by Nancy Fahmy, Russell Investments
As a woman who has worked in the financial services industry for 23 years, I’m keenly aware of the central role we play in money decisions. This was evident during a recent walk I took with two female friends. The conversation quickly moved to money decisions that we make every day for our families: from smaller ones like the summer camps we’ve diligently researched for our children, to larger ones, like home improvement projects or purchasing our next car. Even though I see this play out for me in my life, I wanted to dig deeper to understand if women are increasingly impacting the economy through the financial decisions they make for their families.
For one, I learned spending money is just part of it. Women are increasingly earning money too.
According to the U.S. Bureau of Labor, 38% of American women out-earn their husbands.1 Women are not only contributing to household income, they also want to be included in long-term financial decisions. According to a study conducted by UBS, 96% of women believe both spouses should participate in major decisions around their long-term finances.2
The intersection of my professional knowledge and my personal experience during that walk hit me like a ton of bricks: if my friends and I, who are full-time wage earners, are talking about these topics every day, then surely, we’re not alone. After doing some research, I learned very quickly that we are not! By 2030, American women are expected to control much of the $30 trillion in financial assets that baby boomers will possess.3 This was my light bulb moment!
Are financial advisors fully capitalizing on this massive opportunity in growing their business by engaging female investors more intentionally? Could this rising economic power of women, the powerful demographic changes and the convergence of the relative complexity of their financial lives be one of the most significant engines for growth in the wealth management industry? I certainly think so, but don’t just take my word for it: let the numbers speak for themselves.
Women – the industry’s growth client
Female spending & power:
For starters, women are the largest consumer group in the U.S., responsible for 85% of all purchases.4 Whether it’s groceries, a house, a vacation, a child’s education, activities, or their clothes, women are at the center of consumer spending. In fact, women contribute $7.6 trillion to U.S. GDP (gross domestic product) annually by making decisions every day around how they spend money.5 But it’s not just that women are a top marketing opportunity in today’s economy: they control a third of total U.S. household financial assets—more than $10 trillion dollars.
Women & education:
Women have closed the gap with their male counterparts when it comes to higher education and are graduating in higher numbers than men from college and graduate school. They account for 57% of bachelor’s degrees, 60% of master’s degrees, and 52% of doctoral degrees.6As women are becoming more and more educated, this can and will lead to greater confidence in handling money and investing decisions. The good news is they still want help, and they tend to use a financial advisor more than men do. Research has shown 64% of women prefer to work with a financial advisor compared to only 56% of men who do.7
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Women in the workforce:
Women make up almost half of the U.S. workforce, with representation in almost every profession.8 According to McKinsey research, more women than ever are the family breadwinners, with a significant increase in the share of women in corporate America as well as the upper echelons of management. For example, 44% of mid-sized companies have three or more women in their C-suite, up from 29% of companies in 2015.9 As women move into better and higher paying jobs, their desire to steer money and investment decisions for themselves and their families increases.
Women & marital status:
Unlike 40-50 years ago, when many women felt they had fewer choices around marriage, women these days have numerous options when it comes to relationships. Many women choose to not marry at all, and several studies point to more women initiating divorce than men nowadays. According to one study conducted by the American Sociological Association, women initiated 70% of divorces.10 That surprised me, but I was more surprised when I learned that 40% of women over the age of 65 are widowed.11 This may be because women tend to outlive men by five years.12 All of this points toward more and more women having control of their own finances, and this shift is not likely to slow down any time soon.
But wait … there’s more!
Women are an economic force to be reckoned with for all the reasons mentioned, but this catalyst of growth for financial advisors will only get larger and more heightened as wealth will pass hands—from parents to children AND between spouses. Call it one of the greatest generational wealth transfers in U.S. history, set in motion due to assets passing from the aging male baby boomer demographic. With women having longer life expectancies than men, women are set to be a big beneficiary of this wealth transfer. According to research by McKinsey & Company published in 2020, approximately $30 trillion in wealth is set to change hands in the next decade and women are poised to inherit a sizable share of that.13
From a client retention perspective, a sobering statistic every financial advisor should be aware of is that 70% of widows choose to move to a new advisor within one year of her husband’s death.14 This could have significant ramifications for an advisor’s business if they are not currently engaging the female spouse. As a business consultant to financial advisors, the message to focus on the female clients as a massive client acquisition and retention strategy comes up daily in my conversations with them.
Engaging women differently
Powerful demographic changes along with economic and educational advances are increasing women’s financial strength and independence. But it’s not one size fits all and financial advisors who understand women’s unique financial planning challenges are better positioned to help them identify ways to mitigate risk and improve their financial health. But how advisors engage women is key. To attract and retain female clients and capture some of the trillions up for grabs, financial advisors will need to engage women more intentionally and with more personalized experiences.
We suggest ideas like hosting a women only event. And be sure to have them bring a friend because unlike men, women actually WILL bring a friend, which turns this into a great prospecting opportunity, too. Or maybe you create a female client advisory board to get feedback from your top female clients on how to continue to grow your practice in that demographic. Another idea may be to facilitate a family planning meeting in which members of the household attend and the primary topic of wealth transfer is addressed, where you can ask questions like who would you trust to make decisions for you if you were not able to? Does that person know what your wishes are? How do you envision bringing them into the conversation? And don’t assume anything, ask about their goals: often their wealth transfer goals may conflict with their immediate goals. Help them navigate through that.
Lastly, consider your communication style because that matters too. More than men, women want to be educated, they want to understand the products you recommend (and their fee structures) and they want to feel as though their advisors are trying to help them comprehend their full financial picture. Instead of a sales pitch, they want to be taught about products in language they understand. By speaking their language, we can better align to the way women think about money—generally much more holistic and closely tied to their values, allowing them to be more engaged in their long-term planning. Also, assess how you communicate during client review meetings: are your conversations inclusive of your client’s female spouse? When she is present, do the outcomes you're solving for tie together their portfolios with their goals, preferences, and values?
The bottom line
The bottom line is, whether women earn it, accumulate it, marry it, divorce it or inherit it, 90% of women will be in control of their personal finances at some point in their lives.15And if they are anything like my friends and I, they will do their research, they will plan, and they will make decisions. Then they will tell all their friends when they are happy about the result. But be aware that they will also share bad experiences—call it the word of mouth effect!
So, ask yourselves this question: can your business afford to miss getting ahead of the wave of female wealth set in motion by aging demographics? Financial advisors should incorporate women into their client engagement and prospecting initiatives. Those who do, stand to gain rewarding long-term relationships with loyal, collaborative and wealthy clients who can be a strong referral source. Russell Investments can help you plan to better engage women, with more intention to address their complex and nuanced circumstances, all with a laser focus on helping you grow your business.
5 ways your Russell Investments team can help
- Women Wired to Invest: Your Russell Investments regional director can share additional facts about how women are wired and tips on how to serve them best.
- Women Wired to Invest client presentation: Invite your female clients and prospects to a special event and have a Russell Investments expert share how a trusted financial advisor like you can help women unlock their financial power and take control of their future.
- Get organized checklist: Provide your female clients with a checklist to get them organized on issues that will shape their financial future.
- Deep discovery: Engage your female clients and prospects through a deep discovery process designed to identify their true priorities.
- Effective client reviews: Deepen your client relationships in every review meeting by providing perspective, reviewing your process and their progress and exuding poise.
2 Source: UBS Own your worth paper 2020
6 Source: (US Department of Education “The condition of education 2011, The National Center for Education Statistics 2011 https://nces.ed.gov/pubs2011/2011033.pdf)