inside the minds of wealthy women - advisorhub · 2019-12-17 · for use with financial...

Inside the Minds of Wealthy Women

For use with financial professionals only.

INTRODUCTIONThe number of women millionaires in America continues to grow due to several factors: more women working, stock market performance and demographics. Inside the Minds of Wealthy Women focuses on women with more than $1 million of net worth, their financial decision-making and what they think about their own futures, and the futures of their children.

About Spectrem Group

Spectrem Group strategically analyzes its ongoing primary research with wealthy in-vestors to assist financial providers and advisors in understanding the Voice of the Investor. Spectrem has been one of the premiere research firms in the wealth market for almost twenty-five years. Spectrem continually conducts research to identify what makes clients choose various advisory firms, what their concerns are and what they consider key criteria for overall satisfaction with a provider. Spectrem’s clients rep-resent the full breadth of companies within the financial services industry, including those in wealth management, brokerage, investment management, insurance, banking and trust operations.

The survey was conducted in the first half of 2017. All respondents were women with at least $1,000,000 in net worth, not including primary residence. Three hundred and fifty women completed the online survey. Respondents were from a national panel that represents the overall affluent population in the United States. Some of the data was also taken from Spectrem’s ongoing research with wealthy investors. This represents approximately 6,500 wealthy households in which approximately half are represented by women.


PART I—PORTFOLIOS AND ADVISORSDo wealthy women use financial advisors? What is their level of confi-dence in their financial knowledge and how do they define themselves in terms of their relationship with their advisor?

▶ Sixty-nine percent of wealthy women use an advisor, and 46 percent consider themselves to be Advisor-Dependent or Advisor-Assisted. Twenty-one percent consider themselves to be very knowledgeable about finances and investing, while 26 percent have little or no confidence in their knowledge. Only 57 percent of Millennials and Gen X women cur-rently use an advisor. They are much more likely to consider themselves to be Self-Directed investors. Only 60 percent of Professionals use an advisor. Of the women who use an advisor, 95 percent use the same one as their spouse. The occupation of a wealthy woman has little influence on whether or not she uses a financial advisor. Twenty-one percent of women use an independent financial planner as their primary advisor.

▶ Reputation is the most important attribute when choosing an advisor. The company they work for is important. Gender and age are not important.

▶ More than half of women’s total assets are represented by investments or investable assets. Equities are the largest portion of their investable assets.

▶ Eighty percent of wealthy women have a will, but fewer than 50 percent have life insurance. Almost half have a financial plan and more than a third have purchased long-term care.

▶ Women want to talk to their advisors quarterly but expect a return phone call or email on the same day.

▶ The value of their home represents 13 percent of their total assets and their defined contribution plan represents 10 percent. On average, invest-able assets represent 57 percent of the assets of wealthy women. Of the investable assets, 40 percent is in equities with 15 percent each in fixed income and cash.

More than 40 percent of wealthy women indicate they will begin investing or invest more in equities, mutual funds or exchanged traded funds in the future.


More than 40 percent of wealthy women indicate they will begin investing or invest more in equities, mutual funds or exchanged traded funds in the future.

PORTFOLIOS

57%10%

13%

7%

8%5%

Investable assets

Defined contribution

Restricted stock

Principal residence

Investment real estate

Insurance andannuities

Privately held business

15%

40%

6%

15%

24%

Fixed incomeEquitiesAlternative investmentsCash and liquid assetsOther

Distribution of Assets

Distribution of Investable Assets

Almost 30 percent plan to invest in short-term cash investments, and a similar percentage plan to invest in fixed income products. The younger segment of women were much more likely to increase their investments across the board, with special attention to short-term products, equities and international products.

FUTURE INVESTING (by age)

29%

41%

28%

40%

48%

28%

30%

41%

30%

20%

36%

20%

Short-term cashinvestments

Equities [stocks,mutual funds,

exchange tradedfunds (ETFs)]

Fixed income (including individual

bonds or bond mutual funds)

Total Millennials and Gen X Baby Boomers WWII

23%

11%

7%

38%

15%

13%

22%

11%

7%

16%

7%

2%

Internationalinvestments (stocks,

mutual funds, etc.)


Precious metalssuch as gold

products, collectibles

PORTFOLIOS

57%10%

13%

7%

8%5%

Investable assets

Defined contribution

Restricted stock

Principal residence


Insurance andannuities

Privately held business

15%

40%

6%

15%

24%

Fixed incomeEquitiesAlternative investmentsCash and liquid assetsOther

Distribution of Assets

Distribution of Investable Assets


Roughly three-quarters of wealthy women use advisors to some extent. This is despite how they define their reliance on an advisor. Only 31 percent considered themselves to be Self-Directed. Twenty-two percent define themselves as Advisor-Dependent.

31% 24% 24% 22%

Self-Directed Event-Driven Advisor-Assisted Advisor-Dependent

Investors make their own investment decisions without the assistance of an investment advisor

Investors make most of their own decisions but use an investment advisor for specialized needs such as retirement planning, asset allocation advice or selecting alternative investments

Investors regularly consult with an investment advisor regarding most investment needs, but make most of the final decisions

Investors rely on an investment professional or advisor to make most or all investment decisions

ADVISOR-DEPENDENCY

69%

Use an Advisor

Rely upon an advisor

More than half of wealthy women consider themselves to be fairly knowledgeable about investment products and ser-vices, and 21 percent consider themselves to be very knowledgeable. Twenty-six percent feel they are not knowledgeable.

INVESTMENT KNOWLEDGE

21% 52% 21% 5%

I am very knowledgeable about financial products and investments.

I am fairly knowledgeable, but still have a great deal to learn.

I am not very knowledgeable about financial products and investments, but I do understand some things.

I am not at all knowledgeable about financial products and investments.


Younger wealthy women are much more likely to define themselves as Self-Directed investors and much less likely to see themselves as Event-Driven investors. The World War II women are more likely to be dependent upon their advisor.

ADVISOR DEPENDENCY (by age)

53%

29%

18%

8%

26%

24%

23%

22%

33%

18%

22%

24%

Millennialsand Gen X

BabyBoomers

WWII

Self-Directed Event-Driven Advisor-Assisted Advisor-DependentInvestors make their own investment decisions without the assistance of an investment advisor

Investors make most of their own decisions but use an investment advisor for specialized needs such as retirement planning, asset allocation advice or selecting alternative investments

Investors regularly consult with an investment advisor regarding most investment needs, but make most of the final decisions

Investors rely on an investment professional or advisor to make most or all investment decisions

57%Use an Advisor 68%

Baby BoomersMillennials and Gen X

80%

WWII


PRIMARY ADVISOR

3%

2%

2%

18%

21%

8%

5%

2%

3%

5%

Accountant

Banker/Private Banker/Bank Trust Officer

Discount/Online Broker

Full-Service Broker

Independent Financial Planner

Independent Investment Advisor (RIA)

Investment Manager

Mutual Fund Co. Representative

Other Professional Advisor

Friend or Family Member

More than 20 percent of wealthy women identify their primary advisor as an independent financial planner, and 18 percent use a full-service broker. Almost one-third say they do not have a primary financial advisor.


5%2%6%3%6%

3%2%0%0%3%

3%0%6%0%3%

16%16%9%

19%24%

11%28%23%16%24%

11%7%11%16%0%

3%0%0%

14%6%

0%2%6%0%0%

3%2%0%0%3%

3%2%3%3%0%

5%5%9%0%3%

Accountant

Banker/PrivateBanker/Bank Trust Officer

Discount/Online Broker

Full-Service Broker

IndependentFinancial Planner

IndependentInvestment Advisor (RIA)

Mutual Fund Co. Representative

Private Banker/Bank TrustOfficer

Other Professional Advisor

Friend or Family Member

Professionals

Educators

Health Care

Managers

Homemakers

PRIMARY ADVISOR

60%

65%

Educator

Professional

71%

Health Care

70%

Manager

68%

Homemaker

USE AN ADVISOR

Investment Manager

Professionals are the least likely to use an advisor. When they do, they turn to a full-service broker. Almost 30 percent of Educators use an independent financial planner as their primary advisor, while 24 percent of Homemakers use a full- service broker. Sixteen percent of Managers use an RIA. Nine percent of those in Health Care use a friend or family member as their primary advisor, and 40 percent of Professionals do not use an advisor.


REASONS FOR NOT USING AN ADVISOR

2%

52%

8%

10%

43%

0%

15%

11%

29%

62%

0%

32%

32%

38%

27%

22%

61%

14%

27%

32%

29%

21%

13%

61%

16%

28%

25%

26%

I cannot afford a financial advisor

I can do a better job of investing than a professional

I get help from friends and family

I don't know who to usefor a financial advisor

I don't believe a financial advisorwould be looking out for my

best interest

I don't have enough assets to warrant having an advisor

OtherTotalMillennials and Gen XBaby BoomersWWII

LIKELIHOOD OF FUTURE FINANCIAL ADVISOR USE

17%

23%

40%

14%

6% Very likely

Likely

Neither likelyor unlikely

Unlikely

Very unlikely

Of the approximately 30 percent of wealthy women who do not have a primary advisor, more than half think they can do the job better than a professional, and 43 percent worry a financial advisor would not be looking out for their best interests. Among those wealthy women who do not have a primary advisor, 40 percent say they are not likely to ever have a primary advisor, while 20 percent say they are likely to someday require one.


REASONS TO CONSIDER USING AN ADVISOR

27%

19%

25%

29%

4%

30%

20%

1%

17%

A windfall of money that I need help with in investing

A financial situation where I need professional help, such as preparing forretirement or creating a financial plan

A change in my household such as a marriage, birth, divorce, etc.

A situation where I get tired of managing my investments

A serious downturn in the stock market or economy

A situation where I could get professional help for what I feel is a fair price

A very favorable recommendation for a financial advisor from a trustedfriend or family member

Other

None of the above

Of those wealthy women who do not have a primary advisor, 30 percent say they would consider hiring one if they could get their money’s worth, and almost 30 percent say they would hire a financial advisor if they got tired of deal-ing with the matter themselves.


48.51

24.61

71.91

81.18

44.72

48.30

23.48

71.51

78.39

35.45

50.32

22.10

76.39

75.17

29.93

Age of the advisor

Gender of the advisor

Company they work for

Reputation based on referrals from trusted associates

Advisor is in the same life stage that I am in

Millennials and Gen X Baby Boomers WWII

In choosing a financial advisor, Millennials and Gen Xers are more likely to consider referrals from trusted associates and are more likely to consider an advisor in the same stage of life as the investor.

It is interesting to note that wealthy female Educators express the greatest interest in the gender of the advisor they might hire (although they did not indicate which gender). Homemakers had the highest regard for the reputation of the advisor based on referrals. Professionals most wanted an advisor in the same life stage as they are.

How do wealthy women choose an advisor? Rating advisor attributes on a 0-100 scale, wealthy women had the high-est rating for the reputation of the advisor based on referrals from friends or business associates (78.39). They also had a high rating (72.00) for the advisor’s affiliated company.


IMPORTANCE OF ADVISOR ATTRIBUTES (by occupation)

51.59

23.03

62.73

72.11

42.28

52.61

28.82

74.67

78.51

40.52

51.60

27.87

73.24

77.84

40.27

45.50

16.36

69.40

80.36

32.54

47.16

19.16

63.90

83.70

29.47

Age of the advisor

Gender of the advisor

Company they work for

Reputation based on referrals from trusted associates

Advisor is in the same life stage that I am in

Professional Educator Health Care Manager Homemaker

86% 100%

EducatorProfessional

100%

Health Care

96%

Manager

100%

Homemaker

95%

Total

UTILIZE SAME ADVISOR AS SPOUSE (by occupation)

Among wealthy women who have a financial advisor, 95 percent use the same advisor as their spouse. Fourteen percent of Professional women do not utilize the same advisor as their spouse.


KEY FINDINGSBased upon this research on wealthy women, there are several issues financial advisors must keep in mind to effectively attract, service and retain them.

▶ Women are strongly influenced in their financial decisions and values based upon the age of their children. Regardless of whether they are working or not, women define their own financial security based upon the financial needs of their children. This is not to say they intend to support their children throughout their lifetime, but they do intend to assist their children in paying for college and even graduate school. Later in life, many would like to leave an inheritance for their children.

▶ As women age, they are more likely to turn to a financial advisor for advice. Currently, only 57 percent of Millennials and Gen Xers are using a financial advisor compared to 80 percent of WWII women and 68 per-cent of Baby Boomers. Additionally, reliance on an advisor increases with age. While 53 percent of Millennials and Gen Xers define themselves as Self-Directed, only 18 percent of WWII women and 29 percent of Baby Boomers consider themselves to be Self-Directed. Therefore, you should reach out to women in their 30s and 40s to begin establishing a rela-tionship. Anticipate that as they get older, they will be more likely to rely upon your assistance and to increase the amount of assets they seek your advice upon.

▶ Women do not care about the gender of an advisor. They are seeking reputation and expertise. Don’t automatically push your female clients to female advisors. They may be offended. Introduce them to the advisor that they perceive has the most experience.

▶ Almost two-thirds of women expect their telephone calls and/or emails to be returned within 12 hours. In fact, a quarter expect a response within 2 hours. Make sure you are being responsive to their requests.

▶ Ask your wealthy women clients and prospects the age of their children. Determine how much she plans to assist her children financially. Most of these women will want to assist with college. Some will want to help their children finance their first home. Find out what is important to your client in regards to her children.

▶ Women define financial security as the foundation of their American Dream. Part of that financial security is ensuring that they have properly saved to live comfortably through retirement. Women investors are less concerned with the recent investment return of their portfolio. What they really care about is the specific amount they will have to live on during re-tirement. This could be based on an annual amount or a monthly amount. The recent investment return must be related to their long-term goal of financial security.


▶ Most women already believe they are adequately prepared for retirement but they fear that a health catastrophe might derail their financial security. Just over a third have purchased long-term care insurance. That percentage increases for those in the WWII generation to 58 percent. Baby Boomers are ready to have a discussion about long term care or other alternatives that are appropriate for them should a health crisis occur.

▶ Women are planning-oriented and will look to their financial advisor to create a financial plan for them. In fact, 48 percent indicate they already have a financial plan. Millennials and GenXers are even more likely to have a plan than Baby Boomers. Use the financial plan as a tool to ensure that she understands how your investment advice contrib-utes to her financial plan.

▶ Families with children are more likely to have pooled their finances. Develop a relationship with both spouses because, for the most part, these are joint decision-making households.

▶ Most women have been involved or anticipate being involved in financial decisions regarding elderly parents. If you can provide them with helpful information and insight, you will solidify your relationship and increase their loyalty. These are difficult decisions and being able to rely upon a trusted source of information is invaluable.

▶ Most women believe they have a great deal to learn about financial products and investments. Only 21 percent consider themselves to be very knowledgeable about investment. While 52 percent feel they are fairly knowledgeable, they still believe they have a lot to learn. Ap-proaching investments with an educational twist is appealing to wom-en who hope to understand their investments. But don’t come at it with a condescending or too-basic approach. Keep in mind that 83 percent have a college degree and almost 30 percent have a graduate degree.

▶ Some women, especially those who have children, worry about not having enough to do in retirement. Women who have worked to maintain a work-life balance for decades may be hesitant to retire. They may not feel they will have enough to do. Help them overcome any challenges by providing them with outlets for their energy: recommend activities, clubs and vacations they might enjoy. Help them ease from perhaps full-time to part-time work and eventually into retirement. Pro-vide them with a blueprint that proves to them that they will be okay in the future.

Women investors will represent the largest percentage of inves-tors in the next few decades. It’s important that financial advisory firms reassess how they provide financial advice as well as the type of financial advice that will be required in the future.


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inside the minds of wealthy women - advisorhub · 2019-12-17 · for use with financial...

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