The downsides of the $4.9tn intergenerational wealth ‘tsunami’

female investors intergenerational wealth wealth transfer foresters financial JBWere

27 March 2024
| By Jasmine Siljic |
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Two reports have highlighted potential problems around the $4.9 trillion intergenerational wealth transfer “tsunami”, particularly for women who are most likely to be a beneficiary.

JBWere’s The Growth of Women and Wealth whitepaper has revealed that female investors will have an increasingly vital role to play in the looming intergenerational wealth transfer.

It highlighted “a tsunami of funds” will largely fall into the hands of women due to several factors including wealth transfer alongside the death of a spouse and divorce among wealthy families.

This is driven by women increasingly managing family finances as they outlive their partners. Additionally, divorce rates see approximately 10,000 high-net-worth (HNW) couples divide their assets each year, with an estimated $30 billion asset pool converting to roughly $15 billion in the hands of HNW women.

“In the coming decade, women will not only create their own wealth, but will also be beneficiaries of the significant and imminent intergenerational wealth transfer. We estimate they will become custodians of more than 65 per cent of the $4.9 trillion wealth transfer across the generations,” Maria Lykouras, JBWere Australia chief executive, said.

Alongside this, Foresters Financial’s The Great Wealth Transfer whitepaper expects an “inevitable downside” to arise from the great wealth transfer.

“Conflicts and disputes will eventuate, even with a carefully drafted will and meticulous estate planning. With many families now blended due to divorce and subsequent remarriage (with resulting second families), there is every likelihood of an escalating number of disputes over inheritances,” the paper wrote.

This issue will be exacerbated by the fact that death is often a taboo topic among Australian families, as well as the lack of discussions around future division of wealth, according to the report.

“Fundamentally, Australians will need to be more prepared to discuss death and the wealth transfers that will involve.”

Foresters Financial cautioned that in the absence of these conversations, families may waste estate funds on legal fees, and urged Australians to have a valid will documenting the distribution of assets.

This follows after research from Fidelity last year which revealed less than 10 per cent have a comprehensive estate plan to transfer their wealth and fulfil their legacy wishes, underscoring the need for advisers to be in the box seat of this pressing opportunity.

The female adviser shortage

A further complication is the lack of female advisers to service these HNW female investors, JBWere identified.

Older women are less likely to have a trusted relationship with an adviser than younger generations – 55 per cent of Baby Boomers versus 67 per cent of Generation Y women – meaning they receive less financial support.

Lykouras added: “With women across Australia set to take charge of the intergenerational wealth transfer, the demand for high-level support from advisers will be critical to shaping the financial future for thousands of Australian women and their families. There is a clear need for the financial services industry to support more women becoming advisers.”

In September 2023, Wealth Data found that less than a quarter of advisers on the ASIC Financial Advisers Register are female. Meanwhile, industry professionals have encouraged advice firms to better support their female staff and make the workplace a more accommodating environment.

The JBWere paper wrote: “Several HNW women interviewed mentioned they used female advisers, indicating a possible preference for women among this cohort. Interviewees mentioned they felt their female adviser was more likely to understand their life situation. This makes sense, considering people gravitate towards those who they perceive to be like them.”

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