Women’s influence over wealth in today’s global society can no longer be overlooked. Women are the primary decision makers over investable assets in two-thirds of households in some of the world’s largest economies, including the US and China, according to a May, 2014, report from the Center for Talent Innovation, “Harnessing the Power of the Purse: Female Investors and Global Opportunities for Growth.” Women control 27% of the world’s total wealth, regardless of the source, whether they created it themselves, inherited it, or manage wealth created by their spouse. The numbers are staggering: In the US alone, women control $11.2 trillion, or 39%, of the country’s investable assets.
This “power of the purse” could increase exponentially, as more and more women become the primary source of investable assets and improve their ability to grow those assets. Yet their success in managing assets could be stunted by a lack of professional guidance, as just 47 % of women surveyed—and 75% of US women under 40—have a relationship with a Financial Advisor. Of those who work with an FA, two-thirds report being misunderstood or neglected. Let’s take a closer look at the tremendous financial and wealth management opportunity this underserved cohort represents.
Women view wealth as having a broader purpose than simply providing financial security and independence. In fact, a full 90% support what we refer to at Morgan Stanley as “Investing with Impact,” using wealth to promote positive change, not only for their own families and businesses, but also in support of broader initiatives, such as developing women’s start-ups and promoting corporate social responsibility. Women in less-developed markets actually have higher aspirations for the power of their wealth. In the US, 52% of women support diversity in corporate leadership, while in China, that figure rises to 94%.
Yet it would be a mistake to treat women as a single, homogenous group since meaningful differences exist in how their perspectives on wealth are formed. Self-made women tend to see wealth as a means to advance their own careers, while inheritors, or spouses, of wealth creators place a higher priority on charitable giving. Similar differences exist across age and wealth levels as younger and more affluent women are more risk-tolerant than their older or less wealthy counterparts.
Women have made great strides, achieving financial literacy; but that knowledge doesn’t always translate into sound decision-making. In pursuit of performance, US women are less confident than men in their ability to allocate assets and make other investment decisions—they are 44% less likely to consider themselves knowledgeable than men. This lack of confidence leads women to maintain conservative portfolio allocations and donate less to causes than they would like. Interestingly, when it comes to confidence and risk-taking, US women are much more conservative than US men, while Asian women tend to maintain a more equal footing with their male peers. Such distinctions need to be recognized by financial advisors seeking to work with women.
Indeed, the unique views women have about their wealth must be taken into account for Financial Advisors to form meaningful and successful relationships with female clients. The report revealed several characteristics that are advisor essentials when working with women: effective communication, efficiency, empathy and understanding, as well as a safe and nurturing forum for questions and education. Women desire a connection with their advisors beyond investments, and the advisor who can connect life goals with planning have the best shot at earning a woman’s trust and loyalty.
Advisors who take the time to study and understand the difference and priorities of female wealth creators are more likely to exhibit these “gender smart” behaviors that attract women as clients. Equally important is the realization of women’s growing role as independent or primary wealth creators. Advisors must also be able to discern the different goals, needs and values of each female client based on the source of their wealth, their assets and investment experience.
So what can advisors do to help women growth their wealth and their impact as investors? The good ones will acknowledge the shortcomings in confidence, which many women revealed in the report, and work to educate and instill more faith in their ability to make sound decisions. Improving the transparency of products for easier understanding, as well as aligning investment and portfolio solutions with women’s values and altruistic goals, can also make a difference.
On a larger scale, empowering women as corporate decision makers and promoting them as leaders can lead to more diverse and inclusive financial services firms. In such environments, women’s contributions are valued, and help firms increase their appeal to female investors. The important strides being made by female advisors across Morgan Stanley Wealth Management is evidence that embracing women as leaders works.
Women will continue to expand their roles as wealth creators across the global economy. If you are a woman seeking to make a difference, by growing or better directing your wealth, we encourage you to start a conversation with a Morgan Stanley Financial Advisor.