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When it comes to working with female clients, advisors face a dichotomy. In aggregate, women still earn less than men. On the other hand, there are myriad encouraging data points regarding women’s rising interest in financial markets, saving, retirement planning and overall desire for more financial advice.
To be sure, those items represent good news. While there's still plenty of progress to be made on the equal pay front, women are making more money today. Additionally, women, on average, live longer than men, so there's obvious void to fill for financial advisors with female clients.
Underscoring the need for advisors to better connect with female clients, data and research confirm women are susceptible to seeing financial stresses morph into negative physical health scenarios. Obviously, advisors are not medical doctors nor are they psychologists, but they can take steps to help female clients mitigate financial stress, in turn potentially reducing the possibility of negative health outcomes.
Undoubtedly, those are good reasons for advisors to up their focus on the specific needs of female clients. Moreover, data confirm this is a potentially fruitful endeavor for advisors looking to grow their practices.
Golden Advice from Goldman Sachs
Don’t just take my word for it regarding the need for advisors to improve and increase the emphasis on female clients. Goldman Sachs Asset Management (GSAM) lays it out in cogent fashion.
“Looking at the decade ahead, the Boston Consulting Group expects women’s wealth to grow $5 trillion globally every year,” notes the asset manager. “A similar growth trend may appear with women investors in western Europe too. According to a McKinsey study,2 European women’s assets may grow at 8.1% CAGR relative to the 2.7% estimated for men through 2030. On a cumulative basis, European women’s share of investments is forecasted to reach 45% of assets under management by 2030.”
GSAM also highlights some data points underscoring the women’s rising interest in investing in the wake of the coronavirus pandemic. For example, the percentage of women that are Fidelity clients investing in instruments other than retirement accounts was 67% in 2021, up from 44% in 2018. On Robinhood, the percentage of female clients surged 367% for the year ending February 2021. However, there’s plenty of work to be done by advisors.
“While all positive news, we believe that the current macro backdrop may still require women investors to develop a dynamic portfolio to address both their unique challenges and needs amid this decade of potentially modest economic growth, moderate public market returns, and a higher cost of living,” adds GSAM.
Important Areas of Emphasis for Advisors
There are multiple macro issues for advisors to focus on when it comes to better serving women. Those include persistently high inflation, the specter of potential alterations to Social Security and long-term care costs. A valid starting point, as noted above, is the fact that women earn less than men.
“Women continue to earn 82 cents for every dollar earned by their male counterparts. And while women comprise 47% of the workforce, they earn 21% less in lifetime income relative to men,” observes GSAM. “Consequently, women's lifetime retirement contributions on average fall 30% short of their male peers. The resulting impact is a pronounced pay and wealth gap, leaving women less financially prepared for the future.”
Another marquee point of emphasis – likely one advisors are already aware of – is the point that women live longer than men.
“Differences in life expectancies between men and women may further amplify the retirement shortfall. Women tend to live three years longer than men, on average, which makes retirement savings longevity vital. Yet women are more likely than men to retire earlier than planned due to health reasons, family care needs, or job loss,” concludes GSAM.
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