The advice sector must be prepared to deal with a dramatic shift in economic power from men to women by changing its “old school” attitude towards female clients, experts argue.
Research by US firm the Boston Consulting Group predicts a “revolution” in female spending power which will drive a $6 trillion global increase in earned income by 2018, and flip the gender pay gap in favour of women by 2028 in the US.
It says the impact of the number of women undergraduates surpassing men around a decade ago will now play out economically over the next generation.
BCG senior partner Michael Silverstein says: “The correlation between education and income is almost perfect—the more education you have, the more money you make. Now 57 per cent of US undergraduates are female, and they are pursuing high-income careers and changing the demographics of how money is earned.
“In about 30 per cent of two-income households in the US, she already makes more money than he does. And if you go into New York and stop a hundred 20-somethings, you’ll find that she makes more money than he does.”
Higher earning power
In the UK, Ucas research reveals the gap in university application rates between men and women grew to the highest on record in 2015.
In England, 41 per cent of 18-year-old women applied to higher education, compared to 30 per cent of men, meaning women are 36 per cent more likely to apply.
And research published by Universities UK in 2013 shows that in 2011/12, 58 per cent of UK students in higher education were female.
Furthermore, Office for National Statistics data shows the gender pay gap (based on its preferred measure of median hourly earnings excluding overtime) narrowed for full-time employees from 10 per cent in 2013 to 9.4 in 2014. In 1997, the gap stood at 17.4 per cent.
And among younger age groups, women are earning more than men.
Among 22 to 29 year olds, women earned 1.1 per cent more than men per hour, and 0.2 per cent more among 30 to 39 year olds.
For those in their 40s, however, the gap widens to 13.6 per cent in favour of men, which the ONS says is likely to be connected to women taking time out of the labour market to have children.
Finance & Technology Research Centre director Ian McKenna says there is a causal link between further education and higher earnings power in the future.
He says: “There is evidence that suggests there are far more female multi-millionaires under the age of 35, and there is a definite trend and increasing evidence that women are actually better at starting their own businesses.
“There are enormous changes taking place in society and that begs the question of how is the advice industry, which is so male dominated, going to cope?”
In a report on future trends in the investment management sector last year, KPMG says the industry has focused on engaging male investors for too long.
The report says: “With wealth shifting to new demographic groups and women typically outliving men by five to six years, investment managers needs to re-evaluate how to engage the female investor and whether or not they will be looking for a different investment philosophy.
“The benefits of getting it right could be sizeable not least in terms of the potential to attract new assets. Numerous studies have demonstrated that as clients, women demonstrate greater loyalty, assign a higher value to the advice they receive and have a preference for a planning-based approach versus an investment performance-based approach.
“We are starting to see a shift in client marketing strategies, with a greater proportion seeking to engage a more female audience.”
Old school advisers
But many say the advice sector has a poor track record when it comes to attracting both female advisers and clients, and is likely to be unprepared for these demographic shifts.
Wise Monkey financial coach and former adviser Simonne Gnessen says: “There are still a lot of old school advisers out there who anticipate a traditional role for women in managing finances where the husband takes the lead.
“It is not unusual for a husband and wife to see an adviser and, even if the meeting concerns the wife’s money, for her to be ignored. That is appalling.
“While it is tempting to respond to whoever in the couple is more engaged with the conversation, it is the adviser’s responsibility to engage both clients.”
The industry remains male dominated, with women making up 21 per cent of the Personal Finance Society’s membership, and 25 per cent of the Institute of Financial Planning’s members.
Experts say many women prefer to deal with a female adviser, or want a different type of service.
Addidi Wealth founder Anna Sofat, who specialises in providing financial advice for women, says: “Women want different things from their money and that necessitates a different approach. They are put off by the hard sell – they want to be informed and to make considered decisions, and they don’t want to be patronised.”
Yellowtail Financial Planning managing director Dennis Hall says advisers need to adopt different approaches for male and female clients, but argues male advisers are equally well placed to offer this.
“I have found women prefer a consultative approach, whereas men on the whole are more interested in trading and finding the best funds to invest in,” he explains. “But there are enough male advisers out there who can adapt their style to suit both men and women – we have female clients who come to us because they like our approach.”
Gnessen adds: “Women want to be listened to and to understand things in plain English. A softer and more holistic approach which takes into account what they want from life is more accommodating for women.
“There are definitely women who would prefer a female adviser because they know how to listen and they won’t shy away from the emotional side of money. Money is a very emotive subject and if you are not prepared to deal with that side of things you may put off female clients.”
But others argue there is no need for advisers to adopt a different approach for women, and that a bigger challenge for the industry in attracting the next generation of clients is one of age rather than gender.
IFP communications director Sue Whitbread says: “Whether the client is male or female, the important thing for advisers is to focus on encouraging their clients to plan an effective financial strategy for life.
“Helping clients to prioritise and set their goals is a strategy that typically resonates with everyone.”
Sofat says: “There are some big shifts that advisers will have to deal with: the closing pay gap is one, but another is that the younger generation does not think about money in the same way as older generations.
“Younger couples are more likely to keep some of their money separate, and to want a balance between living today and saving for tomorrow – they don’t necessarily want to be told that all they need to do is save for the future.”
Hall says: “It is an age issue more than a gender issue – we have got to bring the next generation up and you cannot just rely on your clients’ children becoming clients as they will have their own way of doing things.”
Georgina Partridge, Co-founder, Plutus Wealth Management
Generally, the formula is the same for both men and women in how we would advise them, and I am loathe to differentiate between male and female clients.
I always encourage partners to come in together as their financial planning situation has an impact on both of them. The number of female advisers is a different issue, but it will be interesting to see if the shift in earning power from men to women translates into more demand for female advisers.
Head to head: Should advisers target female clients?
For – Gill Cardy
We have known for a very long time that women are actually quite powerful in the decision-making process, for example when it comes to choosing an adviser.
Clients end up migrating to people who are similar to them. This is why female advisers end up with a lot of female clients, even if they don’t necessarily ask for them.
At the moment the advice process is very male, typically dominated by advisers in their 50s. There will be people who treat women equally whether they are the primary breadwinner or not, but the simple fact is there would not be such a market for female advisers if that was universally true.
This may come down to something as basic as understanding husbands’ and wives’ differing attitudes to risk. With the balance of earning power shifting to women, I am absolutely convinced this will lead to a greater number of female advisers.
If the findings of Boston Consulting Group’s research are borne out, it will have implications for the whole of the investment process, from product development, to marketing, to the advice process, to the approach advisers take in framing and explaining their entire service proposition.
Women are sold to in a different way to men. That’s not to say advisers should follow the likes of Labour’s pink campaign bus, that kind of approach just gets you laughed at.
But there are serious discussions that can be had around the things that matter more to women from a financial planning perspective and their priorities.
Gill Cardy is wealth management insight consultant at Defaqto
Against – Justin King
I don’t think the pay gap will shift in a generation. Even if women are earning more than men in their 20s, they take time out to have children and that has a huge impact on their overall earnings capacity.
People will have made the same predictions about female spending power 20 years ago, but company boards are still full of men. There are still more men who succeed in business than women and that is down to their psychological make up – they are risk takers.
Women in my peer group have left good careers to have children and they do not want to go back to work at the same level. Children change everything because of the different roles men and women play in the family. Women have long breaks from work and are likely to go back part time, whereas men sail on with their careers.
I don’t think changes to paternity leave will change that – if you are trying to make partner in a law firm, or you’re running your own business, you are not going to take a long spell of paternity leave.
This means one half of the couple is the bigger earner, and consequently they will have a bigger pension and more savings and will take more of an interest in how that money is invested.
I do have 60 year old clients where the female is very engaged with the couple’s finances, but I am yet to come across a scenario where the wife is worried about the husband understanding the money if she passes away. I think it is still really old fashioned out there.
Justin King is managing director of MFP Wealth Management