Women’s wealth: Bridging a critical financial services gap
E*TRADE Advisor Services
Despite the persistent gender wage gap, data shows that women’s wealth is growing. Even so, their financial services needs are chronically unmet—something that’s especially true for single women and widows.
This is a missed opportunity for advisors. Consulting firm Oliver Wyman estimates the financial services industry would unlock a potential $700 billion revenue opportunity by addressing service gaps and creating new products and services focused on women’s needs.1
It’s time the industry closed the gap, and the first step is to better understand some unique characteristics of this underserved demographic.
Women’s wealth—and appetite for financial advice—on the rise
Women now control 40% of the world’s wealth, are more likely to have self-made wealth, and represent 40% of the world’s entrepreneurs.1
Single women and widows are in a unique position as the sole decisionmakers for their household investments and spending. But a 2020 Streetwise Report from E*TRADE revealed that, while 89% of women say they have moderate to extensive experience managing their household investments, single women are more likely than the general population to say that a lack of financial literacy limits their ability to invest. In fact, less than half are confident about making the right financial decisions for their portfolios.2
If this sounds like a disconnect, it’s not. Single and widowed women face a Gordian knot of financial challenges, including higher student debt, lower wages, longer lifespans, and higher medical bills.1 In this context, it makes sense that single and widowed women are more worried about financial security— and more open to financial advice than the general population.2
So, what can advisors do to meet these needs?
Here are a few things to keep in mind as you work to connect with these potential clients:
- A unique segment of the market requires unique financial strategies. Oliver Wyman notes that traditional wealth planning assumes income will grow at a steady rate each year, but that rule of thumb does not hold true for most women. Although women now hold the majority of college degrees and jobs in the US, representation and pay equity gaps widen at the top: Women comprise only 38% of middle management, 22% of the C-suite, and 5% of CEO roles.3 Women also take more time off for caregiving, and suffer a “motherhood wage penalty” for doing so: The charity Oxfam estimates the value of women’s unpaid care work across the globe at $10.8 trillion annually.4 Women’s wealth follows a non-linear flow of accumulation and deaccumulation, and managing this wealth requires a tailored approach.
- Women clients prefer working with gender-balanced teams. Better serving single and widowed women clients may start with gender diversity at your firm. According to Oliver Wyman, 77% of women prefer a gender-balanced team of financial service providers.5 As of January 2020, however, only 2% of assets were managed by women.6 Having women on your team could be a critical factor in attracting and retaining female clients and the increasing share of the global wealth they control.
- Single women are tech savvy—and hungry for financial education. Industry research shows single and widowed women are eager to learn—more interested than other groups in attending in-person seminars, and more likely to turn to Facebook or Instagram to learn about investing. They also prefer to use an app for trading.2 Have you built an accessible and informative online and/or social presence? Do you participate in educational programming? If not, you may be missing opportunities to build stronger connections to this market.
- Single and widowed women face unique long-term financial needs. Most of us know women can expect longer lifespans than men, but many don’t realize women are also more likely to retire earlier and less likely to have a pension.4 Unfortunately, single and widowed women also spend less time planning for retirement and are more likely to make early withdrawals from their 401(k) plans.2 This presents a unique challenge—and an opportunity for advisors to meaningfully help single and widowed women plan for retirement, long-term care, and medical needs.
- Widowed clients may benefit from additional advisor support. A staggering 77% of spouses who outlive their partners in the US are women.7 Even if clients face widowhood at a younger age, financial advisors may find themselves grappling with complex issues and changing needs that go beyond asset management. Become a true resource for widowed clients by helping them connect with bereavement support organizations and assisting with other practical challenges, such as selling a home.
New solutions for women’s wealth
Investment advisors report that as many as 25% of their single or widowed clients are women,8 and awareness is spreading that the unique cadence of women’s financial lives requires different products and services than their male counterparts. But advisors should be encouraged to know that those who are willing to address the needs of this market will play a vital part in reshaping the industry as women’s wealth continues to grow.
A version of this article first appeared in Financial Advisor
- Oliver Wyman, “Women in Financial Services 2020: A Panoramic Approach,” https://www.oliverwyman.com/content/dam/oliver-wyman/v2/publications/2019/November/Women-In-Financial-Services-2020.pdf
- E*TRADE Financial Corporation, E*TRADE Financial Q1 2020 Streetwise Report
- Harvard Business Review, “Study: How Schmoozing Helps Men Get Ahead,” January 2020, https://hbr.org/2020/01/study-schmoozing-helps-men-hurts-women?utm_medium=email&utm_source=newsletter_monthly&utm_campaign=womenatwork_not_activesubs_movetile_womenatwork&deliveryName=DM66616
- Oxfam, “Time to care: Unpaid and underpaid care work and the global inequality crisis,” January 2020, https://www.oxfam.ca/publication/35449/
- Oliver Wyman, “Women in Financial Services 2020: A Focus on Corporate and Institutional Banking,” https://www.oliverwyman.com/our-expertise/insights/2019/nov/a-focus-on-corporate-and-institutional-banking.html
- ThinkAdvisor, “5 Ways to Bring More Women Into Asset Management,” January 2020, https://www.thinkadvisor.com/2020/01/29/5-ways-to-bring-more-women-into-asset-management/?kw=5%20Ways%20to%20Bring%20More%20Women%20into%20Asset%20Management&utm_source=email&utm_medium=enl&utm_campaign=womeninwealth&utm_content=20200129&utm_term=tadv
- BenefitsPro, “Financial wellness: Why women have a more difficult path to get there,” April 2019, https://www.benefitspro.com/2019/04/10/financial-wellness-why-women-have-a-more-difficult-path-to-get-there/
- WealthManagement.com, “Women Aren’t Planning Early Enough,” December 2019, https://www.wealthmanagement.com/estate-planning/women-aren-t-planning-early-enough?NL=WM-27&Issue=WM-27_20191224_WM-27_598&sfvc4enews=42&cl=article_1_b&utm_rid=CPG09000043604614&utm_campaign=24604&utm_medium=email&elq2=430337edbdb349749550ea365516666c