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In celebration of International Women’s Day, we wanted to offer a look ahead to what the future of finance can be with women at the forefront. The day marks a call to action for accelerating women’s equality and empowerment in investing. The opportunities for women have been relatively few and far between. In the 18th century, women could not even own property, let alone invest. Fast forward to today, women are starting their investment firms and obtaining C-Suite positions. As more women come into wealth and gain power, it will no longer be business as usual. 

The Great Wealth Transfer

This unpredicted shift will largely be due to the Great Wealth Transfer. An increasingly popular new phrase signifying a profound change in the wealth management landscape towards women in the next decade. According to a 2020 McKinsey research, women are poised to inherit a large share of the $30 trillion, especially among baby boomers. The transfer will make women the most influential client segment in wealth management.

As the shift takes hold, widows and daughters will inherit and become responsible for large amounts of wealth, and the industry must catch up with the other half of the population. To do this, women must start taking control of their finances and invest, invest, invest! The success in the next decade of the wealth and investment management industry relies on their ability to bridge the gap between current practices dominated by men and the goal-and community-oriented practices women seek.

Here’s what you need to know about the great wealth transfer, its importance, and how women can take the reins to leverage their financial power. 

Women Are Building Wealth Too

Despite the gender pay gap – 82 cents for every dollar men earn. Women are attaining roles that put them in a position to control much more than their household budget. Women are becoming leaders at increasing rates allowing them to take complete ownership of their finances. 49 percent of new businesses in the US in 2021 were started by women, up from 28 percent in 2019. Similarly, women in corporate America are steadily climbing the ladder. 44% of companies in 2019 had three or more women in their C-suite, an increase from 29 percent in 2015. Whether they inherit or generate their wealth, financial services firms need to understand how to serve and appeal to women. It will no longer be a ‘nice to have’ but rather a prerequisite for success. 

Women seek financial advisors willing to build authentic, trustworthy relationships. They want someone willing to listen, answer their questions, and educate and inform them without being condescending. While performance matters to women, they also want their advisors to provide a holistic approach by considering a woman’s family and caregiving needs. Most women also prefer to work with women advisors, but finding one isn’t easy. Women only account for an estimated 15-20 percent of financial advisors in the U.S. and slightly higher in Canada at 23 percent. 

The reality is money talks – as women’s net worth increases, it will be impossible to ignore their needs. 

Women Invest Differently 

For good reason, women tend to have a more complicated relationship with money than men, which trickles into their approach to investing. On average, women live longer and need money for longer, and are more likely to make less money throughout their careers.

Women’s risk tolerance tends to be lower than men’s, and they tend to build the framework for their decision-making on family and relationships. As you can see, women face more consequences for bad investment decisions. Only 9 percent of women reported having a high or very high-risk tolerance, compared to 42 percent that stated they have a low-risk tolerance. This is not to say that women don’t make sound investment decisions. On the contrary, women tend to be more patient and less likely to make impulsive investment decisions.

As women take charge of their wealth creation, wealth management must approach their needs as investors differently. This is why we at Emerge created EMPWR. This program highlights high-caliber women investment managers and provides them with the agency to construct investments based on their values. The EMPWR Separate Account strategies are fully developed and run by women. The SMA’s also have a stringent sustainability overlay to ensure high ethics with our investment practices. 

Biggest Opportunity for Financially Successful Women

Although women are more educated and successful than ever, they tend to take a passive approach to their finances. The gender investment gap results from society’s cultural failure rather than a systemic issue. Women’s understanding of their cultural position in society has shaped their understanding and perspective on money. Women are more focused on saving and investing money back into their families.

The most significant opportunity for financially successful women is education. Women coming into wealth have the opportunity to get off the sidelines and start actively making financial decisions that will build long-term wealth. 

Emerging Opportunities for Women in Wealth Management

It is more important than ever for wealth management firms to focus on gender diversity as well as contribute and consider women’s unique financial needs and goals. With more women gaining access to great wealth, it’s vital for firms to not only ensure profitability but to understand and reflect their needs on a more holistic level. This means firms need to hire and obtain more women financial advisors proactively.

At Emerge, we take it upon ourselves to provide a space where women investment managers can not only showcase their investing talents but also with opportunities to grow. We want to ensure that we offer a diverse roster of women portfolio managers based on values that reflect the needs of women.