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In the advisory business, “legacy” is a word that’s frequently tossed around and it’s applicable to both advisors and clients. The former view their practices as part of their legacies while clients consider creating generational wealth, substantial charitable giving or both as part of their lasting impacts.
An important element in helping clients create their desired financial legacies is realizing that the endeavor isn’t gender-specific. Both men and women want their financial bestowals to have lasting, positive effects, but there are differences in how they view that goal is attainable. That’s where advisors come in.
However, there is one similarity in a wealth-building strategy that emphasizes legacy. Whereas traditional retirement planning often focuses on current income for the retiree and ensuring there’s enough left over for longer-than-expected lifespans and heirs, the legacy strategy takes long-term investing and planning to another level. One of its core components is ensuring wealth moves from generation-to-generation.
As advisors know, there are advantages to ultra-long time horizons. It’s not always easy to generate adequate amounts of current income and longer timeframes are conducive to illiquid, though potentially lucrative asset classes such as hedge funds and private credit, which can a long way toward building legacy-enhancing wealth. Women want in on those offerings, too.
Legacy Issues Important to Women
A recent UBS survey contains some noteworthy tidbits for advisors. First, 71% of women want to invest in accordance with their personal values compared to 58% of men. Second, 87% of females polled view money “as a tool to help them fulfill their purpose.”
As the case with men, there are some “meat and potatoes” issues advisors should women navigate when it comes to legacy-building, some of which take on added importance because women typically live longer than men.
“At a minimum, women need to have in place a will, together with an assigned person to execute it. Any beneficiaries of said will should be made aware of who this assigned person is,” according to UBS. “Furthermore, it would be wise to have a power of attorney and advance directive in case of illness so that heirs are able to manage any assets and ensure that your wishes are carried out in case your health deteriorates.”
Another issue is liquidity. As mentioned above, the legacy strategy is less current income focused than a traditional retirement plan, but that doesn’t imply female legacy builders don’t need near-term liquidity. They do and life insurance is one of way of checking that box.
“A combination with a life insurance policy can provide additional liquidity, which may prove to be an efficient way either to ensure a more balanced inheritance among the heirs, or for dealing with certain financial needs linked with the inheritance,” adds UBS. “However, according to a 2021 study by Life Insurance and Market Research Association, only 47% of women have life insurance, compared to 58% of men, with only 22% of women feeling very knowledgeable about life insurance vs. 39% of men.”
Discussing When to Pass on Wealth
For generations, the bulk of a family’s wealth was passed onto heirs upon the death of parents. Perhaps a little bit when the father passed on and the remainder when the mother died.
However, some clients may want to see at least part of their legacy in action – be it bestowing assets to heirs or to a charity or foundation – prior to death and that’s a reasonable request. It could also open the door to some tax benefits, depending on the assets in question. Again, this is a conversation female clients are open to having with advisors.
“In certain circumstances, it can make sense that specific assets be passed on to the beneficiaries in the course of a lifetime gift(s), rather than in the event of death,” concludes UBS. “Based on our investor survey, about the same amount of people choose to pass on wealth after they pass away vs. during their lifetime, with a higher percentage choosing to pass along some wealth while alive and some upon their death. Interestingly, we see no gender discrepancies in the choice of timing of the wealth succession. We do see, however, some gender differences on the reasons behind the choice of timing.”