Top of the Morning: The Great Wealth Transfer - An introduction

Hi, everyone, Dan Cassidy here. Welcome back to Top of the Morning on the UBS Market Moves podcast channel. For today, our conversation will focus on the Great Wealth Transfer, how the Great Wealth Transfer is reshaping financial decision making, and how wealth managers must evolve their value proposition.

My guest and I will cover this topic on a series of conversations, as there is much to discuss. Though joining me here today for today's intro episode, glad to welcome back to Top of the Morning, Mariana Mamou, Head of Advice Beyond Investing from the UBS Chief Investment Office. Mariana, it's great to be on the mic with you today.

Thank you for joining us here on Top of the Morning to talk about the Great Wealth Transfer with our listeners and clients. I know there's a lot to cover here. Yes, great.

Glad to be back. And I will point out up front to our listeners, our clients of UBS, that Mariana has authored a publication on this very topic, The Great Wealth Transfer, which is available for you now on UBS.com slash CIO. Though over the course of a series of conversations, we will dig into this topic and cover the many components of it, though perhaps, Mariana, as a starting point, I know in recent years we have been hearing more and more about the Great Wealth Transfer.

So can you simply define for our listeners what this means? Yes, of course. The Great Wealth Transfer refers to the significant shift of wealth assets that is expected to take place over the coming decades, both across generations and within families.

When we talk about the Great Wealth Transfer, we usually tend to highlight the very large numbers that are estimated to path paths, such as the estimated from the UBS wealth report of $83 trillion. But beyond focusing on the impressive amounts, what is important is to appreciate that this is already starting to reshape how wealth decisions are made. So it is not only about wealth ownership, but also about influence, control, and expectations that are changing within families.

So for example, what is changing is who is involved in conversations about investing and planning, and ultimately, who is shaping the decisions around the wealth, and what does that mean in terms of the type of advice they expect? Now, Mariana, with that background, is the Great Wealth Transfer something that will happen in the future, or are we already living it? Is it already underway?

Yeah, it is already underway, but of course, the largest shifts will unfold in the future. But families are already making decisions today that reflect this transition. So as I mentioned, we see more spouses becoming more involved, we see younger family members joining conversations earlier, and we see even wealth creators starting to think more intentionally about succession and even giving during their lifetime.

So we already see a transition that is maybe not necessarily changing hands already, but definitely change in terms of influencing decisions. Now, Mariana, as I was going through the publication, I noticed that the Great Wealth Transfer will not only be linear, though also horizontal in nature. So what exactly does that mean, and what is the significance?

Yeah, absolutely. The wealth rarely moves just in one, let's say, clean, linear step. A meaningful part of the transfer will happen horizontally to surviving spouses before it eventually moves to children and grandchildren.

And we know that women tend to live longer, and on average, they marry older partners, which means they will inherit a big part of these assets. And in these cases, that means that they become central decision makers for the family wealth. And this is important, because it means that women are not only, yeah, the future beneficiary, but they are already, they will be the long term stewards, they will be making decisions about investment, about philanthropy, succession.

And from our research, we know that women have different needs and expectations in terms of the wealth advice they want to receive. So this is something that wealth managers need to be aware of, and make sure that their value proposition is fit for these clients. So in this transition, what role does giving while living play?

So giving while living refers to, yeah, the wealth already transferring, maybe not the entire amount, but some of the assets or support or even responsibility. So wealth owners already give this during their lifetime, rather than waiting for inheritance to happen. So after their death.

And this also matters, because of course, it changes the timing of the wealth transfer, it means that we see at least part of the assets transferring sooner, like already. And it also allows families to have more open conversations about their values, about their priorities and purpose, while the wealth creator or the wealth owner is still present to guide the transition. And from a wealth management perspective, this creates an opportunity to support the families before there is a moment, like one moment of transition and inheritance, and prepare them so that the succession is as smooth as it can be, rather than a reactive event to death.

Now broadly speaking, Mariana, what would you say are the implications of such immense wealth changing hands? Yeah, so beyond the change in ownership, there is a shift in influence and expectations and decision making. And we see that women and younger generations, they bring different priorities, different expectations.

We will cover these in more detail in the next episode. But for example, be it needs for maybe financial educational confidence, the importance of impact, the importance of transparency or connectivity, like the way they also engage with advisors and how they would like the wealth advice they receive to be connected to their objectives and what they're trying to achieve in life. So all of these create these changing expectations and at the same time, wealth succession is important.

Families need to prepare earlier. We know that wealth transfer is not only a technical solution that happens once and then it's all set, but rather is about communication, confidence, family governance and helping even prepare future wealth holders understand their responsibility that comes with wealth. You think about the role of a wealth manager in this case, and I know we'll cover this in more detail in future episodes, though, Mariana, at a high level, how must wealth managers adapt to fulfill the needs and preferences of future wealth holders?

So they need to think beyond the current account holder, as you mentioned. So in the future, you need to think of the needs of women as a segment, the surviving spouses, but also the next gen women. You also need to understand the expectations of Gen Z and millennials, grandchildren and also how all of them work together under a family structure.

So the advisor's role is becoming more holistic. It's not just about managing one portfolio or, let's say, the portfolios of the current wealth holder, but it's also about helping families plan, understand why certain investment decisions are being made, understanding what the legacy looks like, making sure that the advice is comprehensive and personalized and context of a plan, that people receive financial education or, say, confidence to make the decisions when the time will come. So all of this highlights the need to not just look at the offering, but also the advice process and engaging all of the current and future wealth holders in time.

Well, Mariana, a very eye opening and thought provoking conversation today about the Great Wealth Transfer. As mentioned, this will be the first of several conversations we will have on this topic, diving deeper into it in future episodes over the next few months. So thank you, Mariana, for spending some time with our listeners and clients here on top of the morning today.

Thank you very much for having me. Thank you for tuning in. Be sure to visit UBS.com slash studios to view the entire UBS Studios suite of podcast channels, along with our video offerings such as UBS Trending.

You can also follow us on Instagram for content highlights at UBS Trending. UBS Studios is part of the UBS Chief Investment Office within UBS Global Wealth Management. Visit UBS.com slash CIO to view the latest research.

UBS Chief Investment Office's investment views are prepared and published by the Global Wealth Management business of UBS AG or its affiliate UBS. This material has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient and is published for informational purposes only. As a firm providing wealth management services to clients globally, UBS AG and its subsidiaries offer both investment advisory services and brokerage services.

Investment advisory services and brokerage services are separate and distinct, differ in material ways and are governed by different laws and separate arrangements. In the USA, UBS Financial Services Inc. is a subsidiary of UBS AG and a member of FINRA SIPC. For information, please visit our website at UBS.com forward slash working with us.

For a full legal disclaimer applicable to the independent investment views produced by UBS, please visit our website at UBS.com forward slash CIO dash disclaimer.