(What’s so funny ‘bout) embracing the future with women, wealth and understanding?

Aren’t we all looking for a little bit of understanding? Elvis Costello & the Attractions may have had it right in their 1979 release of “(What’s So Funny ‘Bout) Peace, Love and Understanding,” as they wrote we are “searchin’ for light in the darkness of insanity.”

And some would agree that retirement planning has its fair share of insanity, and perhaps darkness. For women to see the light of their retirement goals, it may mean they want to connect and engage with their financial professional differently. And for those advisors who are up for the challenge, a little bit of understanding will go a long way in helping them meet those retirement goals - and to embrace their own future business growth.

 

It starts with understanding the significant trend emerging: the increasing financial influence women are having in the market. This demographic shift presents an opportunity for advisors and for the industry. Women are earning more, inheriting wealth and making key financial decisions for their families. This “niche market” has become a mass market worthy of all in the financial services industry to act for fear of being left behind.

The rise of women in wealth

Studies show an unbelievable wealth transfer in which women are controlling more wealth in this country than ever before. LIMRA estimates women will control $30 trillion in U.S. assets by 2030. Women’s wealth in the U.S. and Canada has grown at a pace 180% faster than men’s wealth between 2016 and 2021, according to a Simon-Kucher study. Women are the primary breadwinners in many families, they are successful entrepreneurs, and they are increasingly involved in financial decision-making. This shift isn't temporary; it's a trend with significant implications for the industry.

Understanding the unique needs of women

Women often have different financial goals, priorities and challenges compared to their male counterparts. They tend to live longer, may have different career trajectories (such as taking breaks to care for children or aging parents), and often approach investing with a different perspective. They are also more likely to be the sole breadwinner of their families, with 80% of single-family households run by women. And while there have been strides in closing the wage gap, it does still exist.

Risk tolerance and longevity

Studies show that women tend to value safety over exercising high risk for potentially larger return. In essence, they may forgo the possibility of a home run, and instead choose the predictability of hitting doubles and singles. And with their longer life expectancy, on average five years longer than men, longevity can play into this mindset.

The opportunity

The women’s market offers a substantial opportunity for building long-term client relationships. In a recent survey of the characteristics women value most in advisors, women rated communication ability, personal interactions, and partnership as part of their top five, along with financial savviness and reputation. Women value trust and personal connection in their advisor relationships, and once established, they are likely to be loyal clients.

Women can be exceptional sources of referrals, as women who have positive experiences with their advisors are often more likely to recommend them to friends and family. But with 80% of widows switching advisors within a year of their husband’s death, negative experiences could impact an advisor’s business just as quickly. This translates into both losing a widow’s business and potentially increasing negative recommendations.

Strategies for advisors

• Tailor your approach. In a recent multi-year national study, nearly two-thirds of women said they have unique investment needs, and financial advisors don’t understand those needs. Asking questions to understand women’s expectations, communication preferences and even their biggest non-financial concern and objective can go a long way. Advisors may have blind spots that they don’t realize, so welcoming uncomfortable conversations and changing their approach could help build the relationships for the long term.

• Educate and empower. Women tend to feel less knowledgeable, less aware of retirement savings options, and overall feel less financially secure in comparison to their male counterparts. Helping clients understand their current financial situation - and educating them on both the accumulation and decumulation phases of retirement - will help build their confidence and empower them to make informed decision. This will position the advisor as that critical trusted guide and partner in their retirement journey.
• Start with why it matters. Although sordid tales of market fluctuations and tax strategies may get advisors’ blood pumping, they may fall short in helping clients understand why it matters. Prior to introducing a financial concept or a product’s features, use a story to explain the problem that concept or feature solves. When done well, business storytelling can be a powerful tool to connect and build meaningful relationships, communicate the problem you’re trying to solve, and to aid in knowledge retention. In fact, telling statistics as part of a story increases retention by up to 600%. We all have stories that show the impact our products and industry have on our customers. For those willing, “great stories happen to those who can tell them”.
• Offer holistic financial planning. Women often prefer a holistic approach to financial planning. Female advisors are twice as likely to have strategies to diversify, which is one of the reasons LIMRA notes that female advisors are seeing a higher growth rate in number of clients and in life and annuity production in recent years compared to their male counterparts. All advisors should be prepared to discuss a broader range of financial topics, including estate planning, insurance needs, and educational savings.

 

Women’s wealth is on the rise, making this mass market a very serious opportunity for those willing to rise to the challenge.  By understanding and addressing the unique financial needs of women, advisors can tap into a growing and rewarding market. As the demographic of wealth continues to evolve, those who incorporate new strategies will be well-positioned for success in the future.

Lori Seaton is director, strategic business development, with Sammons Financial Group. Contact her at [email protected].

 

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