Private View Blog: Wealthy women don’t require special treatment

It’s no secret that men still dominate the wealthiest sectors of our society. Traditionally, the patriarch of the family would control the family’s assets and make all key financial decisions. But the world is slowly changing.

Women are getting richer. According to a study by Wealth-X from 2019, the number of ultra-wealthy women, with $30m or more in net worth, increased to a record high share of 14.6 per cent, with the share even higher at 20 per cent among ultra-high net worth individuals below the age of 50. And this is a trend set to continue.

The rise in flexible working is likely to enable women to balance careers and other responsibilities more easily, ensuring women will have more opportunity to rise to senior roles and earn more. This trend is already unfolding, as the proportion of women in senior management roles rose to 31 per cent in 2021, the highest ever recorded, and is expected to reach 34 per cent by 2024, according to Grant Thornton. 

Additionally, the rise in start-up culture will see more women founding their businesses and creating more wealth. Specific female-focused initiatives undertaken by various venture capital and incubator firms further strengthen the position of female entrepreneurs. 

Women are also poised to benefit substantially from the latest wave of wealth transfer. Approximately $30tn is set to change hands from the baby boomer generation in the next decade, and women are expected to inherit a considerable portion, according to McKinsey. 

Should wealth managers adapt?

However, despite this undeniable shift in wealth, no drastic change is required when catering to female clients compared to their male counterparts. On the contrary, some attempts by private banks to ‘simplify’ the language or create a completely new approach specifically catering to women could be considered condescending. 

Instead, wealth managers should focus on reviewing their entire business model and assess whether it is fit for purpose to deal with the next generation of wealth owners. There is a gap in the wealth management offering when it comes to new clients, and this may be more relevant to women as they take over more of the world’s fortunes. By addressing these gaps and focusing on each individual’s unique needs, whether male or female, wealth managers and private banks will be more equipped to serve the upcoming wave of female clients. 

Planning for the future

One of the issues we often encounter is the expectation of some wealth managers to quickly convert cash clients to investment clients. This approach does not serve those who are new to the industry and who want to take their time trying to explore the financial markets. The focus should be on guidance and training of new clients as well as being patient when it comes to executing investment decisions. Wealth managers should, therefore, plan for a longer decision-making period for new clients rather than trying to push people into quick decisions and accelerating the entire process. 

In a similar vein, taking a client’s experience into account when suggesting specific asset allocations and investment portfolios is vital. Pushing risky products or aggressive solutions onto people with limited financial markets knowledge can be a painful and off-putting experience, and despite many clients’ ambitious financial return expectations, also totally inappropriate. It is the wealth manager’s responsibility to assess each client’s needs, goals, experience and risk appetite and manage their expectations while creating an appropriate and manageable solution.  

Another common complaint shared by clients new to the industry is the frequent use of jargon and complex financial terminology. Terms such as ‘asset allocation’ or ‘yield and duration’ may come naturally to investment professionals but could sound intimidating to clients with no previous financial knowledge. Wealth managers therefore need to change their approach and review their marketing materials and brochures with a fresh pair of eyes to make them more easily understandable and accessible. 

What shouldn’t be forgotten is also the human capital of the wealth management industry itself. Successful wealth managers strive for and run their companies with a diverse workforce. For male and female clients alike, establishing an emotional connection is often as important as financial returns and this can be easier achieved with a well-trained and diverse workforce from varied backgrounds. 

Custom-built solutions

The wealth management industry and the expectations from the ultra-high net worth client base are changing rapidly. While we do not believe women need any more hand holding than male clients who are new to the industry, we understand well the unique needs and desires of each family and client and can cater our offering and approach accordingly. To succeed in this overcrowded industry, wealth managers need to come up with new ways to look after their clients. However, a blanket approach attempting to satisfy half of the human population is not a good solution. Instead, a custom-built solution unique for each client is what both men and women new to the financial world need. 

Petra Posnikova is investment director at Var Capital