Women’s share of global wealth has outpaced the market and continues to be one of the largest growing sectors in the U.S. economy. According to research from McKinsey, “By 2030, American women are expected to control much of the $30 trillion in financial assets that baby boomers will possess—a potential wealth transfer of such magnitude that it approaches the annual GDP of the United States.”
Women also continue to make big strides in leadership positions, occupying some of the highest financial management positions, including the Treasury Department.
While women have changed the game in global wealth, the wealth management industry has lagged in serving them and understanding their needs and goals. Even though startups and fintech investors are beginning to snatch up these clients, there’s still an opportunity for traditional wealth management organizations to pivot to include women in their list of potential clients.
Understanding Gender Differences in Investment Styles
Women have long been a driver for household economics. According to a study by Merrill Lynch, women feel just as confident as men in tasks such as budgeting or paying bills, but that confidence wavers when it comes to investment. Only about half (52%) of women say they are confident in managing investments.
While women tend to invest less than men, when they do, their investments are based on the values that matter most to them: family. Merrill Lynch’s study found 77% of women view money through the lens of what it can do for their families. Women are also drawn to impact investing and choose causes that matter to them.
Women’s investments tend to be more deliberate, diverse and agile than men’s investments. As a result, their returns are higher. A Fidelity Investments analysis of client data showed, on average, “Women performed better than men when it comes to investing by 40 basis points, or 0.4 percent. At first glance, this may appear to be a minor difference, but can have a significant impact over time.” While men tend to “swing for the fences,” women are content with a string of singles.
To attract and be effective with women investors, wealth management providers should embrace new ways to deliver information, offer more diverse advice providers, and above all else, listen to and understand women’s wealth goals.
Younger Women Are Showing Improved Financial Literacy
Younger women, in particular, take a more active role in building wealth. A survey from BCG showed “70% of millennial women (those born between 1980 and 1995) said that they take the lead in all financial decisions, compared with just 40% of female baby boomers.” Millennial women have more formal education than previous generations, and they’re participating in the workforce in greater numbers than their parents and grandparents.
As women in younger generations age, they continue to amass and concentrate their own wealth. According to BCG, “From 2019 to 2023, North America will continue to have the largest concentration of female-owned assets, with women’s wealth in the region projected to rise at a steady CAGR of 6.9%, although this rate is slightly lower than the anticipated global average of 7.2%.”
Wealth management providers should recognize this changing dynamic in younger generations and seek out ways to meet their needs and how they might differ from other clients.
Building a Culture/Service Model of Inclusivity
Effectively reaching women is about more than recognizing their share of capital. Wealth management professionals will need to see women as individuals rather than a single group with the same goals and strategies.
BCG notes that offering plenty of information and options puts the power into women’s hands to make decisions they can trust. “Recognizing the importance of data, leading advisors will use visualizations, simulations, and analytics to help women reach informed decisions. Dynamic tools that make it easy to evaluate different scenarios can enable women to see how they might put a portion of their cash and deposits to more productive use while preserving the liquidity they need.”
Building a culture of inclusivity doesn’t happen by accident. It is a deliberate, thoughtful process. Wealth management providers that offer a diverse offering of investment advisors and take a client-centric approach to investment will be poised to take advantage of the significant financial footprint that women investors offer.
Judie Endemann is Head of Operations at Docupace. Judie has supported executive teams through a variety of growth cycles, from early-stage startups to publicly traded international companies. Prior to joining Docupace, she served as VP of Corporate Services for a global digital media technology company. It was there that, in partnership with the executive team, she designed an acquisition strategy that led to the purchase of a division of a multi-billion dollar, publicly-traded company.
