A great wealth transfer is coming, passed down from the baby boomer generation, and women may emerge as the biggest beneficiaries. Approximately $30 trillion in wealth is set to change hands in the next decade and women are poised to inherit a sizable share, according to research by McKinsey & Company published in 2020. 

What do women want when seeking financial advice in an industry dominated by men? Determining the answer to this question is crucial for financial advisors as the wealth management landscape shifts to accommodate the growing needs of women.

Key Takeaways

  • Women are poised to inherit a large share of the $30 trillion that will be passed down from baby boomers.
  • At the same time, women are increasingly building wealth on their own.
  • As the wealth management landscape shifts, financial advisors (most of whom are men) need to accommodate the growing and unique needs of women.
  • Women tend to be more focused on life goals than men, are less comfortable making finance-related decisions on their own, and have less tolerance for investment risk.

Women Are Building Wealth Too

Women are not only poised to inherit a large share of wealth, they are also building it on their own.

Despite the persistent gender pay gap (women still only earn approximately 80% of what their male counterparts do, according to the Bureau of Labor Statistics), many are intentionally accumulating their own wealth by climbing the career ladder. In 2019, McKinsey research found that there was a significant increase in women taking on upper management roles in corporate America in recent years. One finding: 44% of companies had three or more women in their C-suite, up from just 29% in 2015. 

“It’s critical that women seek professional guidance regarding wealth management,” says Malia Haskins, vice president of wealth strategies at RBC Wealth Management. “Women are attaining financial roles and responsibilities that are taking them beyond simply controlling the household budget.”

$10 trillion

The amount of financial household assets women control in the U.S., or about a third of the total, according to McKinsey.

Women Seek Alignment With Life Goals

Currently, a majority of financial advisors is male, with women accounting for only 15%, according to McKinsey. This influences the dynamic between advisor and client, especially when their values diverge. McKinsey research reveals that there are several key areas in which men and women differ when it comes to their financial planning goals. Women tend to be more focused on life goals than men, but only a quarter are comfortable making financial-related decisions on their own—15% fewer than men.

Myra Natter, a certified financial planner (CFP) and wealth advisor at Titus Wealth Management in Larkspur, Calif., says advisors, who are typically male, can position themselves to attract and retain female clients by recognizing their need and desire to understand. “When approached in a way that makes finances easier to use and understand, women are more likely to become comfortable with the investment process.”

Women can face unique challenges when managing wealth accumulation. They may have to take time away from the workforce to care for children or aging parents and structure their portfolios to account for longer life expectancies.

How Risk Tolerance Differs for Women

Women also approach risk differently, says Gretchen Cliburn, director at BKD Wealth Advisors in Springfield, Mo. “Women are less likely to take on as much risk as men, and with less risk, they may need to save more to achieve their goals.” This choice requires that they be more focused and diligent, and advisors can encourage this strategy by creating a space for open dialogue.

Women are almost 10% less likely than men to take big investment risks for potential higher returns, according to McKinsey.

“Advisors need to break down the barriers that prevent women from asking questions,” says Leslie Thompson, managing principal at Spectrum Management Group in Indianapolis, Ind. “If an advisor finds that their female clients are hesitant to meet with them or reluctant to speak, they need to dig deeper to find a common ground to begin a discussion on how to view and manage their wealth.”

Emotional Connections Matter

Women can be pragmatic when it comes to their finances, but there’s an element of emotion that also influences their decision-making.

According to Haskins, the framework for women’s decision-making tends to be built on family and relationships. “To help ensure their client’s relationship values are incorporated into financial decisions," she says, "an advisor needs to explore both facets—get a deep understanding from the client about what is important from an emotional and relationship perspective and combine that with the specific financial picture the client is working under.”

Haskins says savvy advisors need to be able to manage both financial and emotional objectives in order to be effective in guiding women through the wealth transfer and wealth management process. Getting to know clients on an emotional level can deepen the professional relationship and allow women to better relate to the financial strategies being proposed.

Acknowledging the emotional element can also help bridge potential communication gaps. It’s possible that the language of financial planning may not be familiar to some women, but advisors should not assume that they do not understand it. Natter says advisors must avoid patronizing women clients, and focus on explaining their financial situation and options in a way that resonates with them.

“Advisors who ask clarifying questions and understand a woman’s goals and concerns will be better positioned to provide meaningful advice in a non-threatening way so that it’s well-received,” Cliburn says.

Asking questions is one half of the equation; advisors also need to listen to what women have to say. “Advisory relationships should not be one-way communication paths,” Thompson says.

The Bottom Line

To succeed in a changing wealth management environment, advisors must be prepared to create a holistic experience for their female clients, Haskins says.

That includes designing a customized, comprehensive financial plan, recommending appropriate financial solutions, and being able to pivot the plan to adapt to women’s changing lifestyles and needs over time. The advisor who can do that, Haskins says, “...will cultivate relationships that will endure market fluctuations and other economic forces over the long haul.”