For financial advisors to succeed and take advantage of the new "Women’s Economy," thoughtful engagement with women, including understanding their needs and unique goals, is essential.

The time has come. The
Women’s Economy has arrived. And it’s important - particularly for the members
of the financial services industry, for several reasons. Today, women represent
the largest emerging market for financial advisors, and even greater than China
or India. In the US alone, women control $8 trillion and are expected to
control $22 trillion by 2020.

American women are the
primary retirement planners in 76 per cent of households, and they represent
the majority of the workforce. Women are increasingly the primary breadwinners
of their households, and own 40 per cent of the US privately-owned
businesses. As such, understanding some of the distinctive needs and
preferences that women have of their financial advisors can yield tremendous
gains for leading financial institutions.

The distinctive
characteristics of this new Women’s Economy requires a deep knowledge of the
attitudes, concerns, investment styles and goals that differentiate female
clients from their male counterparts, as well as the differences among women
themselves.

The vast majority of
women still do not feel financially savvy, yet they represent the largest
consumer market in the world, controlling more than 80 per cent of the
purchases in the US and owning 30 per cent of all US companies.

There is no greater
demographic trend that impacts business than the growing wealth of women. As a
result, many businesses have realized that it is necessary to focus on this
emerging demographic as they change the way they conduct business with different
types of female consumers, particularly those of great wealth.

Prevailing attitude of women towards financial
services

Across the globe,
women report they are extremely disappointed with the quality of services and
breadth of tailored products provided by the financial services industry. In
fact, women rank financial services as one of the two sectors with which they
are most unhappy (along with healthcare): women do not feel like they are
treated as equals to their male counterparts nor do they feel that their time
is respected.

Women report that
financial advising is male-oriented and financial advisors do not proactively
listen nor consider their deepest concerns. As a result, women are very willing
to switch to financial service providers that understand them better. Fidelity
found that 70 per cent of women leave their advisors when they inherit assets.

Women want financial collaboration, not to delegate
financial decisions to others 

Historically, women
were rarely involved in financial decisions and did not have the same
opportunities as men in the business world. This reality shaped how women
learned – or did not learn – about financial decision making.

Traditionally, many
women became wealthy when they received significant sums of money through
divorce or inheritance. Today, over 40 per cent of high net worth women have
earned their own money. Additionally, women continue to live longer and
therefore will inherit more from their husbands/families. The trends have
changed in favor of women.

Today’s women are taking
it upon themselves to learn about finance. Although women rate themselves as
less – or not at all – knowledgeable about financial products or investing,
they want to become highly educated about their financial alternatives.
Interestingly, 65 per cent of women do not use financial advisors; yet those
who do rely on their advisors more so than their male counterparts.

Women report less
confidence in their financial expertise, but they do not want to entirely
delegate financial decisions to others. As such, most high net worth women want
to partner or collaborate with their financial advisors, but make the ultimate
decisions themselves.

Today, women
self-educate themselves about managing their wealth, usually from family and
friends. There are differences among women in terms of age, ethnicity, and type
of financial decision (e.g. retirement, investments) affecting whether and with
whom they consult. Importantly, women’s use of financial advisors increases
with their wealth – 64 per cent of female millionaires and 82 per cent of ultra
high net worth use financial advisors.

Women have different emotional reactions to money

An individual woman’s
relationship with money is primarily influenced by her attitude, values,
education and experiences. Risk-taking attitudes affect investment strategies.

In general, women are
more risk averse than men: only 31 per cent of women are prepared to take
higher risks for higher investment gains. This aversion to risk taking may be
related to personal and family concerns that generally drive women’s financial
decisions. On the other hand, a recent study found some women were frustrated
when their advisors assumed they had a low risk tolerance, providing them with
only a narrow range of investment alternatives. Therefore, it is important to
learn the attitudes and preferences of each individual woman.

Behavioral scientists
have suggested that women are more prone than men to experience fear when
making financial decisions, which can indicate the downside of risk is more
threatening to women. One of the primary manifestations of fear is the common
finding that women, regardless of income, tend to be concerned that they will
not have sufficient funds for retirement.

Additionally,
investment strategies differ between men and women. Women typically take more
time to plan, often invest for the long-term, and prefer safer investments
(i.e., investment strategies with lower volatility). Women commonly exhibit a “buy
and hold” strategy, rather than trying to “time the market.” Research has shown
that although men are more likely to be self-confident and take greater risks,
they are less accurate in their investment decisions than women.

When women make
emotional choices about money, they often consciously or subconsciously use
self-control strategies. For example, women - more than frequently than men -
purchase illiquid investments such as homes, real estate and jewelry to prevent
themselves from emotional trading (33 per cent versus 29 per cent). Some women
exercise financial discipline by using rules and financial self-control strategies.
For example, some women wait a few days after making a big financial decision
before executing on it.

There are also
relevant generational differences in attitudes toward money. Women near
retirement have different life experiences and expectations than those in their
twenties or thirties. Whether she is married, has children, inherits assets or
receives a divorce settlement, or earns the money herself affects the
anxieties, expectations and risk-taking strategies of the particular woman. All
of these factors shape the individual woman’s financial life’s picture.

Each woman wants an advisor to understand her unique vision or life’s picture. It is prudent for
financial advisors to connect with women by acknowledging the emotional factors
involved in their decision-making processes. Financial advisors need to show their
understanding of the emotions that drive the individual woman’s financial
objectives (e.g. anxiety or fear of needing to rely on her children in her old
age, not being able to provide for her family, not meeting the medical needs of
parents, or wanting to ensure the education of her grandchildren).

By communicating an
understanding of the unique client’s needs and underlying emotions, financial
advisors can demonstrate empathy and earn the trust needed to develop
actionable financial plans for the female clients. When women trust their
financial advisors, they tend to be loyal and stay with the advisors more
frequently than men, often irrespective of their financial performance.

Women have different views about wealth

Women tend to view
wealth as an important source of security – to provide peace of mind for
themselves and their family – not as an opportunity for investment.

For most women,
financial investing is a tool for reaching life and family goals: they tend to
view wealth as a means to ends (e.g. financial security during their
retirement, enabling them to care for loved ones, or for philanthropic
purposes). For women, their financial legacy is often tied to their values
legacy. They are more inclined than men to engage in philanthropy and non-profits
causes, and frequently want to involve their children in charitable causes as a
central family value. These personal concerns generally drive their financial
decisions.

Most women want to be
involved in making financial decisions with their husbands. Even if the man
makes most of the decisions about the family’s finances, it is wise for the
financial advisor to ask and respond to the woman’s priorities, as studies
report 70 per cent of women say they change their financial advisors after the
death of the spouse.

Women are the new emerging market

Financial advisors can
earn the trust and loyalty of their female clients by listening to her wants
and understanding her goals.

Sixty-four per cent of
the women who use financial advisors are much more willing to take risks. Also,
women who use advisors feel they are on the right track to meeting their
financial goals and feel more confident about not outliving their savings.

Today, women are
earning more money and have access to more money more than ever before. In
one-third of dual-income households, women earn more money than their spouses.
Women already represent most of the college graduates and the majority
graduating from graduate programs. As such, women represent more of the future
self-made wealthy population. 

Whether she has earned
the money herself, inherited it, or received it through a divorce settlement,
90 per cent of adult women will spend some time living alone in their life,
making their own financial decisions.

Women’s economic
empowerment is described as the biggest social change of our time. For
financial advisors to succeed and take advantage of the new Women’s Economy,
thoughtful engagement with women, including understanding their needs and
unique goals, is essential.