Did you know the wealth management space is set to rapidly change? An unprecedented volume of assets will shift into the hands of women in the next 3 to 10 years. Pooneh Baghai, the co-leader of Global Wealth & Asset Management at McKinsey estimates this will represent a $30 trillion opportunity for wealth management firms. Placing women at the centre, as a new face of the industry.

The topic has received mainstream coverage due to the current standing of many wealth management firms. Many are far from ready to accommodate an increasingly female client base.

Firms that wish to buy into this $30 trillion opportunity will need to quickly learn, understand and adapt to the differing needs and behaviours of women. Especially when it comes to managing money.

ARQ | Blogs | Women as the new face of wealth management

A new face of wealth management with women

In the next few years, women are set to increase their wealth faster than the wealth market overall. The question is – how and why now? 

Firstly, more economic prowess. Take the US for example, women currently control a third of US total household financial assets which amounts to close to $10 trillion. This number is going to triple by 2030, as more women become the primary financial decision maker in households.

And this is not a new trend.

Since 2015, around 30% more married women are making financial and investment decisions.

Women are also set to inherit a significant sum of money from the baby boomer generation. This compounded with high divorce rates and women having a longer life expectancy means that women are seeing inflows of more assets under their control. Research shows that many women outlive their significant other due to men often marrying women younger than them and subsequently dying earlier. 

Also important, affluent women (particularly the younger generations) are getting more and more financially savvy.

This comes hand in hand with a higher level of education. 91% of affluent millennial women have obtained a university-level education, compared with the 80% of female baby boomers.

More women are also getting promotions into C-Suite roles. Due to higher level of education, and more gender equal opportunities. Today, 44% of companies have 3 or more women in their C-suite, compared to just 29% in 2015. These opportunities are only set to widen for women.

Therefore, women are not only taking a more active role in household finances. They are inheriting more wealth. AND creating their own opportunities to grow their wealth and join the ranks of the wealthy in their own rights.

So, what is changing?

Men have dominated the wealth management industry for decades. Both on the advisors and advisee side. Due to this, many female investors have reportedly felt either unwelcome, patronised, or alienated as many claim their advisors have assumed their wealth belonged to their spouse or family. 

Therefore, a growing female client base will force a significant shift in the industry. Opening an equal space, where women are treated equally rather than an afterthought, will mark a critical point for the wealth management ecosystem.

These changes will occur because women are very different investors to men.

Men and women invest differently 

Studies show that women have more financially complex lives. Women usually shoulder the household responsibilities, take care of elderly parents and raise the children. This means successful women have way more to balance, and can often find their finances suffering as a result.

Shona Baijal, managing director of UBS Wealth Management in the UK has said,

“Generally speaking, women face five different challenges through their financial life journeys: the gender pay gap, the need for flexible working conditions, maternity leave, longer life expectancy, and a lower risk tolerance.”

Other factors

Many women also struggle with lower financial self-confidence. Don't confuse this with a lower risk tolerance. 50% of female financial decision makers say they feel unprepared for their financial goals despite having a financial adviser. 

Lower risk tolerance, is more of an industry myth. Katie Nixon, chief investment officer of Northern Trust, says,

“Women seek to reach their goals with a high degree of confidence. At times, this may appear as a lower risk tolerance; however, it is often a gap in information. In focusing on personal goals, women want to be armed with the right data—an articulation of the trade-offs and how an opportunity relates to them, not the market itself.”

McKinsey confirmed this showing that women are only 10% less likely to take a big investment risk.

Women also care far less about outperforming the stock market, and more about achieving life goals.

Wealth to women is a means to achieving this. And that makes their relationship to their advisor completely different to men.Therefore, women want an advisor that they can trust and respect, to get them towards their goals, whereas men often want the advisor with the best results in the industry. For women, the advisor must fit well with them personally. 

These three clear differences between men and women show the directions wealth management must take towards accommodating women’s more complex financial lives. Especially if women become the face of wealth management, encouraging women to feel more confident and building long term client-advisor relationships that work is key.  

Women know what they want in wealth management

Did you know, affluent women are more likely to change their wealth provider? Especially if they feel they have a critical gap in meeting their financial goals.

This can especially be seen in life changing moments.

In fact, 70% of women switch to a new financial institution within a year of their spouse’s death. 

As it stands right now, many female investors are very likely to move wealth providers in the near future. In the UK alone, 73% of affluent female investors feel that their wealth manager or private bank misunderstand their financial goals.

The focus, therefore, must not only be on acquiring female clients but also retaining them as long term investors. This may prove quite challenging for the industry. As it has already shown how slow the response was to technological changes.

However this adaptation is crucial if firms want to buy into this opportunity, PriceMetrix has shown:

  1. Simply by just retaining baby boomer women (the demographic most likely to move), firms could still see a third higher revenue potential. 
  1. And firms that acquire and retain younger affluent women, could see up to 4x faster revenue growth if a strong relationship is formed. 

To achieve this, women can no longer be thought of as a homogenous group. Currently, private banks and firms rely too much on labels such as married woman, career woman, widow and so forth. But every woman is an individual.

Firms must understand the cultural differences among women themselves.

Final thoughts

Certainly to be successful, firms must diversify their offerings and quick learning and adaptation will be critical. In 10 years, wealth management may look completely different as this cultural shift occurs, and women become a new face of wealth management.

Right now, firms are still trying to figure this out. Whether this starts with the likes of hiring more female advisers. Or launching female led financial education programs and building greater female representation among investor communities. 

By Catherine Child