iPhone could not be found on the network"

I'm trying to sync my iPhone wirelessly with my Mac.

• I go to Finder and select my iPhone in Locations and click sync
• After 60 seconds of progress bar not going anywhere I get a message "The iPhone "[name]" could not be synced because the iPhone could not be found on the network".
• After this the same message reappears immediately every time I click Sync.

A video of this issue:

https://youtu.be/bA9wdkJphjk

My setup:

• Mac OS version is Catalina 10.15.7
• iOS version is 14.2
• Both devices are connected to same wi-fi

My questions are:

• Why is my iPhone shown in Locations even though it can't be found?
• What are the basic requirements for the wireless sync to succeed reliably?