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Financial services firms focus on women and millennials

Financial services firms focus on women and millennials

Financial services companies are turning their attention to female and younger clients as assets increasingly move into their hands.

Women make up 49.6% of the global population and control 30% of the world’s investible assets, according to the Boston Consulting Group (BCG). Their wealth, which is expected to grow by 7% annually (slightly faster than the global average), is increasingly self-generated, though much of it originates from both inheritances and legal settlements.

UBS calculates that the global wealth of women is expected to grow from $13 trillion to $18 trillion by 2021.

‘This is not a recent trend,’ said Anna Sofat, founder of Addidi, the London-based wealth manager for women. ‘When I set Addidi up in 2008, one of the statistics I read was there were more women millionaires under the age of 44 than men.

‘Many Addidi clients earn more than their partners and some have house husbands. Increasingly, attention is been paid to the influence of women on wealth.’

Millennials, meanwhile, account for 27% of the global population, and hold $17 trillion of the world’s private wealth. By 2020, that could rise as high as $24 trillion, according to Deloitte.

Looking ahead, this generation (born between 1982 and 1998) are set to control an even greater share of global wealth, as they are stand to benefit from one of the largest intergenerational wealth transfers in history.

‘In the UK, where many millennials can’t afford to get on the housing ladder, it may be seen as a squeezed generation, but the flipside is that with growing up in the internet age millennials have access to, and affinity with, technologies that have opened up new pathways to wealth,’ said Lucy Brennan, a partner at accountancy firm Saffery Champness.

‘The ability to cash-in on the digital economy has changed the game. Whereas for previous generations (such as baby boomers whose wealth generally was accrued over time or acquired later in life through inheritance), tech has accelerated the journey to wealth in many respects.’

Business opportunity

A growing band of financial services firms are starting to cotton onto the business opportunity – and the need to adapt to better serve these markets.

BCG found that female investors’ needs are diluted when they are allocated on the basis of wealth level, leading to dissatisfaction and ultimately switching. Roughly 65% of female survey respondents who had switched wealth manager report doing so because of unhappiness with customer service and feeling misunderstood.

Earlier this year, UBS Wealth Management launched a five-year plan to make it a business priority to better serve female clients. Its research found that women want to be served with a different dialogue that places greater focus on their aspirations as opposed to pure investment outcomes.

Financial advisers agree. ‘The industry simply doesn’t speak our language,’ said Anne McClean, a financial planner at Charles Stanley.

London-based John Lamb’s experience of advising women is that their needs aren’t that different to men, but their approach to sharing assets is.

Managing partner Paula Steele said: ‘Men, on the whole, believe that they have to share their assets with their partners; this is less the case with women who have had wealth in their own right for less time and are less inclined to think of their financial assets as shared.

‘This often leads to a different dynamic with regard to women’s aspirations for their wealth compared to their male counterparts and requires a different approach to planning.’

If the industry adapts, the rewards could be huge. Female investors could be set to invest $2.3 trillion in social good by 2021, according to UBS.

Social responsibility

Social good is a focus for millennials, too. ‘The millennial mindset also takes a different approach to wealth once it has been created,’ said Brennan at Saffery Champness. ‘We are seeing a much greater focus on social and business responsibility, which includes both philanthropy and a desire to send wealth back down the ladder through angel investment and the like.’

Julius Baer has a Next Generation programme targeted specifically at millennials. Last month [September], it held a Generation Y event in London aimed at the children and grandchildren of their clients. Boyan Slat, the 23-year-old chief executive of the Ocean Cleanup, a developer of technologies to rid the world’s oceans of plastic, was one of the speakers.

Alexander Classen, managing partner of Bedrock, an international multi-family office, believes millennials’ focus on social good necessitates a different approach to wealth management.

‘What is particularly interesting is the way that millennials define wealth,’ he said. ‘Yes, they are looking to grow their money, but they are focused on fulfilment in other ways as well. For instance, are they fulfilled by their jobs? Are they making a positive contribution to society?

‘Their broader definition of wealth is reflected in growing trends like impact investing and ESG [environmental, social and governance]. As advisers we need to understand and provide relevant advice on both quantitative and qualitative aspects of wealth.’

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