Women are the primary breadwinners in 40% of American households and many of them are accumulating substantial assets as a result. In the United States alone, women control $14 trillion in personal wealth and that number is expected to grow to $22 trillion by 2020, according to the BMO Wealth Institute.
With more women achieving high net worth and ultra high net worth status, the question becomes how to best manage the wealth they’re building. Working women in particular face some unique obstacles that can make overseeing their portfolio difficult. Seeking out professional wealth management services is a smart solution for several reasons.
Extra Time Pressures
While women’s roles have changed dramatically over time, the fact remains that they often are burdened with more responsibilities in terms of care-taking. A U.S. Trust survey found that 71% of high net worth women have primary or shared responsibility for childcare and 39% provide care for an elderly relative. In that same survey, 71% of women said they were the investment decision-maker for their household.
Different Investing Goals
Men and women differ on a number of levels, and the way they invest is no exception. Research from Spectrem Group shows that 55% of women prefer investments that offer a guaranteed rate of return, compared to 46% of high net worth men. At the same time, 50% of men said they’re comfortable being involved in the day-to-day management of their investments, while only 36% of women agreed. Read 3 Wealth Management Rules for Female Investors for further insights.
More women than men said they used a financial advisor – 78% versus 61%. When it comes to what they look for in an advisor, women place a higher value on whether that person comes recommended by a friend, family member or colleague, the research showed. They also tend to veer towards established financial services brands more frequently than men do.
In terms of how they divvy up their wealth, high net worth women gravitate towards safer investments. According to Spectrem, women were more likely to choose money market accounts, certificates of deposit (CDs) and even their checking account over stocks, mutual funds or exchange-traded funds (ETFs). While that lessens the potential for losses, it also limits the potential for growth. For more, see How Women Investors Make Money.
A wealth manager would be in a position to pinpoint areas of opportunity that fit with your overall investment strategy so you’re not losing out on returns.
What Wealth Managers Offer
One mistake high net worth women can’t afford to make when building sustainable wealth is developing tunnel vision. Focusing on a small handful of investment types without exploring what else is available may throw your portfolio off-balance if it lacks diversification. That’s where a wealth manager comes in handy. Your advisor may be able to steer you towards alternative investments that are geared specifically towards accredited investors, who have a net worth of $200,000 or higher.
Hedge funds and private equity, for example, can yield lucrative results, but if you’re flying solo with your investments, you may have trouble gaining entry to these asset classes. With a wealth manager on your side, you can begin exploring new investment paths that go beyond what’s available to non-accredited investors. (For more on this topic, see Top Alternative Investments to the Stock Market.)
The Bottom Line
There’s a strong case for high net worth women needing professional wealth management advice, but which makes more sense – a human advisor or a robo-advisor?
Robo-advisors offer lower costs and streamlined management services, but many of them focus exclusively on ETFs. If added variety and a personalized touch sound more appealing, spending the money on a human advisor may be the better investment.
Comparing the advantages and disadvantages of both options can guide you toward the one that’s most appropriate for you. (For additional guidance, read Robo vs. Human Advisors for Women Investors.)