How women are reshaping wealth (and why you should be paying attention)

Bank of America recently estimated that over the next 25 years, 70% of all inherited wealth will be inherited by women. What does this mean for financial advisors?

In some ways, this is part of a longer trend. In the 1970s, credit card companies demanded that women have a male co-signer before they could open an account. Throughout the 1980s, women never made more than 70% as much as men. Even as late as 1999, fewer than 1 in 4 women had a college degree, limiting earning power.

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Yet in the span of just a few decades, the financial landscape for women has transformed dramatically.

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Female Investors and Wealth Holders Are Set to Reshape America's Financial Landscape

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Today, 47% of young women have at least a bachelor’s degree, compared to only 37% of young men. In some of America’s biggest cities, including New York, Los Angeles, and Washington, D.C, young women are out-earning young men. Our own data show that more than 10 million American women have net worths estimated at greater than $2 million. And by the end of this decade, McKinsey estimates that women will control roughly two-thirds of all American private wealth.

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While women have been described as naturally “more frugal” than men, the data suggests that they were simply making less money and thus less likely to spend on either “frugal” things like retirement or “splurges” like new clothes. Historically, women have saved money at a lower rate than men, thanks in part to persistent issues like the gender wage gap and expectations around homemaking and childcare. But these trends are shifting as women continue to claim a larger share of the income.

Women also tend to live longer than men, another trend that has accelerated dramatically over the last 25 years. Those extra years may influence women’s approach to investing. Studies by both Fidelity and the UK’s Warwick School of Business show that women investors typically:

1. Diversify their portfolios more than men
2. Focus more on long-term considerations than men
3. Outperform men’s portfolios by anywhere from 40 to 180 basis points

Forty basis points in a single year might not amount to much money—but forty basis points a year, every year, for a lifespan that’s already 6 full years longer than the average man’s? That adds up—an additional 4% per decade, assuming simple interest, every decade.

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How Financial Advisors Can Adapt

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So, as a movie once asked, “What do women want?” Like men, most women say they want an advisor who understands them and their personal finance goals. Unlike men, however, nearly half of women say that financial advisors patronize them, and 40% say financial advisors “push them out” of conversations, according to a survey by New York Life. Another recent article from financial-planning.com put a finer point on the issue noting “want to be spoken to as an equal, trusted to make their own decisions and treated fairly in their pricing.”

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For too long, women have been underserved—or outright mistreated—by the financial services industry. To continue to do so, though, is both morally wrong and bad for business. Women investors are on the rise. Financial professionals looking for growth need to know how to find, engage with, and prioritize their unique needs.

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This is a pivotal opportunity to build lasting relationships with the future stewards of wealth. Aidentified equips you with timely data and relationship intelligence to build trust with affluent women before your competitors do. Let us help align your strategy with where wealth is going, not where it’s been.