The Horizontal Wealth Transfer: A Shift in Wealth Management and Investing

The Horizontal Wealth Transfer: A Shift in Wealth Management and Investing

As per a recent report, up to $9 trillion is anticipated to be transferred between spouses and partners in the coming years as part of what is being referred to as “the horizontal wealth transfer.” This shift in wealth is expected as aging baby boomers and older generations are set to pass down a massive $84 trillion in wealth to charity and family members within the next few decades. The report predicts that younger generations, such as Generation X, millennials, and Generation Z, will receive the majority of these inheritances. However, due to the fact that surviving spouses and partners typically receive the initial inheritances, and considering that women generally outlive men, a significant portion of these bequests will likely go to women.

The UBS Global Wealth Report highlights that an estimated $9 trillion will be passed “intra-generationally,” indicating that it will move from one spouse to another. Typically, the inheriting spouse is likely to hold onto this wealth for an average of four years before transferring it further. The report coins this phenomenon as the “horizontal wealth transfer” since it involves wealth moving within the same generation rather than between different generations. This transfer has the potential to reshape various aspects of wealth management, investing, and luxury spending, which have traditionally been male-dominated.

According to the report, surviving spouses play a crucial role in the wealth transfer process. While estate law allows the surviving spouse to inherit property of unlimited value without being subject to estate tax, the subsequent transfer to the next generation becomes significant. After an estimated $9 trillion is passed down to spouses, they are expected to pass over $8.4 trillion to the subsequent generations. This makes spouses key decision-makers in the significant wealth transfer that is anticipated in the coming years.

The gradual increase in women’s incomes and wealth, along with the expected inheritances for both older and younger generations, contributes to what is known as the “feminization of wealth.” Women are projected to represent a growing share of high net-worth investors and consumers, with over 11% of the world’s millionaires being women. Wealth management firms are witnessing a shift, with 45% of UBS’s wealth clients now being women. This change is expected to influence the strategies and approaches employed in wealth management, catering to the specific needs and preferences of women clients.

A McKinsey report forecasts that women are likely to control a significant portion of the $30 trillion in baby boomer wealth by 2030. Traditionally dominated by male clients and advisors, the wealth management industry is undergoing a transformation. The report suggests that more married women are taking financial and investment decisions, and there is a surge in women being the primary breadwinners in families. This shift is altering the landscape of wealth management services and paving the way for more tailored approaches to meet the evolving needs of women clients.

Luxury brands are adapting to the changing dynamics, with a focus on offerings catered to women. 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. Similarly, philanthropy stands to benefit from the horizontal wealth transfer, with a notable increase in giving to organizations focused on women and girls. Notable philanthropists like Melinda French Gates and MacKenzie Scott are directing significant funds to women’s causes, indicating a shift towards supporting initiatives that empower women and girls.

The anticipated horizontal wealth transfer is set to bring about significant changes in wealth management, investing, luxury spending, and philanthropy. With women playing an increasingly central role in financial decision-making and wealth ownership, the industry is witnessing a transformation towards more inclusive and diverse approaches to wealth management. This shift presents opportunities for wealth managers, luxury brands, and philanthropic organizations to tailor their offerings to meet the evolving needs and preferences of women clients and beneficiaries.

Wealth

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