This post was authored by Adem Tumerkan, Dunham's Content Writer. If you have questions concerning today's topic, please call us at (858) 964 - 0500. Hold us to higher standards.

Over the next decade, the financial world will witness a profound change.

I’m talking about the feminization of wealth.

In short, this refers to the growing control women will have over global financial assets, driven by factors like increased labor force participation, higher education levels, rising female entrepreneurship, and the Great Wealth Transfer from baby boomer men to women.

  • According to McKinsey & Company - women in the U.S. are expected to control an astounding $30 trillion in financial assets by 2030 as they inherit wealth from spouses, parents, and other relatives.

This trend opens up valuable opportunities for financial advisors. By understanding and addressing the unique needs of female clients, advisors can thrive in this new era of wealth management.

As always, adaptability remains key to success.

Women’s Growing Economic Power

The economic power of women is rapidly increasing.

Let’s take a closer look at why this is…

  1. First, women now make up over half of the college-educated workforce in the U.S.

    For instance, as of Q2 2022, women now represent the majority of the college-educated labor force in the U.S. with 31.3 million women holding at least a bachelor’s degree - surpassing the 30.5 million men1. This reflects a growing trend of women outpacing men in higher education and workforce participation - a trend that’s likely to further increase.

Figure 1: September 2022

  1. Women-owned businesses have become a powerhouse in the U.S. economy.

    According to Wells Fargo, women-owned businesses make up ~40% of all businesses, employing over 12 million workers, and generating roughly $3 trillion in revenue2. But, as usual, the rate of change is most important here (aka how fast a trend is moving)…

    Between 2019 and 2023, the number of women-owned businesses grew nearly twice as fast as men-owned businesses - with growth accelerating to 4.5 times faster from 2022 to 2023. Meanwhile, during the pandemic, women-led firms not only survived - they thrived by adding 1.4 million jobs while male-owned businesses contracted. More women are taking on leadership roles in business, launching successful enterprises, and accumulating wealth independently of men.

    It's no wonder that veteran Shark Tank investor, Kevin O’Leary (aka Mr. Wonderful) found that 75% of his best investment returns have come from companies led by women - a trend he's observed across all industries3.

  2. The Great Wealth Transfer: A Surge in Wealth Inherited by Women

    As baby boomer men age, their wealth is increasingly being passed down to women—whether as widows or daughters. The longevity gap between men and women, which was just two years in 1900, has now widened to nearly six years. According to AARP4, this is the largest gap in over thirty years.

    Meanwhile, Harvard Health reports that women dominate the older population. Women account for 57% of those aged 65 and older, and by age 85, that figure jumps to 67%5. On average, women in the U.S. live five years longer than men, and globally, that gap stretches to seven years.

    This means women will be first in line for the great wealth transfer, positioning them for a significant surge in wealth in the coming years.

Why Women Are Different as Clients

Women invest their money differently than men, and understanding these differences is crucial for financial advisors.

Research shows that women typically adopt a more holistic approach to wealth management, prioritizing goals like retirement security, family well-being, and long-term health6. Women tend to be more risk-averse, focusing on protecting capital rather than pursuing high-risk, high-reward investments.

This approach is influenced by factors I mentioned above - such as women living longer than men, thereby leading to potentially higher healthcare costs and financial challenges in later life. Meanwhile, research also shows that women often lack confidence in their financial knowledge and seek out personalized, high-touch advisory relationships.

  • In fact, according to RBC Wealth Management7, women are twice as likely as men to pay for professional financial advice - especially during life transitions like retirement or widowhood.

But here’s the catch…

Nearly 70% of women switch financial advisors within a year of inheriting wealth from a spouse. This serves as a harsh reminder that women will move their money to a new advisor they trust rather than stick with their deceased spouse's choice.

In an era where women are gaining unprecedented control over wealth, this represents a significant risk to your assets under management (AUM).

The question is: Are you prepared to keep their business, or will those assets walk out the door?

What Financial Advisors Can Do

To succeed in the era of female wealth, financial advisors must adopt new strategies that cater to the distinct needs of women. Here are some key approaches for advisors:

  1. Personalize the Approach - Women value advisors who take time to understand their unique circumstances and life objectives. Building trust and personal connections is crucial to long-term success.
  2. Focus on Life Goals - Female clients prioritize financial goals such as retirement security, managing healthcare expenses, and ensuring they don’t outlive their assets. And as more women increase their earnings power through higher wage potential and entrepreneurship, advisors should align financial plans with these objectives.
  3. Plan for Longevity – Since women tend to live longer than men, their financial strategies need to account for longer retirement periods, healthcare expenses, and the risk of outliving savings.
  4. Guide Them Through Transitions - Women often manage their wealth through significant life transitions, such as inheritance or retirement. Advisors should provide both financial and emotional support during these periods.

The Future is Female in Wealth Management

As the Great Wealth Transfer continues, the role of women in shaping the future of wealth management will grow even more.

And financial advisors who recognize the needs of female clients will lead the pack.

Figure 2: McKinsey & Co., “Women as the next wave of growth in US wealth management,” July 2020

Understanding how women approach wealth, focusing on long-term goals, and offering personalized advice will be critical for attracting and retaining female clients.

Remember, this is not just a temporary trend - it’s a fundamental shift that will reshape the financial world for decades to come.

Ready to Expand Your Practice and Serve the Growing Female Wealth Market? As women gain more control over wealth, now is the time to act. Whether it’s personalizing your strategies, planning for longevity, or guiding women through major life transitions - your opportunity to lead in this growing market has never been greater.
Don’t wait for these assets to walk out the door.
Start building trust and long-term relationships with your future clients today. Contact our Business Development Team to learn how you can tailor your services to meet the unique needs of women in wealth management.

Let’s work together to grow your practice - click here for more information.

Sources:

  1. Women are now a majority of the U.S. college-educated labor force | Pew Research Center
  2. Wells Fargo Newsroom - New Report Finds Growth of Women Business Owners Outpaces the Market (wf.com)
  3. Kevin O’Leary's best 'Shark Tank' investments are women-led startups (cnbc.com)
  4. Why Do Women Live Longer Than Men? (aarp.org)
  5. Why men often die earlier than women - Harvard Health
  6. The Great Wealth Transfer: The Future is Female (rpia.ca)
  7. Women and wealth: The future is female - RBC Wealth Management
  8. Women as the next wave of growth in US wealth management | McKinsey

Disclosures:

This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel. Any investment products or services named herein are for illustrative purposes only and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. Always consult a qualified professional or your own independent financial professional for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance. All examples are hypothetical and are for illustrative purposes only.

Information contained in the materials included is believed to be from reliable sources, but no representations or guarantees are made as to the accuracy or completeness of information. This document is provided for information purposes only and should not be considered as investment advice.

Dunham & Associates Investment Counsel, Inc. is a Registered Investment Adviser and Broker/Dealer. Member FINRA/SIPC. Advisory services and securities offered through Dunham & Associates Investment Counsel, Inc.

SUBSCRIBE TO
THE DUNHAM BLOG