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Up to $9 trillion is expected to pass to spouses and partners in the coming years as part of what’s called “horizontal wealth transfer,” according to a new report.
Over the next 20 to 30 years, aging baby boomers and older generations are expected to pass on $84 trillion in wealth to charities and family members. Younger generations, including Generation X, millennials and Generation Z are expected to receive the bulk of inheritances.
However, because surviving spouses and partners typically get the initial inheritances, and because women typically live longer than men, endowments in the coming years will go largely to women, according to the UBS Global Wealth Report.
An estimated $9 trillion will be transferred “intragenerationally,” meaning from one spouse to another, according to the report.
“Life expectancy varies between men and women and quite often couples have an age gap, so the inheriting spouse will own and hold this wealth for an average of four years before passing it on,” the report says.
UBS calls this “horizontal wealth transfer”, as wealth moves within generations rather than between generations. And while little noticed, horizontal transfers have the potential to reshape the largely male-dominated landscape of wealth management, investment and luxury spending.
“Most people have a rather feudal idea that wealth is passed down from generation to generation,” said Paul Donovan, chief economist at UBS Global Wealth Management. “But about 10% are likely to go to the side, to spouses or partners and not yet give it to the children, although that will change over time.”
According to the report, the largest horizontal transfers of wealth will take place in America. There are over 43 million people in this region over the age of 75, with more than $50 trillion in combined transferable wealth. The average age of wealth transferors is over 85, the report said.
While some families may pass assets directly to subsequent generations, inheritances can often be a two-step process—first going to the surviving spouse and then passed down by that spouse to the next generation. (Estate law usually allows the surviving spouse to inherit property of unlimited value without being subject to estate tax).
The report estimates that after $9 trillion is passed on to spouses, more than $8.4 trillion will be passed on to subsequent generations, making them the key decision makers in the great transfer of wealth.
These transfers, along with other broader forces in the economy, add to the so-called “feminization of wealth.” With women’s incomes and wealth rising, coupled with inheritances for both older and younger heirs, analysts expect women to make up a growing share of high-net-worth investors and consumers.
Women now make up more than 11% of the world’s millionaires, nearly double the share in 2016, according to Julius Baer.
The biggest impact will be in wealth management. Donovan said 45% of UBS clients are now women.
“It’s important when it comes to wealth management,” he said. Wealth management clients, he said, will likely be “different people, with different ideas and different things they want to do with their wealth.”
ONE McKinsey report estimated that women are expected to control most of the $30 trillion in baby boomer wealth by 2030. While the wealth management industry has traditionally been dominated by male clients and male advisors (representing 85% of the latter group), McKinsey said that changes quickly.
“After years of playing second fiddle to men,” the report said, “women are ready to take center stage.”
McKinsey said that compared to five years ago, 30% more married women are making financial and investment decisions and more women than ever are the heads of families, “driving the growth of their investable assets”.
Luxury brands traditionally aimed at men are also adapting. In the luxury watch market, women’s watches are one of the fastest growing segments. Jean-Christophe Babin, CEO of Bulgari, he told me earlier this year that “the trend is towards more and more feminine and unisex watches. Women have increasing power, in terms of independence, autonomy and purchasing power. We believe this will continue.”
Philanthropy could also benefit from horizontal wealth transfer. Giving to groups focused on women and girls grew 9 percent in 2020, the most recent year measured, to more than $8 billion, according to the Women’s Institute on Philanthropy at the Lilly Family School of Philanthropy.
Melinda French Gates just pledged $1 billion to women’s and girls’ causes, and MacKenzie Scott has given away over $17 billion of her fortune since 2019, including major grants to Girl Scouts of the USA.
“We’re going to see a dramatic shift in the ownership of wealth,” Donovan said. “It will be very important to see who controls the resources that finance the global economy.”
