The Great Wealth Transfer will create specialized needs for both those transferring and those receiving, especially for women on the receiving end of the transfer. Advisors may want to help those two sides of the same coin communicate their needs.
Many in wealth management have been focused on the estate planning aspects of the upcoming so-called Great Transfer of Wealth, that’s when Baby Boomers $15 trillion in assets[1] will pass to the next generation over the next 25 years.[2] But there is another side to that massive trend – those who will inherit the assets. By gaining education, training and business skills and women have amassed assets of their own. In short, women inheriting from this wealth transfer aren’t merely making up ground as against their male counterparts as may have been the case in past generational wealth transfers. Instead, women may be inheriting additional wealth that just by it’s nature of being surplus could create additional advisory needs. Advisors may need to ask their clients if they are ready for the upcoming inheritance. Here are a few topics you may want to consider including in your next client conversation.
Some of the key to that transfer involves the not just the wealth, but the assets involved. It’s estimated that the Baby Boomer generation has 20.43 Trillion in corporate equities and mutual fund shares. By way of comparison, Generation X holds slightly less than half of that, at 9.56 trillion. Millenials, who may inherit from the Baby Boomers, hold 891.14 billion.[3] Inheriting wealth via real estate is very different than inheriting a large, complex portfolio. Advisors may want to help their clients who will be passing that wealth on assess their heirs’ time and capacity for managing those kinds of accounts. They may also want to discuss how clients who are passing wealth along can use other options to transfer, like establishing 529 accounts for grandchildren, creating trusts to hold assets under management by others and increasing their charitable giving.
But a unique and possibly unplanned for aspect of the great wealth transfer is that there will be an influx of clients to financial advisors. And those clients will be, as noted above, women. To prepare for this influx of clients, advisors may be considering questions like do women invest differently than men and do women have different needs than men in investing? Whether they do or don’t may be less relevant than whether women respond differently to marketing about their financial advisory needs.
As we’ve written before, women perceive themselves differently when it comes to investment confidence. “Additionally, women seek out advice more than their male counterparts in investing. Studies have shown that women are more likely than men to ask questions of a financial adviser (26% to 20%) and among women, 39% currently use a financial adviser, compared with 35% of men.”[4] That’s true even though women are often better investors than men when it comes to staying away from emotional investing. Studies show that women research investments more deeply, are more likely to diversify their asset mix and trade less frequently than men. In fact, they trade almost 50% less than men. Women are less emotional about market swings and less likely to engage in panic selling or buying.[5]
Women may conflate their business savvy with their investing skills. That is, they may conflate a lack of training in how to advocate for a raise or close a new client with their capacity to stay away from hot investment trends that burnout quickly. As a financial advisor, your clients may need help identifying their already existing skills and abilities more than education about financial matters.
But there is one more critical, and possibly incredibly satisfying aspect to the Great Wealth Transfer passing assets to women who have education, training and assets of their own: financial advisors may be able to assist women inheriting in the Great Wealth Transfer to use the surplus assets they may have to effect change. That change could be generational wealth transfer or it could be shaping structural change such as via small business investing.
The Great Wealth Transfer will create specialized needs for both those transferring and those receiving, especially for women on the receiving end of the transfer. Advisors may want to help those two sides of the same coin communicate their needs and may find themselves calling on family communication specialists and mediators more often than before. It may be a proactive idea to start familiarizing yourself with those resources in your community now.
[1] https://www.cnbc.com/2021/07/12/the-great-wealth-transfer-has-a-big-tax-impact-how-to-reduce-the-bite.html
[2] https://www.cnbc.com/2021/07/12/the-great-wealth-transfer-has-a-big-tax-impact-how-to-reduce-the-bite.html
[3] https://www.cnbc.com/2021/07/12/the-great-wealth-transfer-has-a-big-tax-impact-how-to-reduce-the-bite.html
[4] https://www.bcgbenefits.com/blog/women-and-investing
[5] https://www.bcgbenefits.com/blog/women-and-investing
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.
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