Family finance is a women’s issue

By 2020, the Boston Consulting Group estimates that 32 per cent – or $72 trillion – of the world’s private wealth will be held by women. In its Global Wealth Report 2018, the Credit Suisse Research Institute reckoned that women were already holding as much as 40 per cent of the world’s private wealth.

Whichever way you look at it, women are growing richer, prompting them to take on a more active role in the management of family wealth. For wealth and legacy planning professionals, this change is demanding a shift in mindset and approach: from short to long term; from transactional to collaborative; and from a focus not simply on preserving and growing wealth, but to also achieving much larger life goals.

Wealth drivers

That women are getting wealthier shouldn’t be a surprise. This is the fruit of a number of trends that have been in play for some 15 to 20 years now, says Stella Mitchell-Voisin, Director of Geneva-based independent trust company Summit Trust International.

More women than ever before are now running their own businesses or in employment, enabled by rising levels of education, falling birth rates and technology that is allowing them to better juggle the demands of work and home life. Within the workplace, the diversity agenda has partly helped women to secure high-paying roles at the most senior levels of organisations. Rising divorce levels are also leaving women with significant settlements from their former spouses.

As a result of these trends, women now have more wealth to manage. Not only that, information about money management – from online investment platforms to news channels dedicated to following the markets – is plentiful, making us all more financially literate. This combined access to wealth and knowledge has led more women to take an active role in wealth planning, and they are bringing a different approach to the table, says Mitchell-Voisin.

A different approach

“While it doesn’t hold true for everybody, on the whole, women have a more holistic approach to wealth management,” she explains, pointing to their tendency to focus their wealth on achieving long-term goals rather than simply growing the bottom line of their portfolio.

That’s something that Anny Giavelli, one of our investment associates, has observed in her own work. For example, a young mother might be focused on how she is going to pay her children’s school fees for the next 15 years, while a single woman might want to ensure that her investments help her to maintain her independence.

By comparison, male investors tend to focus more on short-term outcomes, such as whether a particular investment is performing or whether the overall value of a portfolio is achieving its annual growth target.

Changing relationship

While these differences don’t have an impact on the investment strategies that are devised for female and male clients, they are changing the way the client-adviser relationship develops and the quality of service advisers can offer as a result.

Knowing that their adviser has listened to and understood what they are trying to achieve is important to female clients.

In Mitchell-Voisin’s experience, it’s easier to get closer to a female-led family because female clients prefer to meet in informal settings, over lunch or coffee, where they are more open about their perspective on life and long-term goals. Knowing that their adviser has listened to and understood what they are trying to achieve is important to female clients, Giavelli adds.

For men, managing wealth is much more like a business transaction, conducted in a formal meeting, Mitchell-Voisin observes, adding that as a result of such differences: “You tend to have a much greater understanding and appreciation for what a female client is trying to achieve earlier on, whereas it may take you years to get to that stage with a male client.”

Greater collaboration

Women are also bringing a more collaborative approach to wealth management conversations with their advisers and their spouses. They are more detail-oriented and keener to understand the rationale behind the investment strategies their advisers are employing for them.

Younger women want to understand the nuts and bolts of their investment strategy.

This is particular true of younger women, says Giavelli. While older female clients simply want to know that their money is safe, their younger counterparts – who tend to have higher levels of education and a greater desire for independence – want to understand the nuts and bolts of their investment strategy.

“It’s much more about taking the client on the journey with you rather than just feeding back on what the results are,” Giavelli explains. “When they understand what is being done with their portfolio, they feel more comfortable riding out the bad times during volatile years.”

Educational initiatives

Dolfin is responding to this desire for more knowledge with several initiatives, including a series of ‘Women’s Wealth’ events, launched in July 2019, which create a space for female clients to come together and talk about wealth without feeling embarrassed about their perceived lack of knowledge. “There’s no such thing as a stupid question,” says Giavelli. “If you don’t ask, you’ll never learn.”

Women’s desire to be more involved in the wealth management process is leading to better thought through investment strategies that have greater client buy in, says Mitchell-Voisin, adding that it’s an approach she would definitely advocate.

“I would far prefer to have a really in-depth, detailed discussion showing somebody what the possibilities are, why you might take this route and not that route, or why there might be something else on the table rather than just going straight from what we’re trying to do to how we’re going to do it,” she explains. “That way, you make sure that everybody’s really thought through what’s going to happen and what the ramifications are. And with trusts, that’s important because you can’t just change things on a whim.”

It’s an approach that, arguably, should be at the heart of all good wealth management and the rising profile of female clients is a welcome reminder of this.