Passing down financial assets from one generation to the next is hardly a new concept. Yet with Baby Boomers retiring in droves, a massive shift is on the horizon. Dubbed the Great Wealth Transfer¹, it will see an estimated $1 trillion CAD in personal wealth move into the hands of women before being passed down to their adult children.
By 2026, half of these assets² will be controlled by women. Ian Lusher, Portfolio Manager, and Grant Conroy, Portfolio Manager/Partner at Genus, share their insights on how the intergenerational wealth transfer will affect the women who will manage these assets for the next generation
Bridging the Generational Gender Divide
Lusher works with a wide range of female clients he says are “more than capable of managing their finances.” But he acknowledges that gender differences can be amplified among Baby Boomer clients, even when household wealth is held jointly.
Women who attend meetings with their partners and financial advisors aren’t always asked about their investment preferences or their priorities for passing on wealth. And women can feel left out of the loop if their level of financial literacy doesn’t match up with their partner’s, especially when confronted by a wave of jargon or technical talk.
“Women value someone who listens to them, who understands that their needs might be different than someone else’s,” Lusher says, adding that female Baby Boomers often approach the incoming wealth transfer with a measure of caution. “Their biggest worry is the day-to-day money — are they going to have enough — so that’s when financial planning really kicks in,” he says.
Finding a financial advisor who understands women’s needs when it comes to wealth planning can go a long way toward bridging the gender wealth gap.
Aligning Investment Management With Women’s Priorities
Women are known to invest differently than men – often more conservatively and with a longer-term outlook. And although only one-third report feeling confident in their investing capabilities, the reality is they have unique strengths³.
Lusher notes that, in his experience with clients, women are often more decisive when it comes to delegating in areas where they don’t necessarily have the interest or expertise. While men often focus on the value of their portfolio, women tend to also focus on the impact of their investments⁴.
Engaging in clear communication with both members of a couple well before wealth transfer takes place can help build some financial autonomy for women before they need to navigate the emotional weight of doing it solo. Conroy says that with traditional beliefs deeply ingrained, it’s challenging to expect investors to suddenly shift their thinking as they near wealth transfer age. But older women need to feel empowered to become financially autonomous, which gives them the confidence and competence to manage their wealth. “As couples get older, portfolio managers try to encourage a more combined approach so that both partners’ voices are heard,” he says.
It’s also important to welcome adult children into the conversation, particularly younger generations of women who are “more engaged, independent, educated, and earning money,” says Conroy. They’re seeking more of a co-pilot when working with an advisor, one who is emotionally intelligent and willing to educate clients as needed, whether explaining technical terms or taking the time to have deeper conversations about what wealth means to them⁵.
Getting aligned on both women’s and adult children’s priorities early on can make for a smoother wealth transition when the time comes.
Setting Adult Children up to Take Over the Family Legacy
Generational differences can affect how the family wealth-transfer is structured along gender lines, says Conroy. For example, “Previous generations often felt that daughters needed extra protection, such as the use of a trust.”
Conroy believes communicating the intentions for intergenerational wealth transfer⁶ is essential. The parents’ knowledge and expertise in investing, or their definition of success, might be different from that of adult children in their twenties or thirties who will become the eventual beneficiaries.
“Women are more inclined to involve their children in wealth-transfer discussions with their portfolio manager,” says Lusher. They’re willing to discuss how to manage and transition family wealth⁷ and openly communicate how their finances are structured.
For women preparing to manage the family wealth before passing it on, consider teaming up with an advisor who can boost younger generations’ financial literacy and outline a clear vision for building a financial legacy⁸. “Wealth is more than just money,” says Conroy. “You need to prepare beforehand; there’s an opportunity to raise financially literate children who understand the bigger picture.”
Interested in exploring how a wealth manager can work with your family to manage the wealth transition? Contact a Genus advisor to get started.
References
[1] Harjani, A. (2015) Coming soon: The biggest wealth transfer in history, Entrepreneur. Entrepreneur. Available at: https://www.entrepreneur.com/business-news/coming-soon-the-biggest-wealth-transfer-in-history/241753 (Accessed: March 2, 2023).
[2] Investors are changing (2022) IIROC. Available at: https://www.iiroc.ca/news-room/enabling-evolution-advice-canada/investors-are-changing (Accessed: March 2, 2023).
[3] Meghan Railey, co-founder and C.F.O.of O.C. (2022) Op-ed: If female investors have any weakness, it’s their mistaken belief that they’re not good investors, CNBC. CNBC. Available at: https://www.cnbc.com/2022/04/11/op-ed-heres-why-women-are-better-investors-than-men.html (Accessed: March 2, 2023).
[4] How women are driving growth in impact investing, (2022) Genus. Available at: https://genuscap.com/how-women-are-driving-growth-in-impact-investing/ (Accessed: March 2, 2023).
[5] A modern approach to building a financial legacy, (2022) Genus. Available at: https://genuscap.com/a-modern-approach-to-building-a-financial-legacy/ (Accessed: March 2, 2023).
[6] How to preserve your legacy of family wealth by redefining what wealth means to you, (2021) Genus. Available at: https://genuscap.com/how-to-preserve-your-legacy-of-family-wealth-by-redefining-what-wealth-means-to-you/ (Accessed: March 2, 2023).
[7] Watch on demand – family wealth transition, (2022) Genus. Available at: https://genuscap.com/watch-on-demand-family-wealth-transition/ (Accessed: March 2, 2023).
[8] A modern approach to building a financial legacy, (2022) Genus. Available at: https://genuscap.com/a-modern-approach-to-building-a-financial-legacy/ (Accessed: March 2, 2023).
