A significant transition is underway. Women today control approximately 30% of the household wealth in the U.S.; however, by 2030, women are projected to manage a much larger share of America's astounding $30 trillion in total household assets.1
For financial advisors, this isn't just a noteworthy trend—it's a call to action. Understanding and addressing women's distinct financial needs and preferences has never been more imperative.
Wealth in Motion
A compelling testament to this imperative is that 70% of women in male/female marriages choose to change their financial advisors following their husband's passing.1 And given that women typically outlive their male spouses by 5 to 10 years due to differences in life expectancy and age at marriage, a tremendous amount of wealth will be in motion in the coming years.
Thus, for financial professionals aiming to sustain and grow their practices, it is essential to recognize the shifting dynamics and actively adapt to effectively serve this increasingly influential demographic.
A Challenge and an Opportunity
In a recent episode of The Retirement Space Podcast, I had the pleasure of discussing with Kristin Gibson her experiences in coaching financial advisors. Our main focus? How these professionals can forge stronger and more meaningful relationships with their women clients.
Women Have Differing Preferences Than Men
As Kristin pointed out in our conversation, “Studies, focus groups, and actual behavior tell us that as men and women, our relationship with money and investing is often different, not good or bad, just different.”
Wealth - a Means to an End
One of the primary differences is that women are more likely to see wealth as a means to an end, whereas men see investing more as a competition. “Women tend to have a relationship with money that is about safety, security, and family protection.”
More Risk Averse, Less Confident
Kristin’s experience working with women investors and advisors has taught her that women, “tend to be more risk averse, and perhaps not as confident, regardless of their competence in their ability to invest. So, they're seeking out information; they want a partnership (with their advisor).”
And They Stick to Their Plan
Women investors value a holistic plan, one that puts them on a path to achieving their goals. “They like having a plan, and they like to stick to it, which, quite honestly, is sort of clients that all advisors are looking for.”
Ideal Clients
But as Kristin highlighted, it's not just about numbers. Women present an array of attributes that make them ideal clients.
For starters, women generally consolidate their wealth. This means they're more likely to entrust a larger share of their wealth to a single advisor than their male counterparts.
"Once you build that trusted relationship, women tend to put more of their money in one place. They're open and communicative about the consolidation of assets. They value that holistic relationship and being able to see their whole financial picture."
They Let Markets Reward Their Patience
Furthermore, they tend to make less frequent changes to their portfolio. When a change needs to be made, they are open to suggestions. But they are less likely to chase returns than men, which lessens the service burden for their advisors.
“Female investors tend to trade less. They require less servicing time than their male investors, and there are lots of studies that support this.”
They Want Friends and Family to Share in Their Positive Experiences
But the most striking insight Kristin shared was the power of a positive experience. Women are more inclined to recommend their financial advisor to family and friends when they're truly satisfied with the service. When it comes to building an advisory practice, word-of-mouth can be invaluable.
"Women bond by sharing good experiences, and women tend to be highly influenced by personal recommendations. Multiple studies show that women investors tend to refer their advisors nearly three times as often as their male counterparts."
What's an Advisor to Do?
Engaging with and understanding women clients isn't just good practice—it might be the future of successful financial advisory. So where do you start? Here's how you can hone your skills to capitalize on this trend:
Take Advantage of Resources: Your first step should be to educate yourself. Familiarize yourself with the specific needs and preferences of your female clients. In addition, many advisor networks offer in-house resources to help you adapt your approach. There are also external resources, like this enlightening white paper from McKinsey & Company that provide detailed suggestions.
Balance Your Communication: When dealing with a male/female couple, divide your attention equally. Research has shown advisors typically direct 60% of their eye contact at the man in male/female couples. Ensure you engage both members in your conversations; this balance fosters a sense of respect and inclusion.
Listen More, Talk Less: Building trust with your female clients often requires a shift from speaking to listening. “Most women answer questions with 100 to 300 words more than a man would answering the same question,” Kristin noted. Giving your clients ample time to talk helps them feel they’ve been heard and demonstrates genuine interest in their thoughts and opinions.
Seek Feedback: Regularly ask your female clients about their preferences, the kind of communication they appreciate, and the topics they want to discuss.
Educate and Engage: Host events or sessions specifically tailored to the needs expressed by your female clientele. If you're unsure about what topics to cover or how to approach them, ask. They will appreciate the fact that you value their opinion. Taking a proactive approach to addressing their concerns can go a long way in fostering enduring relationships.
----------
Be sure to download episode #5: Women and Wealth of The Retirement Space Podcast to hear Kristin and my entire conversation.
Endnotes:
- Baghai, Pooneh, Olivia Howard, Lakshmi Prakash, and Jill Zucker. "Women as the next wave of growth in US wealth management." McKinsey & Company. July 29, 2020. https://www.mckinsey.com/industries/financial-services/our-insights/women-as-the-next-wave-of-growth-in-us-wealth-management.
