The Future of Finance will be Female. How and where women choose to invest and how they educate their children about legacy, investment and philanthropy will be one of the most influential forces shaping the world looking forward.
Women are getting richer. By 2020, women are expected to hold 32% of total global wealth, roughly $72 trillion, according to Boston Consulting Group. And this number will continue to grow. Women are expected to inherit 70% of the wealth that will be passed down over the next two generations.
The wealth management industry—a sector developed for and run almost exclusively by men—must adapt to meet the needs and expectations of its quickly-expanding female client base.
- Financial advisors need to understand women’s unique needs, goals and views towards money.
- While men focus on returns and industry benchmarks, women tend to prefer a goal-based approach.
- Women prefer to deal with money—holistically and emotionally.
- Women want a relationship with their wealth advisor.
The surest way for financial advisory services to serve their quickly-expanding female client base is to hire more women. According to the CFP board, only 23% of Certified Financial Planners in the U.S. are women.
Just as women are divesting from companies and brands that fail to champion women, they will no longer feel comfortable keeping their money in the hands of companies with exceedingly few female portfolio managers. (As underrepresented as women are in financial advisory roles, they are rarer still in the world of asset management. Of the 16,084 portfolio managers tracked by Citywire around the world, just 1,662, or 10.3%, are women. In the U.S., that figure falls to 9%. Attracting, retaining and promoting female fund managers is a tall order for the industry, but it is paramount. Those that figure out how to accomplish this sooner will enjoy an outsized advantage.)
Women see an economic role for finance beyond pursuing alpha or market-beating performance. Women, much more so than men, are drawn to investments that have a positive social or environmental impact.
Arguably the loftier goals of impact investors, including the ongoing assessment of how well companies manage their ESG risks, will be better served through active management. As one female fund manager recounted recently: “Contrary to popular belief, millennials are not willing to accept a trade-off between returns and impact. They expect you to beat the market and they want you to do it sustainably. . . Millennials, especially females, research everything and are highly demanding clients for any industry.”