$9 Trillion Wealth Transfer: The Rise of Female Investors and Philanthropists
As the baby boomer generation ages, a seismic shift in wealth transfer is underway. This massive transfer of wealth, estimated to reach $84 trillion in the next few decades, will have a profound impact on the global economy and reshape the landscape of investing, luxury spending, and philanthropy. While much attention has been paid to the intergenerational transfer of wealth, a lesser-known phenomenon, the "horizontal wealth transfer", is set to have a significant impact on the distribution of assets.
Key Takeaways
- Spouses poised to inherit $9 trillion: Over the next 20-30 years, an estimated $9 trillion will be transferred directly to surviving spouses and partners, primarily due to longer life expectancies for women and the typical age gap between couples.
- Women become key wealth decision-makers: Following the initial transfer to spouses, an estimated $8.4 trillion will then be passed down to the next generation, making surviving spouses, primarily women, pivotal decision-makers in the wealth transfer process.
- The "feminization of wealth" accelerates: Combined with rising incomes and wealth accumulation, this influx of inheritance will propel women to a larger share of high-net-worth investors and consumers. Women already make up over 11% of the world’s millionaires, a significant increase from 2016.
- Wealth management industry adapts to female clients: The traditional male-dominated wealth management landscape is adapting to meet the evolving needs of female clients. As women become more prominent in the wealth space, their unique financial goals, investment strategies, and philanthropic interests will shape the industry.
- Philanthropy sees a shift towards women and girls: The horizontal wealth transfer will likely lead to increased philanthropic support for women and girls, as female inheritors demonstrate a greater interest in supporting causes that reflect their values and priorities.
A Shift in Power
The "horizontal wealth transfer" is a significant departure from the traditional model of wealth transfer, where inheritance moves largely from one generation to the next. This shift, fueled by demographic trends, has the potential to fundamentally alter the distribution of wealth, particularly in countries like the United States, where the share of inherited wealth is substantial.
According to the UBS Global Wealth Report, the largest horizontal wealth transfers are expected to occur in the Americas, where over 43 million individuals over the age of 75 hold over $50 trillion in combined transferable wealth. These individuals, with an average age over 85, are poised to pass down a sizable portion of their wealth to their spouses.
Transforming the Wealth Landscape
The implications of this wealth transfer are far-reaching. The influx of wealth into the hands of women will have a transformative impact on the wealth management industry.
Paul Donovan, chief economist of UBS Global Wealth Management, highlights the importance of adapting to the changing demographics: "It’s important when it comes to wealth management," he says. "Wealth management clients, he said, will likely be ‘different people, with different ideas and different things they want to do with their wealth.’"
The "feminization of wealth" is not just a trend, but a new reality. McKinsey, in its report on the future of wealth management, estimates that women will control most of the $30 trillion in baby boomer wealth by 2030. This shift in power is already apparent: 30% more married women are making financial and investment decisions compared to just five years ago, and a growing number of women are now the family breadwinners.
Luxury Brands and Philanthropy Adapt
The impact of the horizontal wealth transfer extends beyond wealth management. Luxury brands, traditionally focused on male consumers, are also adapting. The luxury watch market, for instance, is experiencing a surge in demand for women’s watches, reflecting the increasing purchasing power of women. Jean-Christophe Babin, CEO of Bulgari, has noted the changing dynamics: "The trend is toward more and more feminine and more unisex watches. Women have increasing power, in terms of independence, autonomy, and purchasing power. We think that will continue."
Philanthropy is also experiencing a shift. With women becoming more prominent in wealth ownership, they are increasingly directing their donations to causes aligned with their values, particularly towards organizations focused on women and girls. The Women’s Philanthropy Institute at the Lilly Family School of Philanthropy reports a 9% increase in giving to women and girls’ causes to over $8 billion in 2020. High-profile examples such as Melinda French Gates’ pledge of $1 billion to women’s and girls’ causes and MacKenzie Scott’s $17 billion in donations, including significant grants to the Girl Scouts of the USA, highlight this trend.
Looking Forward
The "horizontal wealth transfer", while often overlooked, is poised to have a significant impact on the global economy. As women inherit and control a growing share of wealth, they will become increasingly influential in areas ranging from investment strategies to philanthropic endeavors. This shift in power will re-shape the landscape of wealth management, luxury spending, and philanthropy, ushering in a new era of female leadership in the world of finance and giving.