As women start overseeing more assets, they want better financial advice.
Women in the U.S. are expected to control as much as $30 trillion in financial assets by 2030, tripling the amount they currently manage, as the wealth held by Baby-Boomer couples is now more likely to go to women, according to McKinsey.[1]
Yet women have often played second-fiddle to men when it comes to finances. Traditionally, men primarily made most key wealth management decisions. And, the consultancy adds, most financial advisors are also male.
Even among younger and highly educated women, the story is similar, a 2020 UBS report shows. Specifically, the study finds half of married women let their male spouses lead long-term financial decisions, even though most women – and men – believe equal financial participation is necessary.[2]
Women may feel they have less access to financial products, tools, services, and safeguards than men, a 2022 report from Principal finds.[3] The report’s survey of participants shows that only 49% of women feel they have sufficient access to affordable professional financial advice and planning compared to 63% of men.
The data underscore how the wealth-management industry needs to help women achieve their financial goals. It is also imperative women take a role in their financial future. Statistically, they often outlive men, and the growing number of “gray” divorces – couples over age 50 who separate – means that at some point in their lives, many women will be alone and solely responsible for their financial well-being.
To reach these clients, advisors must understand the pay and wealth gaps women face and the unique ways women invest and save. Once these issues are understood, advisors can find themselves with a better and much more diverse list of clients that can build additional success.
How Caregiving Affects Women's Finances
Financial priorities for women change throughout their lives, especially if they take on caregiver roles, obligating them to leave the workforce and lowering their total earnings. Women spend 48% of their adult lives outside of the workforce versus only 28% for men, including time spent caring for children, aging parents and spouses, and in retirement, according to research by Age Wave and Merrill Lynch[4]. By retirement age, a woman taking the average time out of the workforce will accumulate $1.05 million less than a typical man, Age Wave reports. Being out of the job market means women don’t have access to the benefits that help build investing opportunities, such as 401(k) and 529 plans, health savings accounts, and other savings opportunities.
Finally, the Age Wave’s study shows that 70% of respondents report that women and men have fundamentally different lives. Yet, financial planning models have defaulted to men’s salaries, career paths, family roles, lifespans, and preferences.
Performance Amid Confidence Challenges
When women take advantage of investing opportunities, they are diligent savers. Vanguard’s 2023 How America Saves report shows that regardless of income, women were more likely than men to join their employer’s plan. They also trade about 30% less frequently than men.[5] These numbers may partially explain why research by Fidelity Investments shows women often outperform men by 40 basis points when they invest.[6]
Despite these positives, McKinsey’s research shows women are less confident in their investment acumen and financial decision-making. Only a quarter of affluent women say they are comfortable making investment and savings-related decisions – 15 percentage points lower than their male counterparts.
Opportunities for Financial Advisors
Not only will Baby Boomer women inherit more wealth in the next few years, but younger women are becoming family breadwinners, which will spur growth in their investable assets, McKinsey's research notes. [7]
Financial advisors who want to help women achieve their goals need to meet women where they are, McKinsey advocates. Women often seek out an advisor after a major life event, such as a marriage, promotion, or divorce. Not surprisingly, retirement savings are a concern as women are more likely than men to say they are concerned about outliving their assets and having enough savings for retirement.
When seeking an advisor, women are likely looking for someone who will answer basic financial literacy questions without judgment. The McKinsey survey adds women want an advisor who will spend time with them to find the right financial plan to meet their goals and are more likely to switch advisors if they don’t feel a kinship.
To help women meet their financial goals, financial advisors need to recognize the unique needs of women who are clients, including understanding different styles and approaches women have when investing. By recognizing these differences, however, advisors can tap into a much more diverse market that has trillions in potential.
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[1] Women as the Next Wave of Growth in US Wealth Management, McKinsey
[2] Own Your Worth 2020, UBS
[3] Global Financial Inclusion Index, Spotlight on the United States, Principal
[4] Women and Financial Wellness: Beyond the Bottom Line, Age Wave and Merrill Lynch
[5] How America Saves 2023, Vanguard
[6] Fidelity Investments 2021 Women and Investing Study
[7] Women as the Next Wave of Growth in US Wealth Management, McKinsey
