are more likely than males to identify a life event as their motivation to seek guidance.
Consequently, McKinsey suggest that women’s wealth will become a “critical battleground” for wealth management firms in the future.
“As wealth begins to pour into the hands of women, firms will need to commit to a much more systematic approach – transforming their business and client-service in ways that will acquire, retain, and serve women as long-term investors,” the report read.
McKinsey’s PriceMetrix indicates that by retaining baby-boomer women, the segment they see being most a risk of churning, firms could see one-third higher revenue potential.