Women to Control Far More Wealth — and FAs Will Need to Adapt

By Alex Padalka July 31, 2020

The next three to five years will see an “unprecedented” shift of assets to women — and the advisors who want to have them as clients will need to make systematic adjustments, according to a recent report. 

Currently, men are the key financial decision makers in two-thirds of affluent households in the U.S., consulting firm McKinsey says in a new report. But women already control about a third of the $30 trillion in wealth held by U.S households, the company says. 

Moreover, certain demographic shifts will transfer even more money to women, according to the report, which includes a survey of more than 10,000 affluent investors, nearly 3,000 of whom are female financial decision makers, and data from McKinsey’s analysis of financial advisors.

Currently, around 70% of investable assets in U.S. affluent households are controlled by baby boomers — and two-thirds of baby boomer assets are held jointly, where a woman is present but doesn’t take part in financial decisions, McKinsey says. 

At the same time, however, female spouses are typically younger since heterosexual women in the U.S. marry men who are around two years older, according to the report. Women in the U.S. also have longer life expectancy, outliving men by an average of five years, McKinsey says. 

Furthermore, women are becoming more financially educated, according to the report. Thirty percent more women make financial and investment decisions today than just five years ago, McKinsey found. Women are also increasingly at the top of corporate ladders: 44% of firms count three or more women among their C-suite ranks, compared to 29% of firms in 2015, according to a 2019 survey by McKinsey. 

Financial advisors should be prepared to see some client movement. When women take charge of financial decisions for a household, switching wealth managers is typical, particularly for widows, 70% of whom change their financial advisor within a year of the death of their spouse, according to the report. 

“Over the next three to five years, as women increasingly take responsibility for making their households’ financial decisions, they will become the critical battleground for wealth management firms,” McKinsey says. 

And while many firms have been experimenting with their product lineup, hiring more female financial advisors and rolling out marketing featuring women, “such measures are no longer enough,” according to the report. For example, only 15% of financial advisors across all channels are women, McKinsey found.

“As wealth begins to pour into the hands of women, firms will need to commit to a much more systematic approach — transforming their business and client-service models in ways that will acquire, retain, and serve women as long-term investors,” McKinsey says. “To rise to the challenge, wealth management firms must deeply understand women’s differentiated needs, preferences, and behaviors when it comes to managing their finances.”

In its survey, McKinsey says it found some key differences in how women manage money. Affluent women are less likely to feel confident about their own skills and more likely to seek professional advice, according to the report. Female decision-makers, meanwhile, prioritize life goals and are less risk tolerant, but are also likelier to have an advisor as well as pay a premium for in-person advice, McKinsey found. Additionally, the group is more likely to rely on a personal fit when choosing an advisor, according to the survey. 

Advisors will also need to pay closer attention to the female clients they already have: McKinsey found that around half of female decision-makers feel unprepared financially — even though they already have an advisor. 

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