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Women don’t think like men, especially when it comes to money. As women control a growing share of wealth in the years ahead, advisors will need a new paradigm in their practice, one that reflects an emphasis on values over goals.
If you ask a man, “what does money mean to you?” or “what do you want your wealth to do for you?” his response will typically be goals-based. He may say something about retiring early, buying a second home, or paying for his children’s or grandchildren’s college educations. For men, wealth is a way to reap concrete rewards.
Women, on the other hand, are generally values-focused and consider wealth to be a means to less tangible ends. Ask a woman that same question and her answer will reflect a desire for security, freedom, or independence – not wanting to be a burden to her children or grandchildren, for instance.1 Women view money as a way to enable themselves and their families to live their dreams and passions both personally and philanthropically.
That women focus on the intangibles of what investing does for them and men focus on the tangibles could be dismissed as psycho-babble – if this distinction weren’t utterly crucial to future success in private wealth management. It is vital that advisors understand that women have different motives for investing and adjust their approach accordingly.
Why does it matter?
The research speaks for itself:
According to the U.S. Census Bureau, as recently as 2006 59% of Americans were in couples and 41% were single. Among single Americans, 54% are single women – nearly a quarter of the total population. Other indicators show the great and growing share of this country’s wealth that women control:
- Women currently control $14 trillion in assets.2
- Women will inherit 70% of the $41 trillion in inter-generational wealth transfer expected over the next 40 years.3
- 80-90% of women will be solely responsible for their own finances at some point in their life.4
- Since women live longer than men, they are often “dual inheritors” – inheriting wealth from their parents and their spouses.
- Because women live longer than men, 80% of women are single when they pass away.5
- The average age at which a woman becomes a widow is 56.6
Does your current model take these facts into account?
Most advisors have traditionally built strategies in line with the male perspective. While that may be a good game plan for the first three quarters of clients’ lives, however, there is an overwhelming likelihood that the quarterback in the fourth quarter will be a woman. She will have her own ideas on what plays to call, based on her own core values.
Furthermore, if her advisor didn’t dial into those values and didn’t ensure she was part of the planning relationship, she will be sure to find a different advisor who will. Approximately 70% of women fire their financial advisor within a year of being widowed. Why? Because no relationship existed between the woman and her deceased husband’s advisor.
The costs of such a switch – to both the client and the advisor – may be high, but things don’t need to play out that way.1. According to a 2010 study from Women & Co., the two words women associate most with wealth are security and freedom.
2. Center for Women’s Business Research, 2005.
3. Boston College’s Center on Wealth Philanthropy, 2009.
4. National Center for Women and Retirement Research, 2007.
5. Illinois Department of Financial & Professional Regulation, 2009.
6. Illinois Department of Financial & Professional Regulation, 2009.
