Up to $9 trillion is expected to be passed along to spouses and partners in the coming years as part of what’s being called “the 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 down $84 trillion in wealth to charity and family members. Younger generations, including Generation X, millennials and Generation Z are expected get the bulk of the inheritances.
Yet because surviving spouses and partners typically get the initial inheritances, and because women typically outlive men, bequests in the coming years will largely go to women, according to the UBS Global Wealth Report.
An estimated $9 trillion will be transferred “intra-generationally,” meaning from one spouse to another, according to the report.
“Life expectancy varies between men and women, and quite frequently couples have an age gap, therefore the inheriting spouse will typically own and hold onto this wealth for an average of four years before passing it on,” the report said.
UBS calls it the “horizontal wealth transfer,” since the wealth is moving intra-generationally rather than intergenerationally. And while little noticed, the horizontal transfers have the potential to reshape the wealth management, investing and luxury spending landscape, which has largely been dominated by men.
“Most people have a rather feudal idea of wealth going down through generations,” said Paul Donovan, chief economist of UBS Global Wealth Management. “But about 10% is likely to go sideways, to spouses or partners and not yet giving it to children, although it will shift over time.”
According to the report, the largest horizontal wealth transfers will be in the Americas. There are over 43 million people in that region over the age of 75, with over $50 trillion in combined transferrable wealth. The average age of the individuals passing down wealth is over 85, the report said.
While some families may pass fortunes directly to next generations, inheritances can often be a two-step process — first going to the surviving spouse and then handed down by that spouse to the next generation. (Estate law typically 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 to spouses, they will pass down over $8.4 trillion to next generations, making them key decision makers in the great wealth transfer.
Those transfers, along with other broader forces in the economy, are adding to the so-called “feminization of wealth.” With women’s incomes and wealth rising, combined with inheritances for both older and younger inheritors, analysts expect women will make up a growing share of high net-worth investors and consumers.
Women now make up over 11% of the world’s millionaires, nearly double the share in 2016, according to Julius Baer.
The biggest impact will be on wealth management. Donovan said 45% of UBS’s wealth 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.”
A 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 been traditionally dominated by male clients and male advisors (accounting for 85% of the latter group), McKinsey said that’s changing fast.
“After years of playing second fiddle to men,” the report said, “women are poised to take center 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 the family breadwinners, “spurring growth in their investible assets.”
Luxury brands traditionally geared toward men are also adapting. In the luxury watch market, women’s watches are one of the fastest growing segments. Jean-Christophe Babin, the CEO of Bulgari, told me earlier this year that “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 could also benefit from the horizontal wealth transfer. Giving to groups focused on women and girls grew 9% in 2020, the latest year measured, to over $8 billion, according to the Women’s Philanthropy Institute 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 large grants to Girl Scouts of the USA.
“We will see a dramatic shift in ownership of wealth,” Donovan said. “It is going to be quite significant in looking at who controls the resources that finance the global economy.”