The great wealth transfer is underway, with women tipped to be the major beneficiaries by 2030. The only problem is that many of us – particularly those with the most money – just aren’t ready for it.
UBS says that more than 40 per cent of high net-worth individuals do not have a will, 50 per cent don’t know the value of their inheritance and 49 per cent do not know where all the wealth is.
These insights are alarming when you consider that a Productivity Commission report estimates that $3.5 trillion in assets will likely change hands in Australia alone by 2050. Much of this is tipped to go to women, given the average Australian is a 30-something woman, the Australian Bureau of Statistics says, one who will live about five years longer than a man of the same age.
Research in the UK and US estimates that women will inherit 60 per cent-70 per cent of their respective country wealth in the next five years with Baby Boomers reaching the traditional retirement age of 65 by 2030, separate studies by Schroders UK and McKinsey show.
What’s at stake with this wealth transfer is huge on many fronts. First, the inheritance pool has doubled since 2002, helped by significant gains in residential property, unspent superannuation funds and other investment assets held largely by Baby Boomers.
It’s also momentous from a financial services opportunity, with behavioural finance studies showing various differences in the way women manage money compared with men. We could see slightly more saving activity, greater property investment, more ethical investment and less risk taking in the decades to come.
Then there’s the social perspective when we consider wealth equality, with expectations that this transfer could help support financial gender equality outcomes.
“With more wealth being controlled by women over the coming years, my hope is that this will augur well for gender equality,” says Ray Tubman, founder and CEO of the online living wealth register HeirWealth.
“Being in control of more wealth and being more financially educated and aware should lead to greater financial empowerment for women. This surely must further balance the equality scales,” he adds.
There are, however, challenges in this wealth transfer, and they come back to our readiness.
A lack of preparation results in difficulties carrying out estate executor duties, and this leads to conflict and regret that these aspects had not been discussed openly beforehand.
The other aspect is a lack of education on financial matters and knowing what steps to take. This is critical for women given research shows that we tend to be less financially literate – although I believe this is changing – and that women have an 80 per cent chance of being in sole control of their family wealth at some point in their life.
Women are also less likely to see a financial adviser than men, and if they do currently see one, are more likely to leave them soon after the death or divorce of a partner.
This means that the financial services industry has work to do on educating and engaging with women and younger generations if it wants to not only attract, but retain, them as clients through this great wealth transfer.
“I think the financial services industry genuinely sees the huge amount of wealth that has started to be transferred and understands that there is an advice attrition rate of around 70 per cent within 12 months after a woman inherits the family wealth,” Tubman says.
To help people get ready for this wealth transfer, particularly women, Tubman provides his top five tips:
- Talk about the wealth transfer! Make sure you are part of family meetings on wealth and inheritance.
- If you see a financial adviser, be sure to “inject yourself into those meetings and have a voice”.
- If you don’t understand something, do your research and ask for help.
- Make the most of free and paid resources such as online financial awareness programmes.
- Document the family wealth and make sure you have all the important documents and legals in place to make the process as smooth as possible.
Financy covers gender finance, diversity, inclusion and ESG issues. We advocate for gender equity change through the Women’s Index report and help businesses take action on DEI through tech solutions like IMPACTER.
