What can we do about the £36.8bn untapped women’s wealth?

Increasing women’s level of financial engagement and confidence could generate a further £12.4bn from millennial women and £24.4bn from Gen X women.

Photo by Alexander Mils on Unsplash

Men earn more than women; men have more net worth than women; men invest more than women.

Now, before you click off thinking this a misogynist rant, hear me out.

A third of the world’s wealth is under the control of women. Women are continuing to add $5 trillion to the wealth pool every year. This means there is an enormous untapped opportunity worth approximately £36.8bn.

Here’s what we can do about it.

Normalise talking about money and sharing ideas with women

We need to change the societal expectation that women talking about money unattractive and tacky. An astounding 8 out of 10 women say that they have refrained from discussing their finances with close friends and family members. Much of that stems from damaging gender stereotypes that still permeate in our society. But there are real and actionable steps we can take to rewrite that cultural narrative.

a. Share ideas about money with other people, men and women. Address the elephant in the room because the more we open up, the more we are able to understand our own views on money and build women’s confidence.

b. Create a plan for the future of your finances and include women in the conversation. What is our overall goal for our finances? Who do we want involved in achieving these goals?

c. Action your plan and tell your friends what your milestone-based investments are to create accountability for yourself.

Make sure financial organisations are actively supporting female leaders

For decades, financial products have largely been targeted at men.

Gender distinctions in financial products, to a large extent, still reflect outdated assumptions about women’s role in driving wealth.

However, more women across the generations taking on the role of the breadwinner and becoming more financially savvy; women are poised to take centre stage.

More wealth management firms, therefore, are trying harder than ever to understand women’s differentiated needs, preferences and behaviours relating to money because it is a critical growth imperative to them too — in the US, there is a $30 trillion opportunity in the assets that will shift into the hands of women over the next three or five years.

So, we need to take this opportunity as firms are transforming their business and client service models to serve women as long-term investors.

To win the 20s, wealth managers must focus on the individual, not the gender.

Women don’t want or need products that are different from those offered to men. Instead, they want a tailored approach so they can realise their financial objectives. Creating a more consciously inclusive workplace to increase cultural competency will root out prejudicial assumptions.

The first step is to take time to understand the financial behaviour of women in investment decision-making.

Here are five key themes that emerged from a recent study conducted by BCG:

1. For women, money is a means to a number of ends, not and end itself. Shona Baijal, managing director of UBS Wealth Management in the UK said, “Generally speaking, women face five different challenges through their financial life journeys, compared to men: the gender pay gap, the need for flexible working conditions, maternity leave, longer life expectancy, and a lower risk tolerance.” As a result, women are more likely to anticipate and plan for key events and life stages.
2. Women make investment decisions based on facts, and not their guts. Although women tend to be more averse to risk, once they are in a position to make an informed decision, their investment profile is quite similar to men. Women want to seek goals with a higher degree of confidence and being armed with the right data. A study of 2,800 men and women by the Warwick Business School found that women’s returns were nearly 2% higher than men’s returns overall.
3. Millennial women are taking charge of their wealth. 70% of millennial women said they take the lead in all financial decisions, compare with just 40% of female baby boomers. More younger women are entering the workforce, embracing entrepreneurship and thus gaining greater earning power. This translates to increased financial literacy and with that comes a strong sense of empowerment and agency, creating a greater need for financial firms to provide products that are tailored to the individual, and not the gender.
4. Cultural differences play a significant role in shaping investment behaviour. Very few women in the Middle East claimed they were involved in making financial decision. Whereas, Ling Xia, head of private banking at the Bank of Shanghai, said, “In China, the wealth market is still young. In general, men in the family still put more focus on creating new wealth, while women are responsible for managing the accumulated wealth and putting it in the bank where they expect to earn a more stable return.”
5. Unconscious bias still permeates the wealth management. Problematic attitudes reflecting prevailing stereotypes are hindering banks to approach the women’s segment from the perspective of real business revenue and growth perspective. Firms that understand women’s individual needs and preferences will be able to capture a large share of this growing market.

Beatriz Sanchez, regional head of Latin America and member of the executive board at Julius Baer & Co. Ltd., puts it well when she says,

“Women will increasingly become more demanding and seek more information to make their own decisions, instead of delegating them to someone else. They will continue to be an economic force to the point where, hopefully, in five years, we will no longer be asking if women should be treated differently.”