Women will inherit a significant portion of the US$83tn wealth transfer from baby boomers
A large stockpile of wealth held by baby boomers, the richest generation since the Second World War, will soon be passed on, according to a report by Financial Post.
They call it the great horizontal wealth transfer. A significant portion of this wealth will go to women, indicating a major shift in wealth ownership.
The UBS Global Wealth Report estimates that US$83tn will be transferred over the next 20 to 25 years, with a significant amount moving within the next decade. The report highlights that wealth is often passed within the same generation between spouses before being transferred to the next generation.
As male baby boomers die, they typically leave their assets to their wives, who are often younger and outlive their husbands.
UBS, which coined the term “horizontal wealth transfer,” predicts that US$9tn of this wealth will move from husbands to wives before children inherit it. The Americas will see the largest portion of this horizontal transfer.
This shift, although not widely discussed, could significantly impact wealth management, investing, and philanthropy. McKinsey & Company notes that wealth management has traditionally been dominated by men, both as financial advisers and as decision-makers.
However, this is about to change. McKinsey's report indicates that in two-thirds of affluent US households, men are currently the key financial decision-makers, but women will soon take over.
By the end of the decade, women in the United States are expected to control the majority of the baby boomers’ US$30tn in assets, a transfer nearly as large as the country’s yearly GDP.
In Canada, RBC Wealth Management projects that women will control $4tn in assets by 2028, almost doubling their current share.
Demographics drive this change. Baby boomers control about 70 percent of affluent household investable assets in the US, and two-thirds of these households include women who are not currently active in financial decisions.
When men pass away and leave their assets to their spouses, it marks a critical point for the financial-services industry. Within a year of their spouse's death, 70 percent of women switch to a new financial institution.
Moreover, younger women are becoming more financially knowledgeable. Research on affluent consumers shows that at the turn of the decade, 30 percent more married women were making financial and investment decisions.
“After years of playing second fiddle to men, women are poised to take centre stage,” McKinsey stated.
