Women as the new face of wealth

Today, women control a third of total US household financial assets—more than $10 trillion (Exhibit 1). But over the next decade, large sums of money are expected to change hands. The biggest driver of this shift is demographics. Today, roughly 70 percent of US affluent-household investable assets are controlled by baby boomers.  Furthermore, two-thirds of baby-boomer assets are currently held by joint households (where a female is present but not actively involved in financial decisions), meaning that roughly $11 trillion in assets are likely to be put into play. As men pass, many will cede control of these assets to their female spouses, who tend to be both younger and longer lived. In the United States, women outlive men by an average of five years, and heterosexual women marry partners roughly two years older than they (Exhibit 2). By 2030, American women are expected to control much of the $30 trillion in financial assets that baby boomers will possess—a potential wealth transfer of such magnitude that it approaches the annual GDP of the United States. After years of playing second fiddle to men, women are poised to take center stage.

Along with these demographic changes among older women, younger affluent women are getting more financially savvy. Compared with five years ago, 30 percent more married women are making financial and investment decisions, according to recent McKinsey research on affluent consumers. And more women than ever are the family breadwinners, spurring growth in their investable assets. Indeed, McKinsey’s 2019 Women in the Workplace survey indicates that there has been a significant increase in the share of women in corporate America—and in the upper echelons of management. For example, 44 percent of companies have three or more women in their C-suite, up from 29 percent of companies in 2015.

All these changes represent a critical inflection point for the financial-services industry. When affluent women take over financial decision making for a household, they typically seek out new wealth management relationships to better suit their needs. Women are more likely than men to feel they have a critical gap in meeting their key financial goals. This is especially true for widows: 70 percent of women switch their wealth relationship to a new financial institution within a year of their spouse’s death.

The COVID-19 crisis will likely accelerate the amount of “money in motion.” First, as clients reevaluate their financial circumstances, we expect firms to see higher churn. During previous economic recessions, there have been upticks in transfers of assets, with clients seeking advisers who can better help them navigate the new normal. Second, the COVID-19-driven economic uncertainty is fueling an increased demand for advisers among people who don’t have one currently. In recent surveys taken during the global pandemic, 30 percent of consumers without financial advisers said they planned to actively seek one in the next year. 

Over the next three to five years, as women increasingly take responsibility for making their households’ financial decisions, they will become the critical battleground for wealth management firms. Many leading companies have already articulated their commitment to meeting women’s needs. They have experimented with new product offerings, hired more female advisers, and launched financial-literacy and community-outreach events that reiterate the importance of serving women as clients. And there certainly has been no shortage of marketing campaigns that feature women setting up retirement plans, purchasing insurance, or buying houses.

However, such measures are no longer enough. As wealth begins to pour into the hands of women, firms will need to commit to a much more systematic approach—transforming their business and client-service models in ways that will acquire, retain, and serve women as long-term investors. Other previously male-focused industries, such as automobiles and real estate, have revamped their product and service models to meet women’s needs. For instance, the real estate industry, recognizing that there are more single female buyers than male buyers, moved from a focus on married couples to creating powerful value propositions for single women looking to become home owners. Now the time has come for wealth management firms to refresh their offerings. Firms that wait too long risk losing out on the next leg of growth.

The prize is substantial. Analysis by McKinsey’s PriceMetrix indicates that simply by retaining baby-boomer women (the segment we see being most at risk of churning) as clients, firms could see one-third higher revenue potential. In addition, firms that acquire and retain younger women—especially millennials—as clients could see up to four times faster revenue growth. Indeed, a PriceMetrix analysis of advisers who are winning with this small but influential segment of younger women (today representing just 15 percent of affluent households’ investable assets) reveals annual revenue growth of 5 percent, outperforming the industry average of 1 percent. Interestingly, these advisers tend to be less tenured.

To rise to the challenge, wealth management firms must deeply understand women’s differentiated needs, preferences, and behaviors when it comes to managing their finances. Based on McKinsey research conducted in partnership with Dynata, we surveyed over 10,000 affluent investors, nearly 3,000 of them female financial decision makers; here we offer a dynamic view into affluent women as investors.