Women and passing on wealth

Contents

1. Key points

2. Women hold the keys to passing on intergenerational wealth

3. Women passing on wealth is an expanding unmet advice need

4. Has the industry got to grips with women and their growing role in wealth?

5. Don’t leave it too late: engage women early

6. The barriers to estate planning

7. Adviser takeaways

Women hold the keys to passing on intergenerational wealth

Women in the UK typically live four years longer than men, often outliving their partner. Allied to women’s improved ability to generate wealth via career progress, house ownership and financial planning, the fact that they are also likely to outlive their spouse puts women in the decision-making seat for passing on considerable wealth to the younger generation like never before.¹

Our survey reveals this is something that woman are aware of, since 31% of our surveyed women expect to inherit the majority of wealth from their partner compared to only 17% of men.

In reality, these numbers significantly understate the pre-eminent role women will actually play in passing on wealth. As time passes, we will see a cascade effect where wealth passes from grandparents (and latterly grandmothers) to parents (and latterly mothers) to couples and ultimately to widows. This gives women an increasingly critical role in passing on evermore significant wealth from one generation to the next.

Women passing on wealth is an expanding unmet advice need

Women feel the need for advice strongly. 53% of women say they will need financial advice to feel confident about managing their inheritance, compared with only 38% of men. Yet, men are more likely than women to have actually spoken to an adviser about their inheritance. 69% of men have discussed investing their inheritance with an adviser compared to 43% of women. Most significantly, a 52% majority of women haven’t yet spoken to an adviser but plan to do so.

Taking these two findings together – that women have a greater need for advice yet are much less likely to have spoken to an adviser - suggests there is a significant unmet advice need for women relative to men, This unmet need is compounded by the fact that, as discussed in our first theme, women have greater initial barriers to seeking advice. With women creating and controlling ever greater proportions of UK wealth, this is an unmet need for the advice industry to face into with some urgency.

Has the industry got to grips with women and their growing role in wealth?

The wealth industry seems underprepared for this transition, given that only 18% of our surveyed men and 14% of women report having carried out intergenerational planning with an adviser. The numbers are only modestly improved when we look at those who currently have an adviser. Only, 27% of advised men and 19% of advised women have done intergenerational planning. More worrying still is the fact that only 36% of advised men and 32% of advised women would retain their family adviser/partner’s adviser in the event of their partner’s death.

Don’t leave it too late: engage women early

Women show a greater degree of discomfort around inheritance planning than men.  Half of women believe that resolving issues with investments on their partner’s death was/would be a challenge, versus only 36% of men. Similarly, 49% of unadvised women are uncomfortable talking with family about their inheritance compared to only 38% of non-advised men. Interestingly, advice may play a role in reducing inheritance-related anxiety, as the proportion who are uncomfortable drops to 35% for advised women and 32% for advised men.

Bereavement can be a time of intense grief and emotion, as well as an trigger for inheritance advice conversations. Since only 23% of women would retain their partner’s adviser in the event of their spouse’s death, the likelihood is that for many advisers it may be too late to engage with women on a transactional advice basis.

The barriers to estate planning

Inheritance is recognised as a relatively complex financial planning topic that is second only to retirement as a reason for engaging an adviser. Government proposals to include pensions in the inheritance tax regime from 2027-8 will mean many more investors become liable to inheritance tax, acting as a trigger for many to seek advice. 40% of men report that they fully understand the tax implications of bequeathing compared to 32% of women. That said, it means the majority of our respondents both male and female, have a less than full understanding.

Despite the considerable tax efficiency of passing on wealth to beneficiaries prior to death, 59% of men and 51% of women in our survey said that they plan to pass on the majority of their wealth after their death. Conversely, only 21% of women and 19% of men plan to pass on most of their wealth before they die. At first glance, these findings - showing relatively limited plans to pass on wealth before death - seem at odds with the solid understanding of the inheritance tax implications of bequeathing. There are some other key reasons that inhibit people from passing on wealth.

The top barrier to wealth planning for both men and women is ‘not knowing how much wealth they would need to retain for living or care costs’. In fact, this is a significantly greater concern for women, who are invariably the principal carers in families. 42% of women cite this as the main barrier to passing on wealth, compared to 31% of men. Given their greater longevity, women are rightfully more concerned about having the money they need to look after potentially sick spouses as well as pay for their own care costs. 

The unpredictability of life and health means many people leave estate planning too late, only genuinely considering it when their health deteriorates. Unfortunately, the value of what can be achieved in a shorter timeframe is dramatically diminished.

Advice can play a key role in giving retiring women greater confidence that they will have the essential cash they need to live on, while ensuring their portfolios are still exposed to the growth required to cover care costs in later life. With pensions moving into the inheritance tax regime, advisers can also encourage  the use of tax-free cash for efficient estate planning for the right clients. Similarly, advisers will also encourage many retirees to enjoy their pension savings and take a more active approach to running down their pension funds given their reduced suitability for passing on wealth.

Adviser Takeaways

• There is a significant growth opportunity to engage more women as they create and control more and more wealth.
• Do you have a segmented view of your client base by gender & age and household with strategies for each segment and are you measuring progress against targets?
• Have you reviewed your marketing, new business and retention strategies from a female perspective and considered the use of targeted content and events for each segment (e.g affluent divorcees; executives approaching retirement; female partners of male clients)?
• Engage women early to help them prepare for key life events and consider the use of essential, discretionary income and growth strategies to give them the confidence to leave a financial legacy for their families.

1Gov.uk, Office for National Statistics, National Life Tables – life expectancy at birth in the UK: 2020 to 2022 was 78.6 for males and 82.6 years for females.