Four important considerations to effectively advise women on wealth

The U.S. is poised for a massive transfer of wealth. Not only will older generations retire from the workforce, leaving thousands of job posts open for young professionals to fill, but they’ll also pass down their assets to their Generation X and millennial beneficiaries. Cerulli research suggests that, through 2045, as much as $84.4 trillion will switch hands — the greatest transfer of wealth in American history — and most of it will go to women.

Although this represents a significant opportunity for women to build and maintain their financial security and sustainability, it also provides financial advisors a chance to effectively support a larger, historically underrepresented client pool. To resonate with this potential client base, advisors must focus on education, organizational practice evaluation — in relation to both human capital and technology — and empathy. 

Education is the first step

Before jumping into prospective client meetings, it’s important for advisors to understand the economic and historical implications of this wealth transfer. No two clients are ever alike, and that’s especially evident when considering gender. 

Women tend to outlive their male counterparts by nearly six years, a margin that’s continuing to grow, and they’re still impacted by the wage gap. In 2022, for every dollar earned by men, women earned 82 cents. At the same time, the COVID-19 pandemic forced nearly 12 million women out of the workforce in addition to 10 million men. Moreover, the pandemic increased the amount of caregiving required at home, with school and day care closures and the need to care for sick family members. Much of this was shouldered by women.

Regardless of their gender, each client has their own unique circumstances. When determining the best wealth growth strategy, advisors must consider and understand the many invisible factors at play that influence how clients should invest their money, especially factors that the clients themselves may not mention or consider relevant but are.

Organization practices will become increasingly critical 

To succeed in meeting the challenges presented by the massive intergenerational wealth transfer and the changing investor demographics, advisors must consider whether their practice has the right resources, in both the people space and the technology space. 

Additional expertise may be required to serve the changing demographic’s needs. And this need will be highlighted by the profession’s coming wave of retirement, which will create talent gaps in many firms. 

Cerulli research suggests that 109,000 U.S. financial advisors will retire over the next decade, representing 38% of all advisors in America and 42% of total assets under management. To make matters worse, there aren’t enough young advisors entering the profession to fill all the vacant roles. 

The number of female financial advisors has remained constant over the past decade, and, according to Zippia, only 26%-28% of U.S. advisors are women. Job satisfaction among women advisors is also low, and Carson Group’s State of Women in Wealth Management reports many female advisors are thinking of leaving the business. All this at a time when assets available to female investors will hit an all-time high, McKinsey reports.

To prepare for the upcoming wealth transfer, advisor practices must consider how they can fill the pending talent gaps. How can they improve the talent pipeline? Are there any parts of the compensation package that may deter women advisors? What role does technology play in helping to close the gap and enable women to thrive as clients and advisors?

The right technology 

If advisors have not already done so, this is the right time to reevaluate the technology they use to manage client funds and interact with customers. Today, women account for 46.8% of the workforce, according to the U.S. Department of Labor, with McKinsey reporting women hold 28% of C-suite positions. At the same time, they’re still balancing at-home responsibilities. Forty-five percent of women in opposite-sex marriages earn the same or more than their spouses, but Pew Research found they still take on the most housework. Their busy lives leave little room for on-the-phone conversations with financial advisors or in-person meetings. This highlights the increased need for easy-to-use portals, dashboards and interfaces like they see used in other sectors.

Likewise, the technology serving financial advisors must have similar ease of use. Not only does the functionality and accessibility of technology tools make it easier for financial advisors to do their jobs, but these tools also free up time to work on business development and interact with clients. Having the right tools means that advisors have the resources at their fingertips to effectively support all their customers, not just women. 

Empathy is essential

An advisor’s greatest strength is not product knowledge or sales skills — it’s empathy. And this will be in high demand during the coming generational transfer. The reality is that many clients who receive a sudden inheritance of wealth will be overwhelmed. The reason they will receive these assets is because a loved one has died or has fallen mortally ill. Thinking about how to handle this money likely won’t be their top priority. 

As advisors begin discussions, approaching clients with empathy is critical. Simply providing a space for them to talk and express their worries or fears can go a long way in establishing a trusting, understanding and respectful business relationship. It is also a time when advisors can provide truly valuable help by recommending other professionals or services that can handle some of the myriad tasks that must be dealt with in this difficult time (legal, real estate, etc.).

Once the investment and financial security talks begin, advisors should maintain open lines of communication and be honest throughout the process. Breaking items down into easily digestible bits of information and steps can help clients smoothly navigate this new territory while also dealing with their own grief. 

Over the next few decades, a significant amount of wealth will change hands, impacting individuals, families and the economy. This presents both an opportunity and a responsibility for financial advisors to step up to the plate and help the beneficiaries through this process, establishing a foundation for sustainable asset growth and setting them up for success. Through education, evaluation and empathy, advisors can play a pivotal role in empowering women’s financial security and ensuring that they and their families are taken care of.