Worldwide, $20 trillion of investments are controlled by women, up by 16 per cent in just one year. Wealth managers need to be ready to cater to female clients, in the way they want to be catered to. The question is: what do women want?

Worldwide, $20 trillion of investments are controlled by women, up by 16 per cent in just one year, according to a recent paper entitled The Coming Gender Transition in Wealth. Wealth managers need to be ready to cater to female clients, in the way they want to be catered to. The question is: what do women want?

Of this investment wealth, $9 trillion is in North America, where over 30 per cent of wealth is controlled by women, the same paper claims.

Family Wealth Report sat down with Sherry Barrat, vice chairman of Northern Trust, to discuss how firms should be dealing with this wealth transition.

Broaching the subject

“In our business of working with ‘successful families’, women have always been half of our client base. That wealth comes from two principal sources: some earn it while others inherit it. Women have always had the power they’ve just not always been wielding it,” says Barrat.

One of the trends she’s noticing is that, broadly speaking, many women are “committed to educating themselves” about their finances, regardless of their ages. She says that although one should try not to generalize on the subject, “the younger the woman the more likely she is to want to know more about her finances.”

With the caveat that it is “less gender specific than personality specific,” Barrat believes that in terms of catching up women’s financial awareness with men’s, “there’s still quite a bit to do.”

Women may require different services from men in some cases but broaching this subject is tricky. As Barrat puts it, “Do you want to be marketed to as a woman?” And in many cases, she adds, the answer is no, but “they want to know you have them in mind.”

As I do, not as I say

Barrat says that, for female clients, seeing women working “within the firm” and  well represented in the professional ranks “sends the strongest message.”

Unfortunately, there isn’t much female representation at board level in banking, or elsewhere. Just 11 per cent of corporate directors at Fortune 1000 companies are women, according to the 2020 campaign to increase the proportion of female board members to above 20 per cent by 2020.

Meanwhile, women comprise some 46 per cent of the US’ total workforce and are responsible for almost 80 per cent of consumer spending, the campaign’s website says.

Barrat herself is a member of the Committee of 200, a network of women business leaders which works towards “advancing women for a lifetime of business and socially responsible success,” according to the organization’s website.

She says wealth management firms “do realize” the need to increase female board membership, but as yet haven’t made too much progress. She is optimistic though, and says “they get it.”

There’s plenty of work to be done at both board and management level. Within private banking and finance, women make up 26 per cent of high earners, and 79 per cent of low earners, according to a report released in September by the Institute for Women’s Policy Research.

In the case of Northern Trust, three out of 11 members in the management group are women (27 per cent), and its board is made up of two women out of 14 (14 per cent).

A different client segment?

In terms of service offering, some wealth managers publicize tailored services for women, and there are even some “women-only” wealth management firms. But segmenting your clients by gender could be perceived as reductive, or even sexist.

However, there are gender differences to contend with. Wealthy American women are less likely than their male counterparts to “consider themselves knowledgeable” about finance and investing, and are “more likely” to answer “don’t know” when asked how they expect various asset classes to perform, according to a Barclays Wealth survey released in May last year. Of course, such findings may be affected by other personality differences between the genders.

Barrat says she understands that some female clients are more comfortable working with small boutique firms owned and operated by women. They would likely attract female clients who want to support women-owned businesses, and those who “aren’t comfortable” in the financial world, perhaps because some women “feel they are not educated enough” to ask the right questions, she says. It’s the second client-type all wealth managers need to make sure they are catering for. Barrat advises that women assess the resources of a financial firm to confirm the breadth and depth of its services.

In her view, the answer is that firms do need to offer services targeted at women, formulated on their needs and wants, but these need to be just “one option.” They need to be available to those who want them (male and female alike), without making the suggestion that all women need them.

The female dollar

Meanwhile, marketing departments are thinking “very much” about which channels and messages are best to reach HNW women, says Barrat.

To do this, marketers must figure out the profile of wealthy women, just as this profile is becoming more diverse. Wealth managers have always had female clients, but these may no longer be divorcees, widows and wives, and more and more executives and entrepreneurs.

Barrat says there is no doubt this profile is changing and more women are “holding the purse strings.” Northern Trust’s female clients range from hedge fund managers to stay-at-home wives, highlighting the danger of generalizing.

Barrat believes the end-goal of the women’s movement is to feel that whatever division of labor occurs in the household, it has been a choice for all those involved. Whether a woman opts for the “traditional” model or becomes a high-powered executive, “that’s OK, but it must be a choice,” she says. Basically, there should be no “default option” for women, but neither should they be vilified for opting out of a career.

The basis for choice is education, she says. “Education helps you not worry about finances because you gain clarity around where you are and what steps you need to take to get where you want to be.”

A silver lining to 2008

Looking back to the disaster in the markets in 2008, Barrat says that “moment in time really propelled a lot of women to get more knowledgeable about their finances.” She says Northern Trust has had more requests from women since for one-on-one meetings about their wealth.

The point applies to both men and women. People have started asking, “Will I have enough to achieve my goals?” says Barrat. All clients are gaining a broader understanding of risk, and the increased volatility is driving a movement towards goals-based investing.

In such an environment, to appeal to all clients, it makes sense to offer the services that make them feel comfortable working with their advisors and getting them to understand their wealth. Fortuitously, these may also be the services which most appeal to the growing number of wealthy women.