A Special Report by IMGW.News:
With female clients controlling a larger share of global wealth, managers are doing more to address their particular needs.
The landscape of wealth management is experiencing a profound shift as women around the world assert more influence in financial decision-making. Research from the Boston Consulting Group indicates that approximately one-third of the world’s private wealth is now held by women. Moreover, the Centre of Economic and Business Research projects that by 2025, 60% of the UK’s wealth will be controlled by women. This transition reflects a broader trend of escalating economic empowerment among women, with the proportion of ultra-wealthy women globally rising to 10.9% in 2022, up from 6.5% in 2016.
Financial planners emphasise the growth potential in catering to the specific needs of female clients. While financial products and services historically targeted men, there is a growing acknowledgment of the importance of understanding gender-based drivers and behaviours to effectively connect with female clients.
An essential aspect of attracting women clients is recognising their diverse goals, which often encompass caregiving responsibilities and a focus on longer-term planning. Experts emphasise the necessity for early engagement with women, providing financial education at various life stages to empower them in financial decision-making.
Despite progress, significant gaps persist, including the gender wage disparity and women’s tendency to invest less in growth assets. Women typically earn less than men, resulting in disparities in wealth accumulation and retirement planning. Nonetheless, wealth managers are evolving their services to address the specific needs of female clients, offering tailored financial planning and addressing concerns such as longevity and caregiving responsibilities.
When it comes to investing, research indicates that women are more inclined to focus on investments with positive social and environmental impacts, reflecting a growing interest in responsible investing.
Experts highlight women’s prudent investment behaviours, such as adopting a long-term view and engaging in less frequent trading compared to men. To better serve female clients, firms are investing in training programmes to help advisers understand gender differences in financial attitudes.
There is a growing recognition of the importance of a holistic approach to wealth planning, aligning with women’s preferences for investments and services that reflect their values and ensure long-term financial security.
Financial Literacy: Bridging the Gap
In the pursuit of gender equality in wealth management, bridging the gap in financial literacy among women is crucial. Financial literacy, as defined by the Organisation for Economic Co-operation and Development (OECD), encompasses financial awareness, knowledge, skills, attitudes, and behaviours necessary for sound financial decision-making and individual financial well-being.
Denmark, Norway, and Sweden, serve as models for fostering inclusive financial education initiatives empowering women to make informed financial decisions and achieve greater financial independence.
Results from the OECD/INFE 2020 International Survey of Adult Financial Literacy reveal persistent gender differences in financial knowledge across 26 countries and economies. In most participating countries, men tend to have higher financial knowledge scores than women, underscoring the need for targeted interventions to enhance financial literacy among women globally.
As countries continue to prioritise financial education, there is hope for a world where individuals, regardless of gender, are equipped with the tools they need to succeed in their financial journeys. Leading countries in financial literacy, such as Denmark, Norway, and Sweden, serve as models for fostering inclusive financial education initiatives empowering women to make informed financial decisions and achieve greater financial independence.
The Evolution of Women’s Wealth
On the demographic front, women continue to outlive men and are inheriting money at higher rates than before. While women’s wealth historically derived mainly from family inheritance, today, more women are leveraging their professional skills and achievements to accumulate wealth through work, entrepreneurship, investment, and wealth management.
BCG projects that women’s wealth globally will reach $93 trillion this year, with an estimated annual addition of $5 trillion to the global wealth pool. This projection underscores the significant growth trajectory of women’s wealth and their increasing contribution to the global economy.
In particular, Asia is witnessing a remarkable surge in women’s wealth, with total wealth expected to reach $19 trillion by the end of this year. Better education and higher job positions have propelled women’s earning power, leading to a surge in female entrepreneurship and senior management roles globally.
When it comes to investing, research indicates that women are more inclined to focus on investments with positive social and environmental impacts, reflecting a growing interest in responsible investing. This shift underscores women’s desire to align their investments with their values, contributing to social and environmental causes while seeking financial returns.
The rise of sustainable investing has gained traction among female millennials, with over 90% expressing a keen interest in social and environmental causes. As wealth creation evolves, women increasingly recognise the power of their wealth to drive positive change in society and the environment.
Incorporating environmental, social, and governance (ESG) factors into investment decisions has emerged as a key strategy for mitigating risks and capitalising on opportunities in a rapidly changing global landscape. Sustainable investing not only offers risk management benefits but also taps into lucrative growth opportunities arising from the global transition towards sustainable development.
As the world that navigates through challenges posed the Ukrainian and Middle Eastern tumoils, climate change, and social disruptions, sustainable investing offers a pathway for investors to support companies with resilient business models and sustainable practices. With Asia leading the green revolution and embracing low-carbon economies, sustainable investing presents significant growth potential in emerging industries, including renewables, electric vehicles, and environmental technologies.
In conclusion, the evolution of women’s wealth underscores the importance of adapting financial services to meet the diverse needs of female clients. By addressing gender disparities in financial literacy and empowering women in wealth management, the industry can foster a more inclusive and equitable financial landscape, driving sustainable growth and innovation.
Of interest:
Key Data on Women’s Economic Participation: Understanding Gender Disparities in Economic Participation
Gender disparities in economic participation persist worldwide, impacting women’s access to financial resources, digital opportunities, and employment. Despite advancements, women continue to encounter challenges in achieving parity with men across various facets of the economy. This overview delves into key data points highlighting these disparities, shedding light on the ongoing imperative to address systemic barriers to women’s empowerment. (Data Source: UN Women)
- Access to Financial Institutions: Women trail behind men in access to financial institutions and bank account ownership, with a global gender gap of 4% and a 6% gap in developing economies.
- Digital Divide: A gendered digital gap endures, with 37% of women globally abstaining from internet usage, resulting in 259 million fewer women online compared to men.
- Labour Force Participation: Globally, women’s labour force participation trails men’s by 30%, a trend that has persisted since 1990, with women at 61.4% and men at 90.6% in 2022.
- Unemployment and Job Gap: While women are marginally more likely to be unemployed than men (5.7% vs. 5.8% in 2022), the job gap rate for women stands at 15%, signifying 153 million additional women seeking employment.
- Gender Wage Gap: Women earn 80% of men’s wages globally, with an estimated 20% gender wage gap, compounded by the motherhood penalty.
- Entrepreneurship: Women encounter hurdles in entrepreneurship, with lower rates of start-up activity (10.1%) and established business ownership (5.5%) compared to men.
This data underscores persistent gender disparities in economic participation, emphasising the imperative to address systemic barriers to women’s empowerment. Source: UN Women 2024.