American women are set to receive significant sums of money over the next two decades, according to a report released Wednesday by Cerulli Associates.
Of the $124 trillion that will change hands through 2048, $54 trillion is expected first to be passed to surviving spouses — 95%, or about $51.3 trillion, of which will go to women.
With so much money poised to be passed on to women across all generations, Cerulli recommends that advisory firms address the service gap between male and female investors.
Overall Wealth Transfer
Heirs overall are inheriting some $2.5 trillion annually, and this figure will rise to more than $3 trillion annually by 2030 and exceed $4 trillion around 2036, Cerulli's research has found. At present, Gen X households inherit more than $1 trillion annually.
Eighty-one percent, or nearly $100 trillion, of wealth transferred will come from baby boomers or older generations, according to Cerulli. Over the next decade, nearly all wealth transfers will originate from these households.
Cerulli projects that $62 trillion, or more than half of the overall transfers, will originate from high-net-worth and ultra-high-net-worth households, which comprise around 2% of all households. It finds that these households are currently transferring more than $1 trillion annually to heirs.
Millennial households will inherit $46 trillion over the course of the next 25 years, compared with $39 trillion inherited by Gen Xers. However, Gen Xers stand to inherit the greatest portion of assets in the next 10 years, totaling $14 trillion to millennials’ $8 trillion.
Cerulli’s projections of intragenerational transfers show that $54 trillion will occur between spouses before it is transferred intergenerationally to heirs. Nearly $40 trillion of these spousal transfers will go to widowed women in the boomer and older generations between 2024 and 2048, with $21 trillion of that moving between spouses who are currently considered high net worth, defined as those having $5 million or more in investable assets.
Meanwhile, younger women can expect to receive $47 trillion of wealth transferred intergenerationally.
Serving Widowed Investors
A massive opportunity exists for wealth and asset management providers to address the needs of widowed women, Cerulli's research shows.
“When husbands pass away before their wives, finances are understandably the last thing the surviving spouse wants to think about,” Cerulli senior analyst Chayce Horton said in a statement. “This is why Cerulli recommends establishing relationships with all members of the client household as early as possible in the client lifecycle.”
Nine out of 10 high-net-worth practices tell Cerulli that clients’ partners are at least involved in the financial planning process. That can make approaching widowed spouses about financial issues less difficult for both parties — and has proved to increase asset retention when spouses inherit substantial wealth.
For advisors, ensuring the strength and trust of that relationship in advance is key, Cerulli said, as relationships are a significantly more important criterion in choosing an advisor for female investors than for male ones.
Beyond establishing trusting and lasting relationships, female investors also have different advisory preferences and product needs. Cerulli research found, for instance, that women are much likelier than men to prefer that advisors lead with financial planning and other strategies rather than with investments.
Wealthy women also tend to be more inclined than men to prioritize philanthropic and sustainability goals. Cerulli said this reinforces the thesis that adding an expansive service menu can provide a multitude of benefits.
Recruiting female advisors, adding services and offering comprehensive advice are several areas that Cerulli’s research highlights.
“To address the existing gap in women-focused advice, some firms have begun to make strides by establishing recruiting and mentoring programs for women advisors and offering clients dedicated resources that emphasize topics such as financial planning and philanthropy,” Horton said.
“Cerulli believes that firms that can provide direct support for women will have a tailwind for decades to come.”
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