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Up to $9 trillion is expected to be transferred 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, baby boomers and older generations are expected to pass on $84 trillion in wealth to charities and their families. Younger generations, including Generation X, millennials and Generation Z, are expected to receive the lion's share of inheritances.
However, since surviving spouses and partners typically receive the initial inheritances, and since women generally live longer than men, bequests in the years ahead will largely go to women, according to the UBS Global Wealth Report.
An estimated $9 trillion will be transferred “intragenerationally,” meaning from one spouse to another, the report said.
“Life expectancy varies between men and women, and very often couples have an age difference, so the inheriting spouse will typically own and hold this wealth for an average of four years before passing it on,” the report said.
UBS calls it “horizontal wealth transfer,” as wealth moves within a generation rather than between generations. And while it hasn’t been widely noticed, horizontal transfers have the potential to transform the landscape of wealth management, investment and luxury spending, which has largely been dominated by men.
“Most people have a fairly feudal idea that wealth is passed down through generations,” said Paul Donovan, chief economist at UBS Global Wealth Management. “But it's likely that around 10% of that is passed down to spouses or partners, but not yet to children, although this will change over time.”
According to the report, the largest horizontal wealth transfers will occur in the Americas. There are more than 43 million people over the age of 75 in that region, with a combined transferable wealth of more than $50 trillion. The average age of people transferring wealth is over 85, according to the report.
While some families may pass their fortunes directly to subsequent generations, inheritances can often be a two-step process: first they pass to the surviving spouse, and then that spouse passes them on to the next generation. (Probate law generally allows a surviving spouse to inherit assets of unlimited value without being subject to inheritance tax.)
The report estimates that after $9 trillion is passed on to spouses, they will pass on more than $8.4 trillion to subsequent generations, making them key decision-makers in the vast wealth transfer.
These transfers, along with broader forces in the economy, are contributing to the so-called “feminization of wealth.” With women’s incomes and wealth rising, combined with inheritances from older and younger heirs, analysts expect women to make up an increasing share of high-net-worth investors and consumers.
According to Julius Baer, women now account for more than 11% of the world's millionaires, almost double the number in 2016.
The biggest impact will be in wealth management. Donovan said 45% of UBS' wealth management clients are currently women.
“It's important when it comes to wealth management,” he said. Wealth management clients, he said, are likely to be “different people, with different ideas and different things they want to do with their wealth.”
A McKinsey report estimated that women are expected to control the majority of the $30 trillion in baby boomer wealth by 2030. While the wealth management industry has traditionally been dominated by male clients and advisors (who make up 85% of the latter group), McKinsey said that is rapidly changing.
“After years of taking a backseat to men,” the report says, “women are ready to take centre stage.”
McKinsey said that compared with five years ago, 30% more married women are making financial and investment decisions, and more women than ever are breadwinners, “fueling the growth of their investable assets.”
Traditionally male-oriented luxury brands are also adapting. In the luxury watch market, women's watches are one of the fastest-growing segments. Jean-Christophe Babin, CEO of Bulgari, told me earlier this year that “the trend is towards increasingly feminine and unisex watches. Women are increasingly empowered, in terms of independence, autonomy and purchasing power. We believe this will continue.”
Philanthropy could also benefit from the horizontal transfer of wealth. Donations to groups focused on women and girls grew 9% in 2020, the latest year measured, to more than $8 billion, according to the Women’s Philanthropy Institute at the Lilly Family School of Philanthropy.
Melinda French Gates just donated $1 billion to causes supporting women and girls, and MacKenzie Scott has donated more than $17 billion of her fortune since 2019, including large grants to Girl Scouts of the USA.
“We're going to see a dramatic shift in the ownership of wealth,” Donovan said. “It's going to be very significant in determining who controls the resources that fund the global economy.”
