Earlier in March, millions of women celebrated “International Women’s Day” — a largely politicized demonstration wherein participants typically lament over wealth disparities between the two genders. However, one new report suggests things might not be so bad for the fairer sex.
More and more money managers are interested in attracting and serving wealthy female clients. These women are beginning to have a major impact on the investment industry and the economy as a whole via the values, such as social and environmental impact, that they express through their portfolios.
The Boston Consulting Group found that the amount of private wealth in the hands of women increased from $34 trillion to $51 trillion from 2010 to 2015. The proportion of all private wealth held by women increased from 28 percent to 30 percent. It is expected that women will hold $72 trillion by 2020, which will amount to 32 percent of all private wealth. The majority of the private wealth that switches hands will probably go to women.
The main reason women’s wealth is growing so quickly is that far more women are in well-paid positions. In 1950, women made up 34 percent of the labor participation rate. By 2016, the rate had risen to 57 percent.
Another reason for the rise of women’s wealth is inheritance from their husbands. Men tend to be older than women they are in relationships with, and they also tend not to live as long. Other times, women are inheriting their money from their parents. Today, parents are more likely to treat their offspring of both genders equally. As the baby-boomers enter old age, this transfer of money to both sons and daughters will speed up.
Of course, this will have major implications for all asset managers. For example, research studies indicate that men are more likely to take financial risks and are more likely to claim that they have a good understanding of financial concepts. On the other hand, women have a greater tendency to buy and hold. While one may say that this means men are less risk-averse and have greater financial literacy, one can conversely claim that women are aware of risk and less likely to be delusional about their financial competence.
Brad Barber and Terrance Odean conducted a research study in 2001, and found that women did better than men in the market by one percent each year. They argued that the reason behind this is that men are more likely to be overconfident about their abilities than women. As a result, men tend to have more unprofitable trades.
Another difference is that men have a greater tendency to say that their main investment goal is to outperform the market. On the other hand, women usually have more specific goals, such as retirement at a certain age or buying a house. In comparison to men, wealthy women are more likely to seek out financial advice. Fewer wealthy women direct the investments of their wealth, according to Cerulli. However, a survey conducted recently indicates that men are more likely to be satisfied with the advice they’re receiving. 44 percent of men would consider getting rid of their manager, while 62 percent of women would consider the same. Millennial women who receive wealth are more likely to fire the incumbent advisors.
According to Balandina Jaquier, who works as an impact-investment advisor for Zurich, affluent women who inherit wealth tend to be less confident when it comes to how to invest it. However, women are more likely to take a risk and forge a new path when it comes to investing their money to have a social impact. 67 percent of men are interested in the concept of “sustainable” investing, in comparison to 84 percent of women. This indicates that women are more likely to focus on social and environmental goals, and not just financial returns.
Even among the world’s wealthiest, the gender gap is narrowing. In 2000, there were only four women on Forbes’ list of the 100 richest individuals in the world. Today, there are ten women on this list. While an addition of six women to the list isn’t a huge change, it indicates that the gender gap is slowly but surely narrowing.
Regards,
Ethan Warrick
Editor
Wealth Authority
