The wealth management community is inundated with demographic data and lot of it pertains to women. Whether it’s the Great Wealth Transfer, rising incomes or other factors, advisors have credible reasons to tailor strategies specific to women.
As just a couple of example, the number of single, working-age women in the U.S. is rising by more than 1% per year and their level of education (minimum of a bachelor’s degree) is far exceeding their male counterparts. That opens the doors to career advancement and higher earnings power, the latter of which highlights the need for advisors to be ready with planning and strategies relevant to women that want to add financial independence to their list of accomplishments.
“Alongside these trends, more women are delaying marriage and the birth of their first child, which can provide additional time to build earnings and financial independence,” notes Morgan Stanley Wealth Management. “That longer runway can boost lifetime earning potential and expand the window for compounding across their investment portfolios.”
Said differently, long gone are the days when women simply deferred to men regarding money matters. Today’s women, particularly those in those younger demographics, are opting to stay single longer and they want to control their own financial fates. That’s one reason some surveys indicate women are more likely to seek professional advice than men, but advisors cannot take that trend for granted.
Women Are Driving Wealth Movement
Smart advisors know that for generations, many women, whether they worked or not, actually oversaw household budgets. That trend continues today, but there are new layers to it, including their own increasing earnings capacity and the concept of wealth movement.
As it relates to female clients and prospects, wealth movement has various pillars with some important ones underscoring the need for estate planning and what to do upon receiving a windfall conversations.
Rates of homeownership have converged between men and women over the past four decades and are now roughly equal,” observes Morgan Stanley. “What’s more, women’s average home values are now higher than men’s. Looking ahead, over the next two decades, $124 trillion in wealth is projected to change hands from older generations to heirs in the U.S. — and because women live five years longer than men on average, they are expected to inherit most of that wealth. Women are also expected to receive a total of $54 trillion from their partners over the next 24 years, with further intergenerational wealth going to women.”
Women Still Face Challenges
Broadly speaking, women’s financial pictures are improving and that outlook will be fortified by improving earnings, the Great Wealth Transfer and other avenues, but that doesn’t mean everything is perfect.
Advisors need to be mindful of a still lingering pay gap favoring men over women and some women-specific issues, such as time spent out of the workforce due to childbirth.
Motherhood is expensive because childcare costs “can slow income growth during prime earning years,” according to Morgan Stanley, while other forms of unpaid labor “such as domestic and caregiving work, that inordinately falls on women and can limit mobility into high-paying careers with long, inflexible hours” can create financial burdens, too. When working with female clients and prospects, advisors can’t afford to gloss over those issues.
Related: Family Matters: Why Advisors Should Be Courting Parents