December 12, 2016 3:37 PM

Women-owned wealth in America is expanding rapidly, and along with it, an unprecedented demand for high-quality financial services, products, and advice. Research affirms the growing financial clout of women in America and references to a “female economy” can be found in recent feature articles, reports, and series in Barclay’s, Newsweek, Time Magazine, Catalyst, Harvard Business Review, Huffington Post, as well as evidenced in the global Women Owned initiative.

Woman advisor researching financial risks

While there is still work to be done in terms of gender/wage equality, many refer to the “female economy” as reflective of the progress women have made in recent decades, predicting that American women will play significant roles in fueling the nation’s economic growth in coming years.

Primary Drivers of Women-Owned Wealth

To fully appreciate the increasing opportunities that American women present to financial professionals, it is useful to set context about the fundamental drivers of personal wealth creation: education, employment, and earnings.

1) Education

Foremost among wealth drivers are the educational achievements that women have made. According to data from the U.S. Department of Education, women have earned more bachelor's and master's degrees than men since 1978. While the number of males earning a college degree more than doubled during the same increment of time, the ranks of female college graduates nearly tripled. Women continue to dominate the ranks of Americans holding a bachelor’s degree, particularly among younger cohorts.

According to data from the U.S. Census Bureau, women are more likely to have a college degree than men, with 37.5 percent of women and 29.5 percent of men in the 25-34 age range having a bachelor’s degree or higher Additionally, women have greater representation among those attaining master’s and doctorate degrees. Advancements in higher learning are extremely important trends for financial professionals to watch because they suggest what the future holds for the profession.

2)   Earning Power

Beyond achievements in education, American women have made significant gains in earning power, narrowing the frequently debated “pay gap” over the past 50 years. In the early 1960s, American women earned on average 40 percent less than men. By 2008, the gap narrowed to a 24-point differential, with American women earning roughly 76 cents on the dollar, compared to 60 cents in the 1960s.In 2015, women narrowed the gap even further earning roughly 80 cents for every dollar earned by a man.

While a gap in earning power remains, the increased earning power of women since the 1960s has had positive impacts on both society and family relationships. Nearly two-thirds of the nation’s families are two-income households, with women increasingly filling the role of breadwinner. Between 2000 and 2015, the share of married couples where the wife earned at least $30,000 more than the husband increased from 6 to 9 percent.

Some point to the Great Recession of 2008/2009 as further leveling the playing field, since the unemployment toll has been greatest in traditionally male-dominated occupations such as construction.

Changes in the American workplace have also occurred in a relatively short period. In 2015, 57 percent of American women were working full-time out of the home — nearly twice as many in 1950. Beyond the increased quantity of women in the workforce is the increased quality of positions they now hold. While a “glass ceiling” remains at the highest levels of corporate leadership positions (women represented just 4.6 percent of Fortune 500 CEOs in 2015), according to U.S. Census Bureau data, more than half of all persons employed in management, professional and related occupations today are female.

3)  Entrepreneurship

One notable area of growth is the rapid expansion of female entrepreneurs. As of 2016, there were 11.3 million women-owned firms in the United States that employed nearly 9 million people and generated over $1.6 trillion in revenues. Further, the National Women’s Business Council estimated that roughly half of all privately held firms are at least 50 percent women-owned. Research reveals that there is untapped potential in addressing the needs of both female employers and their employees.

According to the Center for Women’s Business Research, only about 25 percent of women business owners have a succession plan, indicating a strong need for professional financial advice. Taking care of employees retained by female entrepreneurs can also mean big business. According to the National Association of Women Business Owners and the Small Business Administration, women employ approximately 27 million Americans. However, only 43 percent of women business owners offer retirement benefits to their employees and LIMRA reports just one-fifth of owners being satisfied with their firm’s benefits package.

Taken together, the gains American women have realized in the three drivers of wealth creation over the past 60 years are substantial. Watching and understanding the progress of women in these three areas is critical for astute financial advisors because they influence a wide swath of their prospects and clients, and light the path to future opportunities.

Untapped Opportunities for Financial Advisors

Rising from the progress that women have made in the major economic drivers is the growth and scale of wealth they own. It is widely believed that women control more than half of the investment wealth in the United States including 60 percent of all personal wealth and 51 percent of all stocks. Additionally:

  • The number of wealthy women in the U.S. is growing twice as fast as the number of wealthy men.
  • Women represent more than 40 percent of all Americans with gross investable assets above $600,000.
  • Approximately 45 percent of American millionaires are women.
  • Sixty percent of high-net-worth women have earned their own fortunes.

Looking ahead, the future presents even more asset and revenue generation opportunities for American women and the financial professionals that serve them. As the ranks of highly educated, employed and affluent women continue to grow, their demand for wealth accumulation, management and protection services will grow along with them. The employment choices women make will also influence their ability to accumulate assets.

According to the U.S. Bureau of Labor Statistics, women represent more than two-thirds of employees in 10 of the 15 occupational categories expected to grow the fastest in the coming years. Women already control more than half of the personal wealth in America, and some estimate that by 2030, women will control as much as two-thirds of the nation’s wealth.

Despite the growing economic independence and affluence that the women’s market presents to financial advisors, it remains largely underserved. According to LIMRA, while about half of female producers market to women, just 16 percent of their male counterparts do. Because financial services producers remain largely male-dominated, only an estimated average of 20 to 25 percent of all producers intentionally market to women.

As their affluence and financial sophistication grow, more women will require the assistance of competent, trustworthy financial advisors to guide them.

Unmet Financial Risks of Women

Some women will also need help in addressing risks that expose them to higher probabilities of poverty, particularly later in life. Paradoxically, while American women as a whole have benefitted from increased wealth creation and transfer, many are exposed to higher financial risks than are men. Just as it is important to recognize the drivers of wealth, it is also critical to understand the factors that can jeopardize a woman’s financial security, especially in her senior years. The United States has the highest poverty rate for elderly females of all post-industrial nations with approximately 75 percent of Americans over the age of 65 living below the poverty line being women, according to the Business and Professional Women’s Foundation.

Heightened financial risks are frequently a result of factors related to lower income and asset accumulation, as well as longer life expectancies and more chronic health conditions relative to men. Because American females, on average, take 12 years out of their working lives to care for family members, they wind up narrowing their savings window and decreasing their total wages earned as well as Social Security benefits by $324,044. Also, lower pay, whether a result of the “earnings gap” or occupational choice, means fewer resources to set aside for the future.

Further exacerbating a woman’s financial risks can be her greater longevity, not only requiring assets to stretch further but also increasing the likelihood of becoming single later in life and the need for long-term care. Each of these perils is significant on its own, but when combined with others, the cumulative financial consequences can be catastrophic. Financial risk exposure can become magnified by the low financial literacy levels that many women have, across a broad range of key concepts and investment products such as annuities, mutual funds, long-term care insurance, and stocks and bonds. Research reveals that the likelihood of being on welfare is inversely proportionate to financial literacy levels. Bottom line being, the lower the financial literacy rate, the higher the risk of poverty.

How Can Financial Advisors Break Into This Untapped Market?

In light of untapped opportunities and unmet risks, what action should financial professionals consider to serve the female market successfully? Action begins with education — first for financial advisors, then for their female clients and prospective clients.

  1. Acknowledge the audience individually - Financial professionals must realize that there is no such thing as a monolithic “women’s market” just as there is no “men’s market” for financial services. Rather, the market is composed of individuals with an array of ethnic, education, economic, lifestyle and employment backgrounds. It is important for advisors to gain a thorough understanding of the broadly shared issues that women in general face, as well as to dig deeper to identify where niche opportunities exist. This requires an honest self-assessment of skill and expertise, evaluation of one’s existing book of business to profile “ideal” female clients that the advisor would like to attract more of, along with analyses to identify women’s organizations and affiliations that may be a good fit.
  2. Research needs - Once the advisor has chosen a niche audience, researching the common financial needs and attitudes will help position the advisor to better meet them through marketing activities, relationship and competency building, as well as product and service offerings.
  3. Pursue education - As more women continue to realize success and higher educational achievement, they will expect their advisors to become more knowledgeable as well. An advisor’s long-term success when serving female clients demands continuous learning and ever-growing technical sophistication.
  4. Be an educator - Beyond self-education is the need and expectation to educate female prospects and clients. Research by OppenheimerFunds found that 90 percent of wealthy female investors felt their planner should fully explain financial concepts, as well as proactively advise them on decision-making.

Helping a female client increase her financial literacy can lead to mutual benefits. Because providing financial education leads to greater client trust and wellbeing, professionals can increase their opportunities to tap into incremental referrals, assets and premiums. More importantly, they can position themselves to make a positive and lasting difference in the lives of the women they serve.

Are you interested in deepening your comprehensive financial expertise? Learn how becoming a Chartered Financial Consultant® (ChFC®) can accelerate your career and help you meet the complex financial demands of female clients and other niche investing groups by viewing the SlideShare Accelerate Your Career with the ChFC® Designation.


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