American women control a third of total U.S household financial assets — more than $10 trillion — and that number is expected to surge over this decade. In addition to independently increasing their wealth, women stand to inherit much of the $30 trillion projected to be transferred by baby boomers, according to a McKinsey & Company report last year.
Wealth managers that acknowledge and adapt to that change stand to keep more of those women as clients, effectively increasing their revenue by as much as one-third (women change financial advisors 70% of the time after the death of their spouse).
But women are wary of wealth managers.
Women are less interested in being involved in the day-to-day of their portfolios than men; 41% of women have interest in that level of engagement in their financial affairs, compared with 57% of men, according to a new report by Cerulli Associates, a Boston-based research and consulting firm. The difference is more pronounced at the ends of the spectrum. While 25% of men surveyed said they “Strongly Agree” to wanting day-to-day involvement, just 15% of women said the same.
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However, women are also more reluctant to pay for advice to guide them through financial decisions. Only 51% of women are willing to pay for financial advice, compared to 58% of men, the same Cerulli survey revealed.
To Cerulli, the diagnosis is clear: historically, financial services have tailored themselves to affluent men. To better serve women, the solution is evolution. Or financial advisors need to at least do a better job explaining and proving their value to women.
“With such a relatively high percentage of advisor-reliant female investors already concerned with their fee relationships, it will be crucial for providers to clearly and concisely express the value of their services. As the industry edges toward a greater emphasis on planning-based fiduciary relationships, the benefits of employing trusted advisors are becoming more material,” the report says.
For some firms, this will be a challenge, but it is also an opportunity, according to Scott Smith, director of advice relationships at Cerulli.
“When connecting their remuneration to specific responsibilities and outcomes, advisors could reduce the potential skepticism among female investors and create millions of mutually beneficial client relationships,” he said.
Last year, McKinsey called the growing number of wealthy women in the coming years “a critical inflection point for the financial-services industry” and also urged wealth managers to alter their service offerings. “Firms that wait too long risk losing out on the next leg of growth,” according to the consultant.
Much can be done to better serve women but to start, wealth managers can hire more of them. Clients want to work with advisors who are like them; advisors who can relate to and understand their specific challenges and appreciate their preferences.
Women are better at serving other women as clients and/or those clients prefer them; 58% of women advisors say at least half of their primary client contacts are women, compared to one-third of men, according to Cerulli.
More women are choosing to work in wealth management, but they face many obstacles to success in the industry, which do not reflect its current or future clientele. Only somewhere between 14% and 18% of financial advisors in the U.S. are women, but they account for more than half the U.S. population.
Michael Thrasher (@Mike_Thrasher) is a reporter at RIA Intel based in New York City.