Why Should Wealth Managers Target Female Entrepreneurs?

The fact is that women often outlive their spouses, so they often take control of the family wealth when their husbands die and before it passes to the next generation. Globally, women’s wealth has shown unprecedented growth over the last decade. Women now control 32% of the world’s wealth, according to Boston Consulting Group (BCG). This will rise at a compound annual growth rate of 5.7% to USD 97 trillion by 2024.

Wealth managers who fail to recognise the specific needs of a growing potential female client base are likely to miss what could prove to be a rewarding field. Financial Conduct Authority data last year revealed that only 16% of advisers are women, according to the Financial Times. Recent research from Schroders found that only 5% of advisers have a differentiated strategy for attracting and retaining female clients. It’s not about inventing something totally new for female clients but about responding to the ways women think a bit differently about money.

Different Attitudes and Opportunities

Female clients take many forms. Some are time-poor businesswomen or entrepreneurs seeking to delegate, and many want guidance as they approach retirement. Rebecca Tunstall, an investment director at Rathbones Investment Management, the provider of individual wealth management, asset management, and related services from London, focuses specifically on divorcees. “Most are in charge of their own finances for the first time in their lives,” she says to the Financial Times. “It’s vital to empower women who may not have had much experience with investments with the knowledge and understanding to be able to engage with us.”

Leila Hoteit, managing director and senior partner at BCG, says that this gender lens will drive diversification of investment through targeted advice. “In general, women feel less comfortable trying different investment opportunities and stick more to what they know. Helping them experience new asset classes and new investment opportunities will require a more focused and differentiated effort.” It is important to recognise the different circumstances that may lead women to seek financial help, the ways in which they may feel inhibited or uncomfortable, and the opportunities to educate and empower.

Higher Revenue and More Success

The European Investment Bank’s report Funding Women Entrepreneurs states that greater gender diversity could lead to a potential increase of 26% of annual global GDP and USD 160 trillion of human capital wealth. There is a lack of funding for female projects, though female entrepreneurs generate more revenue than their male counterparts. Nevertheless, a global study by BCG found that for every USD 1 of investment raised, women-owned start-ups generated USD 0.78 in revenue, whereas those run by men generated only USD 0.31. The research concluded that if investors backed female-founded or co-founded start-ups with the same amount of capital as those founded by men, an additional USD 85 million would have been generated over the five-year period studied.

Woman to Woman

There is a strong sense among female wealth managers that they are better placed than men to empathise with female clients because they too have juggled careers, motherhood, caring for elderly relatives, and the impact of pay and pension gaps on finances. That is backed to some extent by a 2013 study from the US Insured Retirement Institute, which found that 70% of women seeking a financial adviser would prefer to work with a woman, though it also suggests that wealth management skills may be more important than adviser gender for the remaining 30%. Especially for women who are newly widowed, patience may be required.

Charlotte Tattersall, a financial planner at RBC Brewin Dolphin, one of the largest British wealth management firms, observes that although women tend to be more cautious investors than men, “they will take more risk once they have gained knowledge and understanding, which is why the right advice is so important.”